ijeb_2011_1 completo.pdf 1 homo economicus editorial 2 rodica ianole, managing editor jurnal eb 2012 completo finale.pdf 1vol. 2, 2012 editorial what do we know about the structure of economic behavior? after decades of studies and theory building a cleavage is still persisting between the neoclassical approach to economics, which assumes that decisions are guided by rationality and related to the prospect of future rewards, and approaches that recognize the social and psychological bases of economic behavior, since decisions are made by humans, individually or as part of organizations. the economic perspective assumes that decision-makers are rational and consistent with the objective of maximizing a subjectively expected utility; the behavioral perspective adds factors, taking into account that humans’ powers of computation and cogitation are limited, and people are not consistent. 1 (e.g. hunger, thirst, sexual desire, anger, fear). of course, when interpreting economic phenomena, the assumption of purely rational and coherent behavior is unlikely to be realistic. adam smith, who prior to introducing the concept 2, stated that to make economy improve, philosophers are required. to understand the economic behavior, a multidimensional, interdisciplinary approach becomes necessary, the distance between different research communities must be reduced and opportunities from the integration of research methodologies must be pursued. sociology, political sciences, psychology, neurosciences, biology, anthropology, can contribute in completing the analytical perspectives that are needed for the exploration of human behavior. the papers collected in this issue of the international journal of economic behavior (ijeb) contribute in continuing the construction of the complex mosaic of concepts and tools that is necessary for the study of economic behavior. a special thanks goes to elena druica and viorel cornescu, former editors-in-chief of the journal, for the intuition they had in starting this challenging initiative, of which i have the honor of holding the reins. expectations formation hypotheses, adaptive and rational expectations. the author concludes that the adaptive expectations hypothesis can be considered more appropriate for short-term 1 organizational behavior and human decision processes 2 the theory of moral sentiments 2 analysis when data and information are scarce. rational expectations, being based on broader and longer learning experience and data, can be considered appropriate for more comprehensive and longer-term planning. the paper of omran, abdulbagei and gebril help us to understand which are the critical success factors for the construction industry, in order to address investment choices in this sector. based on the case of the libyan construction industry, a quantitative analysis highlights ten critical factors, some of which are objective and some subjective, that impact on construction projects. in omran, bazeabez, gebril and wahm's work, a study on the characteristics of managers is presented. based on an empirical research on project managers, the article analyses and ranks a series of characteristics related to personality, attitudes and skills. the measurement of service quality is the subject of oyeniyi and abiodun's paper, who conducted an empirical research on department stores in nigeria. they found a combination of subjective and objective key factors affecting customers’ satisfaction, among which are reliability, personal interaction, problem solving and physical appearance of the store. del baldo and aureli focused their study on the mechanisms of cooperation among small and medium-sized enterprises for internationalization strategies. they analyzed a particular the network contract is not the most suitable instrument to promote the internationalization of launched by the authorities of many western countries in response to the global economic crisis finally, erfani and islam examine how european union (eu) membership impacted the their countries joined the eu. heartfelt thanks are due to the authors, reviewers and the members of our editorial board for contributing with their competencies and efforts to the completion of this issue. fabio musso editor-in-chief microsoft word 0 (19-00) editorial.docx 1 multidimensional and interdisciplinary approach for behavioral economics editorial of the international journal of economic behavior, vol. 9 understanding the human mind is an issue still characterized by great complexity, despite the fact that over the years the field of neurosciences has made great advances and technology allowed a greater ability to explore the cognitive processes of the human being. in economics, it is important to consider how people’s mind regulates and classifies information for making decisions and the impact that their coding has on emotional reactions, feelings and choices. since the nineties, behavioral economics has taken on an increasingly important role, especially thanks to the contribution of psychologists kahneman and tversky, authors of the first model aimed at formalizing cognitive decision-making mechanisms in uncertain situations. this current of thought is opposed to the principles proposed by the classical economics, based on the hypothesis of rationality of decision makers, able through their choices to maximize the benefits of organizations. on the other side, a cognitive approach to the choices of economic agents considers the influence that a series of cognitive bias have on decision-making processes, which often lead to suboptimal results. the models developed within the behavioral economics do not have as their ultimate goal to replace traditional economic models, but to contribute in providing an explanation of human behavior within the economic sphere that classical principles only partially recognize. introducing a cognitive approach allows to understand more in depth both human nature and the limits of classical models. the economic perspective assumes that decision-makers are rational and consistent with the objective of maximizing a subjectively expected utility; the behavioral perspective adds more realistic parameters related to the influence of social norms, emotions, environmental factors, taking into account that humans' powers of computation and cogitation are limited, and people are not consistent. of course, when interpreting economic phenomena, the assumption of purely rational and coherent behavior is unlikely to be realistic. to understand the economic behavior, a multidimensional, interdisciplinary approach becomes necessary, the distance between different research communities must be reduced and opportunities from the integration of research methodologies must be pursued. sociology, political sciences, psychology, neurosciences, biology, anthropology, can contribute in completing the analytical perspectives that are needed for the exploration of the human behavior in the economic field. the papers of this issue of the international journal of economic behavior (ijeb) contribute in the construction of the complex framework of concepts and tools that is necessary for studying economic behavior. the first article entitled "equal or nothing”: concern for fairness and reciprocity in trust game", by chiradip chatterjee, christopher johnson and arthur sams, presents the results of a contingent trust game experiment measuring the impact of a ‘fair’ allocation by the proposer on the reciprocal reaction of the responder. results suggest that in response to unequal allocations, responders return more proportionally, as an evidence of negative reciprocity. international journal of economic behavior, vol. 9, n. 1, 2019, 1-2 2 the second article from john kolade obamiro, babatunde oladipupo kumolu-johnson, and justice chidi ngwamaj entitled "workforce diversity and employees’ performance: evidence from a nigerian bank”, examines the relationship between workforce diversity and employee performance in a nigerian bank. the objective of the study is to examine the relationship between gender diversity and job satisfaction, and between ethnic diversity and employee intention to quit. results show a strong relationship between workforce diversity variables and employee performance, suggesting promoting equal employment and opportunity for career growth for all gender. rahim ajao ganiyu, with the article entitled "a study of the influence of entrepreneurial orientation on the business performance of auto artisans firms within lagos state metropolis in nigeria” investigates the relationship between entrepreneurial orientation and business performance of small auto artisans within lagos state metropolis. results show that all the entrepreneurial orientation dimensions (innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) are significantly related to one another and business performance. “corruption: where and why (and how to beat it)?” is the subject of the article from štefan šumah and matic borošak. the authors, based on a country analysis, researched the main factors that affect the level of corruption, by focusing on two key questions: where corruption is occurring and why is it occurring. the article entitled “appraising the efficacy of the national economic empowerment and development strategy (needs) as policy intervention in nigeria (2003-2007)” by sunday abayomi adebisi, abiodun adebowale oyedele, and christo gbenga adelakun, examines the efficacy of the needs as policy intervention. the result of the study indicated that the needs policy was not effective on the targeted growth and development indicators, and there were no significant differences after the intervention of needs. nichel gonzalez, with the paper entitled “nominal or proportional investments: investment strategies, judgments of asset accumulations and time preference”, analyses how fund investment strategies can be influenced by the response format, nominal or proportional. the article from george obeng (“contractual obligation of claims. a factor influencing investors choices of capital”) investigates how contractual obligations of claims influence the choice of capital in emerging markets. the study reveals influence of security over assets and contracted claims on decisions. ik muo, adebiyi abosede, jonathan ehimen ekpudu, and bilqis bolanle amole present a research on “leadership styles, organizational politics and employees` commitment in selected public and private organizations in lagos state, nigeria”. to achieve its objectives, the study probed the direct relationship that exists between organizational politics and the leadership styles used in both private and public organization. results revealed a relationship between leadership styles and employees’ commitment, and between organizational politics and employees’ commitment. “an examination of governance typology in nigeria higher education system” is the title of the article authored by abdulazeez abioye lawal, waidi adeniyi akingbade, and hameed omotola ojodu. the article explores corporate governance (cg) culture and its challenges in nigeria higher education institutions. the results revealed the adoption of cg structures and processes, and the non-existence of disclosure of cg practices. fabio musso editor-in-chief jurnal eb 2012 completo finale.pdf 27vol. 2, 2012 abstract managers are more likely to perform better or to stay longer in their position if their personal characteristics meet the requirements of the position. the importance of project manager’s competency to construction derived from the nature of changing business circumstances of the that will bring to successful of a project. peaks framework was adapted and applied in order to determine the competency of the construction project managers within the libyan construction industry. two objectives which are following (i) to identify the construction project manager’s perceptions on the level of importance of the competencies against their personality; and (ii) to determine the level of competencies of construction project managers were proposed to be achieved. quantitative approach was implemented in this study whereby 50 questionnaires were sent out. however, of these, only 41 questionnaires were returned and analyzed. as result, it can be concluded that our project managers today are at the high level of competent. keyword: 1. introduction the unique structure of the construction industry, coupled with the challenges of global competitiveness, and changing regulatory requirements have created great demand for highly educated and competence construction project managers. the construction project managers have never had a tougher job. companies are always in transition now remodeling and effective management of an entire spectrum of projects. confronting with the new issues and undertaking additional roles have traditionally not been part of their responsibility. to ensure their continued relevance in the industry, construction project mechanisms by which these construction project managers acquires such requisite skills should provide in addressing the training needs of future construction project managers (ryssell et al., developing competency model for the project manager in the libyan construction industry abdelnaser omran, ahmed bazeabez, abdelwahab o. gebril, woo suk wah university sains malaysia, malaysia 28 through real-estate or construction-related careers. their role and responsibility in delivering knowledge for their job competency in this industry. the project management competency refers to the capability to manage projects professionally by applying best practices with regards to the design of the project management process and the application of project management representative of the common understanding of the word. however, as noted by robothan “competence is used to accomplish something. it includes knowledge in all their shapes, but it also includes personality traits and abilities, such as social competence, but is however not impossible to also talk about organisational competence. one can then refer back to the complete competence at the individuals in the organisation, or the stored knowledge concerning systems, techniques or the culture”. an individual perspective and also from an organizational point of view. in the organizational in his view the organization is deemed to posses’ project manager competence if it is able to are not contradicting, after all an organization is an inanimate character that exists only through its people. therefore, for an organization to have competence, it is essential that the people inside are competent. nevertheless, there is a difference on how competence is approached; one perspective looks at the individual parts and the other at the whole. for this study intends 3. project management and competency theory the importance of project managers leads to the concern of their training and development. proper training and development programs can be developed to provide the necessary training to those who want to become project managers. order to provide insight into the effectiveness of training program, as well areas that may management is attained by the combination of knowledge acquired during training, its subsequent application and other skills developed in the course of practice. they notice that 29vol. 2, 2012 required in practice by project manager is much wider in context. thus, they suggest that modern project management demands other general and management knowledge, together with skills that extend beyond the technical aspects of traditional engineering areas. 4. research methodology the target of this research is to determine the importance level of core competency of construction project managers and the level of competencies of the construction project basically, the paper is was used to determine the effectiveness of leadership needs for the project leader. to relative importance index for each factor, which made it possible to cross-compare the relative importance of each of the factors as perceived by the respondents. the relative importance index relative importance index (rii) = 4n1 + 3n2 + 2n3 +1n4 +0n5 4n (0 < rii <1) where n = total number of respondent, 4= highest weighted score (0, 1, 2, 3, 4) of agreement (whereas n1 = number of respondents for strongly disagree, n2 = respondents for strongly agree). 5. results and analysis project managers 1. personal characteristic 2. attitudes 3. knowledge competence 4.skills competence independent variable dependent variable figure 1 – conceptual framework of project management competences 30 5. results and analysis 5.1 respondents background the analysis has shown that the presence of female in the industry is relatively less and their contribution of respondent (figure 2). it can be said that the presence of female in the male female figure 2 – distribution of respondent’s gender from the data collection, most of the respondents are middle age project manager. the maturity age of respondent will give a better and more consistent results due to their exposure is much more compare to the young age of project manager. it was found from the analysis that 51.2% 31.7% 17.1% 30-40 years old 41-40 years old 51-65 years old figure 3 – distribution of respondent’s age different holding degrees are shown in figure (4). 25.1% 33.6% 22.9% 18.4% diploma bachelor master phd 31vol. 2, 2012 table 1 – respondent’s job description / position job description frequency (%) others 100% in term of the working experience, table 2 depicts the years of experience accumulated by the respondents in the construction industry. the data reveals that their years of experience table 2 – respondent’s years of experience years of experience frequency (%) 100% the present position. table 3 – numbers of current project under respondent’s responsibility numbers of current project responsible for frequency (%) 100% 5.2 personal characteristic competence variables table 4 depicts the competency level for personal characteristic competence of our project 32 clearly. table 4 – personal characteristics personal characteristic rii ranking seeks out and is comfortable with change 11 aptitude to uncertainty enjoys problems 12 at ease with prioritisation & decision making critical thinking need to be organized 2 self driven & tenacious 4 sustained energy & enthusiasm 1 selfcontrolled selfawareness & regulation leadership / team management seeks out face communication 4 charismatic & inspirational 2 intuitive & sensitive to the needs of others adaptable integrity 1 5.3 attitudes competence variables project manager today. there are total 2 constituents namely (i) personal values and (ii) in table (4). with refering to the section (b) in the below table, it can be observed from the 33vol. 2, 2012 table 5 the competencies’ attitude of the project managers in libya attitudes rii ranking a. personal values 1 team approach 2 4 b. organization / project concern for stakeholder needs 4 concern for safety & quality 2 concern to learn from experience 1 willing to play at organizational politics personal agenda 5.4 knowledge competence variables included factors in this study. while, section (d) shows that most important factor for the knowledge competency on the human material resources and procurement management is table 6 knowledge competence of the project managers in libya knowledge competence rii ranking a. organizational context identify project environment & context 4 coordinate project development processes & phases 2 establish project organization structure & role 34 2 organize completion & handover activities 1 b. scope, quality, risk & value 1 4 decide & identify risk management 2 c. time and cost appraisal techniques for evaluating options 4 time & cost estimating time scheduling & phasing management 2 budgeting & cost management 1 d. human, material resources & procurement management 1 acquire, develop & manage project team 2 2 5.5 skills competence factors table 7 the competence skills for the project managers in libya skills competence rii ranking a. project process 4 develop projects resources & capacity planning 2 1 close project 35vol. 2, 2012 b. communication communicate in writing at all levels. 2 communicate verbally at all levels. 4 1 c. leadership and documenting) 4 negotiation and delegation of project information and process critical thinking and rational decision making building, leading and motivating teams to ensure commitment, respect and loyalty 2 transfer knowledge (coaching, mentoring, and training) ability to manage legal issues ability to listen ability to complete project on time 1 6. conclusion and recommendations level of importance for core competency. however, this objective has successfully achieved important role in any level of job position because it reveals a personality value of a person who was to identify the level of competencies of construction project managers. however, from the results, it can be concluded that our project manager today is at the high level of competent. finally, this study provides a competency model consisting of a list of competencies needed at this position level, therefore an effective job description for the construction project manager position level in organization should include the required competencies. 36 references 111-124. in large swedish organizations. and economics. singapore. international journal of project management development review, continuous assessment of project perfomance, journal of conctruction engineering and management, jurnal eb 2012 completo finale.pdf 37vol. 2, 2012 abstract the nigerian economy is experiencing a boom in the retail sector of departmental stores. the sector is becoming increasingly competitive with the entry of foreign and multinational retail stores. extant literature indicates that loyalty of the customers can be maintained with service quality. consequently, the current study attempts to measure service quality among nigerian departmental stores using dabholkar, thorpe & renz (1996) retail service quality scale (rsqs) instrument to gauge customers’ satisfaction with the retail service quality in the nigerian retail sector. four hundred and seventy eight customers of three major departmental stores in central lagos, nigeria were used for the study. data generated was analyzed using factor analysis, correlation and hierarchical regression analysis to test the relationships of the for evaluating retail service quality in retail sector of departmental stores. physical dimension, customers’ satisfaction, while policy was found not to have similar effect within the nigerian environment. keywords 1. introduction retail business in nigeria is largely informal and fragmented. the informal retailing is growing faster in number and investment largely because of the seemingly reluctance of the populace to change from the traditional ways of trading and partly because growing number of unemployed youths taking to retailing as a means of survival. consequently, retailing has remained one of the easiest ways to be gainfully employed. however, in recent decades the nigerian economy has been experiencing increasing relevance of formal retailing (departmental retail shops, chain stores and supermarkets). this can be inferred from several retail outlets coming into the competitive retail market including foreign retail outlets. several retail outlets measuring retail service quality in nigerian departmental stores omotayo oyeniyi, abolaji joachim abiodun covenant university, nigeria 38 today there are various types of retail outlets some of which are specialized outlets; general outlets (most of whom are chain stores) about a quarter of them are foreign retail stores. the increasing importance of the departmental retail outlets may be attributed to increase in wages the emergence of middle class within the nigerian society. despite the increase in number of retail outlets and their seemingly importance, consumer satisfaction of their service quality to developed countries with limited applications in retail outlets and developing countries particularly nigeria. there are a few indications of measuring service quality in nigerian retail 2. literature review the use of service quality to gauge the level of consumers’ satisfaction with service provision has been on the increase in the last decades, particularly since the development of rests on measuring the difference between customer expectation and perceptions of service measuring service quality and in add value to customer and ensuring satisfaction (das, saha measuring service quality in retail setting cannot be undertaken in similar ways as other service products. one major requirement of measuring service quality in retailing is the need to ascertain service quality is an attempt to measure the gap between expectations and perceptions verify the gap i.e the extent to which service obtained is related to service expectations. expectations and performance are expected to be measured to determine the gap. however, other researchers are of the opinion that measurement of performance is a more superior 39vol. 2, 2012 to performance dimensions of service quality. aspect, reliability, personal interaction, problem-solving and policy. three of these dimensions one of the ways by which customer satisfaction and retention can be achieved in retail retail stores in nigeria strive for customers’ attention and increase market share. retail service quality dimensions are measured through reliability, validity and component problem solving and policy. the measurement of physical facilities is done using appearance of the physical facilities and convenience the layout of the physical facilities provides. customers of retail shops place a high premium on store appearance as well as convenience of the physical appearance and convenience are physical aspects sub-dimensions. reliability is the extent to which customers can rely on promises made by the retail outlet and whether merchandise will be available when they are required by the consumers (dabholkar, thorpe & rentz, right. the third dimension is personal interaction which covers such variables as friendliness, environment of shopping without pressurized. the sub-dimensions for this measurement are 40 be improved as customers are noted to be sensitive to how service providers attend to service last dimension is policy which is related directly to management policy of the store. this will include policy on convenience hours of shopping, credit facilities, and availability of parking 3. methods and material of service quality. the study was conducted in lagos. lagos has emerged as nigeria’s largest departmental stores were established and as such it is expected to have a greater degree of customer expectation of service quality than other cities. the population of the study comprises of all retail shoppers of the sampled organizations, population. the sample organizations were selected partly because of their relative size (they are in terms of sales the largest departmental stores in lagos) and partly of their locations (they are located in the choice areas of lagos city and as such attract large numbers of patronage) and lastly because they are one of the oldest of the new stock of departmental stores that sprang up in recent years. variables had been noted in literature to impact positively on the perception of service quality regarded in nigeria as adults and mature enough to undertake his own shopping with little or cards by the stores. the use of credit card and offering of credit through credit cards as a mean instrument being used. the second item deleted from the scale is ‘telephonic interaction with customers’. cost of telephone despite the use of mobile phone is high in nigeria and there is low tele-interaction with customers as this not really used in nigeria. this indicates that other physical facilities, convenience of the store layout as well as the aesthetic beauty of the store 41vol. 2, 2012 to capture how reliable are the promises made by the outlet and whether merchandise measures the relationships that exist or should exist between employees and the workers. it solving deals with how complaints, goods returned and exchanges are handled. this dimension actually involves service recovery which is also an indication of service quality. the last dimension captures store policy in terms of opening hours, it convenience and whether the policy is responsive to customer’s desire. the questionnaire was self-administered with the assistance of research assistant, who has been trained and instructed on what to do and are also expected to help the shoppers to properly choice of this method is based on the fact that shoppers evaluate service quality easily in three departmental stores were chosen labeled a, b and c. store a in an indigenously owned top brand, while store b and store c are notable foreign owned departmental stores. the captured in section a and section b consists of items that were meant to evaluate service quality commencement of the distribution. 4. data analysis table 1 – cronbach’s alpha for rqsc dimensions and its sub-dimensions dimensions items sub-dimensions items overall 1.1 appearance 1.2 convenience 4 2 2. reliability 2.2 doing-it-right 2 customer satisfaction 42 table 2 – question items cronbach’s alpha results item cronbach’s alpha item cronbach’s cronbach’s alpha the content validity of the instrument is assured as the instrument is adopted from previous study where it was developed through extensive review of literature. the instrument was their suggestions led to the removal of two question items from the original scale under the policy table 3 – correlations 1 2 4 1 reliability 1 1 1 1 customer satisfaction 1 a review of the table shows reasonable level of relationships among the dimension and the which are within acceptable limit. regression analysis. the results of the multiple regression is shown in table 4. 43vol. 2, 2012 table 4 – hierarchical multiple regression results dimensions r r2 adjusted r2 r2 change f change tstatistics anova (f) vif aspect reliability interactions solving of outliers, and improves normality and linearity of residuals. as such no outliers among the cases assessed at the end of step one of the hierarchical regression f p f p are such may be interpreted as positively affecting customer satisfaction. table 4 shows the results of r, r2, and adjusted r2 independent variable (policy) r2 2 more than half of customer satisfaction in sampled departmental stores can be attributed to the level of retail service quality practiced by the organizations, after taking cognizance of the nonr2 policy did not really improve r2. the pattern suggests an improvement in the level of customer satisfaction by the level of physical aspects available in the departmental stores, how reliable is the promises made to the customers, the level of personal interaction with the customers and prompt response to customers’ problems. 5. conclusions and managerial implications the measurement of service quality has become useful tool in gauging the level of the measurement of service quality in the not too pure service context (retailing). the study attempts to further the frontier of application of retail service quality scale particularly its scanty application in a developing country like nigeria. the results of the study showed that 44 of the dimensions on customer satisfaction. as within the nigerian cultural setting managers consumers’ satisfaction. satisfaction manager should ensure high level of reliability on the promises made to customers in terms of doing the right things and ensuring that what is promised is delivered. the level of training that is offered to the staff in terms of their dispositions to the customer is an important provide helps to needy customers. the respondents’ reactions to problem solving dimension is an indication to managers of retail outlets to develop appropriate strategies in service failure recovery. this is because customers are sensitive to how complaints and problems arising from transactions are handled. service failure recovery strategies are not only necessary to ensure satisfaction they are equally response to this dimension indicate that within the nigerian retail cultural setting issues such as parking space, opening at convenient hours and the use of credit cards and credit facilities are not too valued. not surprisingly, this response is in line with practical reality of the nigerian due to security issues in nigeria and partly because as a developing country business operating implications of such practices. references assessment in a developing economy, international journal of bank marketing, empirical investigation, hospital services research south african journal of business management, dimensions, journal of retailing south african journal of business management, journal of marketing scale development and validation, journal of the academy of marketing science, 24 (1): 3-16 a transition economy, poms 19th conference, la jolla california journal of retailing and consumer services, 11: 235-245 45vol. 2, 2012 in retail apparel specialty stores, journal of services marketing, vikalpa, 32(1): 15-26 journal of services marketing, 7 (2): 223-237 journal of services marketing, internet, journal of services marketing, international journal of retail and distribution management, 28(2): 62-72 journal of retailing, marketing intelligence and planning, customer satisfaction, and store loyalty, international journal of retail and distribution management, exploration of its antecedents, journal of retailing, european journal of social services, 23(1): retail relationships, journal of services marketing, 17 (5): 495-513 international journal of bank marketing, jurnal eb 2012 completo finale.pdf 67vol. 2, 2012 abstract in response to the world economic crisis of 2008 the authorities of many countries have launched policies of interest rate reduction through large-scale asset purchases on the open key rate targeting. the author explains how changes of the federal funds rate increased bank interest rate risk and provoked the recession of 2007-2009. the results of this paper show that institutions. keywords: commercial bank. 1. introduction countries were triggered by the mortgage crisis and stock market crash in the united states. these facts are indeed undeniable and have become the part of economic history, but one very reliable banks to rush into such risky undertakings as sub-prime lending and investing huge amounts of assets in mortgage-backed securities? of course, we could say that the bankers just made a mistake; however, the idea of mass delusion of highly skilled specialists seems the federal reserve system. one of the basic instruments of central bank monetary policy is steering the short-term money market rate with the help of open market operations. in the united states, this rate is called the federal funds rate and in the eurozone, targeting of key interest rate as a source of crisis yana sokolova st. petersburg state university, faculty of economics, russia 68 interest rate is a powerful instrument of monetary policy. the objective of this paper is to study kind of monetary policy. to reach the established objective, the following research methods observation and aggregation. 2. literature review th government and central bank enables to conduct monetary policy. literature review shows that over the period of the history there were a lot of advocates and opponents of key interest rate economists that came to the agreement for the general question had different opinions established it should be brought to the determinate size by open market operations. however, against of monetary authority intervention on the market as they thought that it causes the and presents the author’s view of the problem. let us consider monetary policy mechanism that is widely applied all over the world. if the economy falls into recession, central banks of many countries tend to lower base interest affordable and increase demand for them. the real sector of the economy gets on opportunity to raise cheap funds, which stimulates its development. as a result, unemployment falls and the a rapid economic growth rate and an excess of consumer demand over productive capacity meltdowns. in such cases, central banks usually decide to increase key interest rate. this provides monetary contraction in the economy because the cost of interbank overnight loans rises, which leads to increase in all other interest rates. therefore, the business activity and in order to reduce interest rates, central banks increase the money supply by purchasing government liabilities on the open market. thus, the amount of money in the economy grows and its cost falls, which means that loan interest rates decrease. if a central bank pursues the goal of increase in interest rates, it sells government liabilities on the open market. as a result, monetary funds raised by a central bank are recalled from circulation. the supply of 69vol. 2, 2012 harmless. 4. disadvantages of targeting the level of interest rates although in theory, the motivations and results of open market operations are convincing and logical, in practice, we are faced by several nuances that drastically change the picture and lead to undesirable consequences. the disadvantages of targeting the key interest rate can be illustrated by the outcomes of the federal reserve system’s behavior in the usa. this was conceived, but also because it has a huge stock market, which gives the usa the ability to change its federal funds rate quickly and effectively. theoretically, the decline of the federal funds rate stimulates economic growth, and the can be really seen on diagrams in figure 1, there are also situations in which practice differs from theory. if the federal funds rate was and reach a high level, which undoubtedly hampers economic development. the rapid increase of prices doesn’t allow depositary institutions to reduce the loan interest rates because they must compensate for the depreciation of money. for instance, with the considerable decline in such a way, generally results in distortion and overheating of the market. in this case, the action usually leads to another recession. economic downturn doesn’t occur out of nowhere. rather, it is a signal that something has gone wrong. first of all, it is necessary to understand make every effort to eliminate them. instead, the federal reserve begins to conduct open market operations by acquiring government securities and injecting money into the economy. therefore, interest market. the monetary policy of targeting key interest rate by open market operations impedes progressive changes. this measure usually has only short-term effects because, in time, old problems begin to crop up again. only investments of real savings and resources, accumulated by the effective work of production and service spheres, can lead to stable, long-term economic growth. similar opinions on this question were expressed by a.r.j. turgot, j. bentham and 70 and gdp percent change in the usa. source: compiled by the author from data published by the federal reserve system (federal funds maintain a large amount of outstanding securities not only to raise additional money, but also in order to afford an opportunity for the federal reserve to conduct open market operations. ( . as a result, the internal problems of the u.s. economy were not solved and a new federal funds rate and its appearance at that level on the interbank market. therefore, the federal reserve system must foresee changes in the economy and take measures to the possibility for error in such forecasts always exists, and monetary policies that can be very expensive may lead to negative results. 71vol. 2, 2012 on the general condition of a country’s economy, but they are especially detrimental commercial banks sometimes don’t have enough time to readjust for new conditions due risk such as repricing risk, yield curve risk, risk of embedded options and basis risk. downturn caused by mass shares depreciation of internet trading companies occurred in the usa. consequently, hundreds of organizations, which worked through websites and were referred to as dot-coms, became bankrupt, and were liquidated or sold. this happened because most business model enron and worldcom collapsed as their huge illegal s was disclosed. however, close scrutiny reveals that they were relatively local and temporary. the bankruptcy made room for investments. the events of september 11 were a huge shock, but they did not have a long-term increasing legislative pressure and government control. however, authorities considered these a large variety of assets and liabilities, which mature and reprice at different times. thus, the curve risks. if, during that period, a bank expected more assets than liabilities to be redeemed or cover interest expense anymore and the bank would suffer losses. in this situation, the yield curve of the bank portfolio would steepen as the difference between short-term and long-term to change the balance structure in order to reduce interest rate risk. of course, a drop in the interest rates level can put some banks in favorable positions. if a bank has more rate-sensitive 72 assets and had to pay higher interest on liabilities, which were attracted, for example, one year earlier. since the rates had been diminished, individuals and entities borrowed money more dissolve agreements for long term deposits, which still were bearing high interest rates. thus, the interest rate risk of depository institutions continued to grow. in figure 2, we can perfectly observe the inverse relation between changes in the federal borrowings rises. and vice versa, with an increase in the federal funds and mortgage rates, the or withdrawal is called the risk of embedded options; that is one of the main interest rate risks of commercial banks. the monetary policy of the federal reserve system provoked an increase of 30-year conventional mortgagesof 30-year conventional mortgages sources of funds. this situation caused an increase in demand for mortgage-backed securities. to interest spread drop. however, the aggregate net interest margin of depository institutions in 73vol. 2, 2012 obligations enabled banks to receive money back quickly without waiting for the date of loan repayment and invest these funds again to obtain additional income. the risk of mortgage securities defaults was successfully hedged by credit derivatives. over the developed rapidly. decline, as the majority of the creditworthy population had already borrowed money and bought and other collateralized debt obligations, as the demand for them grew rapidly. besides, banks needed additional sources of funds, as they were by that time, commercial banks had already lent a large amount of long-term mortgage loans at low interest rates and were faced with the problem of how to conduct payments for new deposits with high interest rates. thus, the gap between earnings on assets and costs of liabilities narrowed and net interest income fell. the federal reserve considerably increased repricing and the yield incomes and without initial payment. this decision was provoked by high demand for mortgage rate and open market operations of the federal reserve. this meant that short-term rates curve and the beginning of a recession has been, on average, equal to 14 months (national or slightly inverted for a long time prior the beginning of the recession. figure 3 – the amount of mortgage loans and mortgage-backed securities provided by depository institutions in the usadepository institutions in the usa source: compiled by the author from data published by the federal deposit insurance corporation 74 since world war ii, only twice has the yield curve inverted without being followed by a business cycles amplitudes. this can be reasonable if monetary policy doesn’t lead to an of recession during the vietnam war to massive federal government spending. an increase in market operations. in the adjustment of the rates earned and paid on different instruments with otherwise similar while commercial banks were losing their incomes. when the federal reserve was raising the rates felt that their debt burden had become overwhelming and gradually stopped paying it. as a result, the amount of past due loans increased (figure 4). less reliable borrowers purchased houses at higher prices and took loans with higher rates as the federal reserve started to increase the federal funds rate (figure 1). by the time that homeowners’ debts exceeded the real cost of their residential property. since that time, there a while, the loan principal became larger than the market price of a house, and, in addition, the borrower had to pay interest. it is not surprising that the amount of past due loans skyrocketed. in figure 4, we can see the correlation between a decrease in house prices and a rise in the mass defaults began. financial institutions in the usa and other countries also suffered losses because they had issued credit derivatives for hedging asset-backed securities. as collateralized mortgage obligations of u.s. organizations were sold all over the world, the indexes of many conjuncture. 75vol. 2, 2012 figure 4 – the correlation between decreases in house prices and rises in the amount of past-due mortgage loansdue mortgage loans source: compiled by the author from data published by the federal deposit insurance corporation depository institutions, distorted the market, and deprived entrepreneurs of any stimulus to start to raise the federal funds rate and cause new problems for the whole economic system all over again. 6. comparative analysis of key rate targeting in the usa, the eurozone and the uk the pattern of federal reserve policy is also actively implemented by the monetary authorities of other countries. the correlation between different target rates is illustrated in federal funds system, but with smaller amplitude of oscillations. thus, the more conservative monetary policy of the eurozone may smooth some considerable negative effects of key interest rate targeting, but they nevertheless can damage the economy. used for enacting monetary policy. the size of the libor (london interbank offered rate) is determined by the market without interventions of regulatory authorities, as opposed to the 76 decided to follow the example of other countries and the base rate plummeted to (the bank of england). europe and base rate in the ukeurope and base rate in the uk source: compiled by the author from data published by the federal reserve system (intended federal £ monetary authorities electronically created new uncovered money in the accounts of security supply that has been increased by open market operations makes loans cheaper and lowers 77vol. 2, 2012 the market competition. therefore, it doesn’t encourage entrepreneurs to implement new the fact that the european central bank mainly purchased privately issued bonds (beirne, et the bank of england, on the other hand, purchased government securities, which encouraged figure 6 – the results of the asset purchase programs in the usa, the euro area (17 countries) and the uk over a period of three years (2009 2011)countries) and the uk over a period of three years (2009 2011) source: compiled by the author from data published by the federal reserve bank of new york the u.s. department of labor (consumer prices on resources and goods beforehand, as they anticipate that authorities are going to banks should try to deceive market expectations. however, if depository institutions and other suffer from interest rate risk. the policy of key interest rate targeting should not be the main method used to recover by tax regulations, as the neoclassicists proposed 78 government should accumulate monetary reserves in order to spend them during times of recession. it is easier to cope with crisis if authorities reduce taxes, invest in the development of alternative energy sources, high tech and core industries, which enable the country to be competitive on the global market. 7. conclusion the conducted research has proven that key rate targeting by monetary authorities can an increase in the interest rate risk; a distortion of market; a slowdown or even drop in economic growth; low motivation for cardinal changes and innovations; an increase in government debt; the consequences of mistakes in market forecasts. a historical analysis of federal funds rate adjustment shows that the world financial crisis occurred in many respects due to the rise of the main sources of interest rate risk. firstly, sharp changes in rates increase the repricing risk, because the assets and liabilities of depository targeting activates the risk of embedded options. if rates are lowered, this can cause massive rates of bank assets and liabilities change according to the size of the federal funds rate, and some are tied to different basic rates, which can lead to a considerable narrowing of interest risk of changes in the shape and slope of the yield curve. in particular, if a monetary authority long-term rates should be higher than short-term because lending money for a longer period of time carries a higher risk. of the economy are not eliminated. the real sector loses its stimulus to foster innovations and carefully choose investment projects because monetary authorities reduce the cost of money. errors in the forecasting of market behavior are possible since there is a time lag between the 79vol. 2, 2012 slowdown of economic growth presents itself. furthermore, open market operations are possible only if a fairly large amount of government securities was issued, which leads to an increase in government debt. all of the above-mentioned negative consequences of various risks. in all likelihood, instead of targeting interest rate level, authorities should invest money in infrastructure and develop core industries. interest rates would then fall naturally due to an open market operations does not always lead to the growth of effective production. however, references model. international economic review . retrieved the european central bank, no. 122, pp. monthly bulletin: november 2011 federal deposit insurance corporation. (2000-2012). retrieved from large-scale asset purchases. the american economic review frbsf economic letter world economic outlook: a survey by the staff of the international monetary fund. operation and impact. bank of england quarterly bulletin the general theory of employment, interest and money. cambridge bank management th learning. econometrica: journal of the econometric society us business cycle expansions and contractions. occ’s quarterly reports on bank trading and derivatives activities classical economics: an austrian perspective on the history of economic thought 80 money, sound and unsound. democracy now. jurnal eb 2012 completo finale.pdf 47vol. 2, 2012 networks’ contribution to small-sized firms’ internationalization1 1 abstract this paper analyzes a new legislative instrument called “network contract” designed to abroad after joining the network, we also found that those with an international dimension do not seem to have changed their approach towards internationalization. consequently, we argue that the network contract is not the most suitable tool for promoting internationalization relationships. keywords: 1. introduction to rethink their strategies and organizational structures in order to be competitive and survive long term. in this context, and especially in italy, networking still appears to be the most viable market constraints and search for new opportunities for growth. latu sensu mara del baldo, university of urbino “carlo bo”, italy (*) selena aureli, university of bologna, italy 48 among the different types of networks that companies can establish, we decided to competitiveness. relationships characterizing other types of organizational networks, or even industrial districts all sectors, as well as the plurality of planned objectives and programs as recorded by cafaggi networks contribute to starting or augmenting their international expansion. and networking. second, we examined the formal objectives associated with existing network contracts. third, we shifted our basic unit of analysis from networks to single nodes by internationalization. of small-scale italian businesses willing to cooperate through the network contract. it reveals whether they focus more on upstream or downstream market expansion, preferred modes of entry into foreign markets, relevance, geographic scope, and duration of international activity. second, it compares the usage of the network contract for the development of international cooperation. lastly, but most importantly, it illustrates in which cases companies belonging to a formal network have succeed in starting or improving their international expansion. information about the size of the company, the network’s dimension, the goals associated with 2. literature review 2.1. theories on small business internationalization internationalization refers to the process of increasing involvement in international 49vol. 2, 2012 decision-making process, for optimizing the company’s production structure, penetrating new markets, obtaining access to inputs, and operating in more favourable conditions. the second which describes internationalization as an incremental process based on learning. the third activate when they do not directly possess the resources necessary to cross national borders. stress the importance of the learning process along with internationalization’s advancement steps. through export, creation of international subsidiaries, subcontracting, job orders, licensing, establishment of production sites abroad, and collaboration with foreign partners. lastly, in production, supply, and r&d activities. functions involved (i.e. purchase, marketing, production, r&d), the extent of the company’s investment (i.e. indirect export, direct export, foreign direct investment), and the type of product exchanged (from goods to services and know-how). this highlights three key the international dimension through their initial stages of importation, and the most frequent form of internationalization is the export of goods. there is actually a wide agreement in the among the different export-related theories of internationalization, it is interesting to note 50 as changes in business practices occurred, and the importance of networks in international describing internationalization as an evolutionary process, the has been revisited in light of theoretical advances that view the business environment as a web of relationships relationships. the network represents a key factor for network theorists who interpret the internationalization of businesses as a natural development of network relationships. some sometimes internationalization is seen as opportunity-seeking efforts this internationalize because of its relations (usually as a sub-contractor) with a larger organization, developed inside the industrial district stimulate the crossing of national borders (brown & 2.2. the role of networks may be interpersonal or organizational; thy may be limited to bilateral (or dyadic) relations, or they might assume the form of true networks (a combination of multiple sub-systems of links). they range from informal relationships to formal agreements, strategic alliances, constellations, reduce costs; obtain complementary resources, knowledge and capital; improve learning; regardless of the theoretical perspective used, inter-organizational links emerge as facilitators of international expansion in several studies. and personnel constraints, which hinder internationalization, while also providing the best 51vol. 2, 2012 alternative to both international transaction costs and coordination costs associated with markets to distribution channels, infrastructures, or other resources owned and shared by a partner. in addition, knowledge of foreign markets is a key resource that can be shared and acquires outside knowledge that allows it to do something new and different (a process called international strategy (the decision to go abroad, the choice of the markets, and the mode of entry) is linked to the opportunities that emerge from network relations more so than to place in a network setting where business actors are linked to each other through business (with customers, suppliers, distributors, regulatory and public agencies as well as other market international marketing activities were impacted by larger network partners, whereas no connection has been detected between relationships created inside an industrial district and relationships related to entrepreneurs’ and managers’ personal and social relations, which usually generate more loosely coupled networks compared to inter-organizational ones. they a directorial style centred on direct relations promoted by the owner-entrepreneur. as noted and serve as a catalyst for the formation of formal inter-organizational relationships. they lastly, it is important to note that networks can also be interpreted as a means of increasing of international opportunities. other scholars emphasize the importance of the entrepreneur’s opportunity recognition is positively related to an entrepreneur’s social network. social ties serve as conduits for the spread of information concerning new opportunities (granovetter, 52 social ties with mentors and informal industry networks, the more positive are the effects on opportunity recognition. 3. methodology and if it eventually increases the entrepreneurial capacity to recognize the opportunities in both international markets and in other business aspects. this study draws upon theoretical frameworks that consider the network as an important to interpret data from the following empirical analysis, which is as important as the deductive construction of the theories. inductive models of proposition development and theory construction ( this methodological orientation is particularly appropriate for the study of small businesses concurrence of ownership and control) which generate different behaviours from those of their larger counterparts. we made use of different sources of data (public documents and questionnaires) and different methods of analysis (document analysis and descriptive statistics). that companies had a minimum of one year of experience with the network contract at the time decisions toward internationalization after months of supposed reciprocal experiential learning and increased commitment. thanks to the national system of the chambers of commerce, it was possible to examine the content of those written agreements and to identify their strategic objectives and network programs. this helped us discover the networks with a formally stated international scope. 21 common activities to be performed in foreign markets. population to study, followed by a telephone call to remind them to complete the questionnaire. functioning of the network (usually the entrepreneur or the company director). approximately three-quarters of the questions were closed and coded, whereas the remaining were open-ended. internationalization strategies before and after joining the network contract, motives for networking and, lastly, the type and impact of common activities undertaken during the alliance. in contracts with no international aims (as revealed during the documentary analysis), were 53vol. 2, 2012 common activity of the network. we are aware of the small size of the sample, which hinders generalization. since we the representativity of the sample. 4. empirical results 4.1. the sample same province). this distribution is perfectly in line with national data provided by unioncamere district and seldom contributed to creating trans-regional clusters. table 1 – basic descriptive statistics of the sample variable mean standard deviation median turnover 2010 turnover 2011 n. of employees 2010 n. of employees 2011 total asset 2010 n. of nodes companies of the sample belong to the manufacturing sector (mainly mechanics), followed at the national level, the manufacturing sector represents almost the entire phenomena lombardia, with the northern part of italy counting for about half of all companies involved in a network contract. 54 emilia romagna lombardia veneto graph. 1 – italian regions with the highest number of network contracts 4.2. network’s contribution to internationalization regarding domestic companies, our results indicate that building formal alliances such as the network contract did not largely promote internationalization for the individual nodes after signing the network contract. sales representatives, participating in international trade shows, approaching some potential internationalization processes and activities are underway, they have still not experienced any tangible effects. initiatives regarding internationalization. 55vol. 2, 2012 table 2 – firms that have developed international activities network's contribution to itz yes no internationalized firms a b domestic firms c d tot. 26% 74% companies) state that the network contract has not contributed to any increase in existing international operations (tab. 2). when the network contract has impacted international international fairs and exhibitions, augmented export, and raised the number of foreign market representatives. changed its approach to internationalization describes the adoption of a collective strategy to enter new foreign markets. noticed that they are larger than the domestic ones and have been operating over national the companies surveyed export indirectly by selling their products and services to other italian the third stage of development of luostarinen’s model (fig. 1). cooperation is sometimes or a franchising contract. figure 1 – forms of internationalization downstream internationalization 4 5 3 3 56 found that none of the companies analyzed receive foreign subsidiaries for commercialization. foreign direct investments (fdi) are cited by only 2 companies, who utilize them for production purposes only. none of the companies investigated perform r&d activities at the international level. with an international orientation purchase inputs aboard; in these cases, they are mainly raw use intermediaries or forms of international cooperation. for international business is also demonstrated by the level of international turnover. on of respondents were trying to decrease production costs. interestingly, none of the companies figure 2 – firms’ reasons for internationalization main motives 4.3. firms’ motives for networking and contract’s objectives in order to better understand the logic behind network contract usage, we posed some questions about the motives which directed the single nodes to sign the collaboration agreement. international expansion as the main reason for aggregation. 57vol. 2, 2012 main reasons for networking to verify if internationalization was considered a less relevant reason for joining the network contract, we asked single nodes to specify other expected results deriving from network’s figure 4 – other reasons to start collaborating secondary reasons for networking focusing on internationalization, we noticed there is not always a perfect correspondence between an individual company’s purpose for signing the network contract, and the concrete 58 contribution of this instrument regarding internationalization. nor did we note that their written concrete results. table 3 – objectives of internationalization network’s contribution to itz yes no internationalized (n. 9) a 2° b domestic (n.18) c d (°) companies attributing international expectations to network’s participation networks can generate new unplanned opportunities, we asked all of the companies in the sample if and how the idea of internationalization eventually appeared during their involvement in the network, regardless of any written provision or prior aims for international development. was neither included in the network’s written goals nor cited as a motive for aggregation. company, which was not necessarily the most experienced in international operations (i.e., the the network’s nodes), while it was formally scheduled during a network’s meeting in the the above-mentioned discourse then translated into (an) initial contact(s) with international the contribution of different network nodes). reaching an international dimension did not person responsible for international operations was introduced. international visibility it is important to note that network contracts are mainly built by companies with previous 59vol. 2, 2012 value chain (i.e. client-supplier relationship); in two cases they came from equity links. entrepreneurs had previous contacts with members of the same cultural association or actors 5. in-depth analysis of different company situations international expansion only in a minority of cases, and rarely orients them towards foreign market changes. thus, we decided to better understand the reasons for such differences by closely examining network size, motives for collaboration, and pre-existing links. group a international activity after joining the network. these are the largest companies with a mean of cooperation is the development of marketing activities, while the most common secondary reason is product exchange and internationalization (in 2 cases). considering that goals reported in network contracts concern internationalization only in one case (cited by a company that signed up for the contract for other reasons different from internationalization), it emerges that the network’s contribution to foreign expansion is mainly unexpected in this group of companies. again, all companies belong to a network characterized by a focal organization with relationships. group b application of the network contract, but who did not register any improvement in foreign operations. together with the companies in group a, they are the largest organizations of the largest networks (with 11 nodes on average). one of them also expressing the unrealized expectation of foreign expansion. all companies belong to a network where there is one leading internationalized company, while only half of them indicate having experienced previous relationships with other network’s nodes. 60 group c this group contains domestic companies that started some international activity, thanks to million, indicating a high rate of productivity per unit. these companies belong to very small the main reason for cooperation is the exchange of products and services, while information sharing represents the most common secondary reason (cited by all 4 companies). thus, these which is also reported in two of the network contracts. foreign expansion also occurred for the one company that did not have such expectations and joined a network without formally stated international objectives. in this case, all 4 companies of the group declared that they had previous relationships with other nodes, and that all networks to which they belong are characterized by the presence of a leading company with strong experience in international operations. group d the most recurring reason for cooperation was launching common r&d activities (cited launch common projects and share risks and costs, so as to increase their power as an entity and to sustain knowledge-sharing in order to establish and improve their competitive advantages. that they were looking for new activities in foreign markets, and, indeed, internationalization not make any difference. not have client-supplier relations. favour foreign expansion (as demonstrated by group c); network contracts, including common international goals, are subscribed by both domestic and international companies. however, its use is more widespread among domestic businesses 61vol. 2, 2012 the presence of printed objectives concerning internationalization in network contracts does not always translate into concrete results. nor are companies’ individual expectations about international expansion automatically associated with subsequent foreign market entry. this suggests that the network contract may be too recent an innovation given priority; the objectives of companies are more relevant than the written goals stated in the network b and d did not improve their international activities. this is in line with their lower personal additionally, we found that the network was responsible for starting some companies’ international operators (in groups a and c), though they did not plan for it nor had the contract foreseen it. this indicates that network interactions may nevertheless contribute to the companies that did not increase their international operations (group b and d) are purposes; however, these respondents also believe that the contract may contribute to internationalization, indicating that this strategy of development is not excluded; the presence of a leading organization with strong experience in international markets does not seem to be associated with networks’ ability to favour foreign expansion, nor it is related to companies’ previous activities. actually, almost all companies within the sample belong to networks that boast a focal company. therefore, this variable is not determinant in the network’s dimension, expressed in terms of nodes, seems to be slightly associated with the network’s contribution to international expansion, since the companies in groups a and c belong to the smallest networks; the presence of prior relationships also seems to be higher among companies that declared that the network contract has increased their international operations. thus, our sample seems attributes pre-existing links to the capability of favouring reciprocal trust and consequent international expansion, although it should be noted that the larger dimension of networks may limit the existence of previous links. 6. conclusions foreign partners, or the recent birth of this legislative tool has not allowed network relationships in the latter case, network contracts may represent only the initial experimental steps toward comments, the majority of whom positively evaluate the capability of the network contract to impact international expansion while stating that it is too early to derive conclusions. 62 a different explanation for low internationalization could be attributed to companies’ responses indicating that participation in the network contract was mainly driven by other reasons (i.e. innovation, marketing objectives). thus, low international expansion is not motives for collaboration. in other words, while the network contract’s nodes espouse positive attitudes toward cooperation (as also demonstrated by the presence of previous interconsequently, pre-existing relations can be considered a prerequisite for formal cooperation, but not a determinant variable for generating common international initiatives. a general inconsistency between international goals and outcomes generated by network participation. such an inconsistency can be both positive and negative. a positive inconsistency emerges when internationalization develops, despite both domestic and internationalized companies (a and c groups). a negative inconsistency occurs when internalization is not reached, even though it was formally planned in the network cases is there a perfect match between the international motives for networking and their actual finally, the network contract seems to stimulate an entrepreneur’s ability to recognize and exploit business opportunities in different areas (i.e. product development) and markets from a practical point of view, this study contributes to a fuller understanding of a new it also provides a set of practical implications for the italian government, which introduced this without losing their independence (i.e., to innovate and strengthen their development), and to facilitate corporate dialogue across regions. in particular, the italian government should question whether or not technical obstacles hinder the network contract’s adoption among european economic interest grouping), and how it should be improved and adapted to include companies based abroad. at the same time, we are aware that this exploratory study has several limitations. on the one hand, our current research can be deepened. first, our sample should be enlarged to include more observations. second, it should be deepened to include additional variables that could explain internationalization such as industry sectors, partners’ motives, and ceo’s characteristics. third, it is necessary to monitor networks’ outcomes in the long term to verify should be performed to understand how key variables and networking processes have generated positive outcomes. both of these trajectories may be pursued in future research projects. 63vol. 2, 2012 references research paper small business research institute, brussels. the foreign investment decision process inter-organizational networks as a strategic industrial networks: a new view of 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business review, 1 alternatives. administrative science quarterly, 36 regional studies, 41 for research on international opportunity recognition and exploitation. international business review, 14 multinationals in a new era (pp. born international business review, 17 microsoft word 1 (19-6) chatterjee 3 “equal or nothing”: concern for fairness and reciprocity in trust game chiradip chatterjee university of north florida, usa christopher k. johnson university of north florida, usa arthur b. e. sams colorado state university, usa received: december 17, 2018 accepted: july 29, 2019 online published: september 2, 2019 abstract we present the results of a contingent trust game experiment measuring the impact of a ‘fair’ allocation by the proposer on the reciprocal reaction of the responder. we used an online questionnaire to ask participants how they would respond to each possible transfer made by the proposer in a standard trust game. existing research suggests that there is a ‘norm of reciprocity’ dictating that one repays (in kind) for the provision made by another. we have confirmed that the traditional relation between trust and reciprocity exists, and that there is a positive and significant relation between the amount transferred by the proposer and the return made by the responder. more significantly, our results suggest that in response to unequal (unfair) allocations by the proposer, responders on average return more proportionally. we believe this is the evidence of negative reciprocity, where responders return proportionately more to humiliate and/or to refuse any bond of alliance with the proposer. we also find that responders who are not economically dependent on their parents, return more than others. psychological characteristics were also tested and interestingly a respondent who ‘cries’ when their feelings get hurt return significantly more than others. key words: trust; trust game; reciprocity; fairness. 1. introduction a fundamental assumption in economics is that individuals are rational and act in their selfinterest. however, behavioral research suggests that even when it goes against self-interest, people reciprocate the acts of others (ortmann, fitzgerald, & boeing, 2000). that is, there exists a ‘norm of reciprocity’ dictating that one should repay (in kind) for the provision made by international journal of economic behavior, vol. 9, n. 1, 2019, 3-11 4 another (chaudhuri, li, & paichayontvijit, 2016; gouldner, 1960). the notion of reciprocity has been well established in the literature using the trust game experiment. in the standard format of a trust game experiment, there are two players (proposer and responder) who must decide on how to share a certain amount of money. the proposer (player 1) receives certain amount of money (x) and decides on a transfer (t ;0≤t≤x) to the responder (player 2). the responder receives three times the amount of the transfer (3t) and decides how much he/she wants to return (r; 0≤r≤3t) to the proposer. the concept of nash equilibrium suggests that the responder will maximize his/her wellbeing by returning r = 0 to the proposer and consequently, the proposer will make no initial transfer (i.e., t = 0). despite this theoretical underpinning, studies have found that proposers make considerable transfers (berg, dickhaut, & mccabe, 1995) and responders return (r) proportionately as per the norm of reciprocity (bchir, rozan, & willinger, 2012; pillutla, malhotra, & murnigham, 2003). while both positive reciprocity (i.e. the rewarding of cooperative behavior) and negative reciprocity (the punishment of noncooperative behavior) have been examined in the existing literature, evidence of the latter has not been fully explored in the trust game experiment, particularly from the responder’s perspective. no study has established the coexistence of positive and negative reciprocity in the return decision of the responders. using a standard intention-based trust game, we explain how the return decision of the responder is simultaneously influenced by both positive and negative reciprocity. 2. review of the literature in the trust game experiment, the return made by the responder can be described as reciprocal only if she interprets the proposer’s transfer as trusting (mccabe, rigdon, & smith, 2003). reciprocity captures the responder’s tendency to adjust her own behavior to the previous behavior of the proposer. depending on whether the responder rewards cooperative behavior of the proposer, or the proposer punishes uncooperative behavior of the responder, one can distinguish between positive and negative reciprocity in a trust game (perugini, gallucci, presaghi, & ercolani, 2003). according to the economic literature, two simultaneous principles explain the positive reciprocal behavior of the responder: a feeling of obligation and a desire for equality (malhotra, 2004). theoretically, the feeling of obligation is proportional to the transfer made by the proposer through an implicit compulsion to compensate (burnham, mccabe, & smith, 2000). the desire for equality maintains a nonlinear but positive relation with transfers made by the proposer. for example, suppose the experimenter assigns $10 (i.e., x = $10). if the proposer transfers $2 (t) and keeps $8, the responder will in turn receive $6 (= $2 x 3). in this scenario, the desire for equality suggests that the responder should not return any amount back to the proposer. the responder should return a positive amount only when the transfer made by the proposer is $3 or more. hence, both the above factors explain a positive association between trust (symbolized by t) and reciprocity (symbolized by r), known as ‘positive reciprocity’ (fehr & gächter, 2000). if the participant punishes uncooperative behavior, the retaliatory action is known as ‘negative reciprocity’ (fehr & gächter, 2000). the existence of negative reciprocity has also been addressed, but only in a variant of the trust game or an ultimatum game. for example, engle-warnick and slonim studied a trust game with repetitions (engle-warnick & slonim, 2004). trust requires people to make themselves vulnerable to others, as it is not possible to punish untrustworthiness of the responder. engle-warnick and slonim found that the level of trust is indistinguishable between the finite and indefinite games when players are inexperienced. however, the proposers in the indefinite game threatens to permanently stop trusting if the responders are untrustworthy. fehr et al., on the contrary, conducted a 5 sequential one-shot trust game with third party involvement to find proof of punishment (fehr, hoff, & kshetramade, 2008). in their experiment, the third player had the power to punish the responder for not returning the favor made by the proposer at her own expense. yamagishi et al. discussed the existence of negative reciprocity in ultimatum games through rejection of ‘unfair offers’ made by the proposers (yamagishi et al., 2012). thielmann and hilbig (thielmann & hilbig, 2015) also found evidence of negative reciprocity in trust game based on personality structure as designed by ashton and lee (ashton & lee, 2007). every study has always expected a positive and linear relation between transfers made by the proposers and the returns by the responders in a pure one-shot trust game (altmann, dohmen, & wibral, 2008; johansson-stenman, mahmud, & martinsson, 2005). responders’ choice to return in pure trust games were believed to have no impact of negative reciprocity (mccabe et al., 2003). no one has been able to establish the coexistence of positive and negative reciprocity in the return decision of the responders. using a standard intention-based trust game, we have explained how the return decision of the responder is simultaneously influenced by both positive and negative reciprocity. it is important to understand that by the virtue of reciprocal behavior people pay back gifts and they also take revenge even in interactions with strangers at their own cost. according to marcel mauss, one of the founding scholars of reciprocal behavior, refusing to accept an allocation “is tantamount to declaring war” (mauss, 2002). it is not the refusal of the allocation itself, but the rejection of the bond of alliance that is at stake. the reason behind such rejection is the reciprocal reaction to unfair action (gintis, 2003). it is our intrinsic motivation to punish non-cooperators, even when the behavior cannot be justified in terms of self-interest (calabuig, fatas, olcina, & rodriguez-lara, 2016; fehr, fischbacher, & gächter, 2002; offerman, 2002). in the trust game set-up responders lack any ability to punish the proposer in financial measures as they can in an ultimatum game (rabin, 1993). still, they have a unique way to refuse the bond with the proposer in protest to an unfair/unequal allocation (transfer). that is, to return a major portion of money received to humiliate the proposer. if the responder reciprocates more proportionately for small transfers (e.g. $1) than she does for comparatively larger transfers (e.g. $3), we may identify those returns as a possible form of refusal of the allocation made by the proposer. we have introduced the concept of ‘fair’ transfer by the proposer. that is, the proposer may not trust the responder but makes at least equal allocation. in our trust experiment, a “fair’ allocation requires the responder to transfer $3 more. this makes a transfer below $3 unfair to the responder. the idea of fair allocation is not new (yamagishi et al., 2012), but has never been applied in a trust game set-up. the experiment is identical in construction to that put forward by berg et al. (berg et al., 1995). in this experiment used an online questionnaire to ask respondents how they would respond to each possible transfer made by the proposer. after studying the responses, we concluded that in response to an unequal division by the proposer, responders on average return more proportionally. we offer this result as the evidence of negative reciprocity, where responders return to humiliate and/or to refuse the bond of alliance with the proposer 3. experimental design the trust game experiment was conducted online using qualtrics as a platform. a general invitation was sent out to students at the university of north florida (jacksonville, fl) asking about their interest in participating in a trust game experiment and getting paid based upon their responses. altogether, 1065 students expressed interest in participating and provided important demographic information in response to the invitation. ultimately, 128 students were chosen in 6 such a way to reflect a good mix of students with respect to gender, race, and ethnicity since one of the broader objectives of the research was to understand whether the selection of responders has any significant gender or ethnic bias. the experiment was carried out in two parts. the first part involved a registration survey, which asked participants to complete a social, psychological, physical and demographic profile of themselves. the trust game experiment was explained where the proposer determines a transfer (split) of an initial endowment of $10. the responder then receives three times the remainder of the endowment left by the proposer and the responder then decides how much he/she will return to the proposer. each participant had to make contingent choices in the trust game as a responder for every possible dollar transfer (between $1 and $10) made to them. each participant received $5 to complete the registration survey as long as they completed the second and the final part, the decision-making experiment. the decision-making experiment asked respondents to choose 5 out of 28 characteristics (collected in the registration survey), which they wanted revealed to the rest of the participants. each participant then chose 10 of the remaining 127 participants, whom he/she desired to have as proposers in the trust game based on their revealed characteristics. depending upon how the experiment turns out, participants could earn up to $50 from the decision-making experiment alone. it is important to note that participants were not given detailed information of the decisionmaking experiment during the registration survey. rather, they were told that their payoff in the experiment would be determined through a combination of their responses in the registration survey and the decision-making experiment. this study analyzes the contingent responses of 128 participants as responders, collected in the registration survey. brandts and charness (brandts & charness, 2000) have established that contingent choices are parallel with experimental findings. we therefore propose that the result would be similar if participants were paid based upon their actions in the registration survey instead of compensated uniformly. 4. regression model and results we have analyzed respondents’ return ratios (return ratio), which is the amount returned divided by the amount transferred (𝑟 𝑡). we propose that a u-shaped relationship between the transfer and the return ratio indicates the existence of negative reciprocity in the trust game. figure 1 illustrates how average return ratio change across different transfer amounts (transfer), ranging from $1 to $10. it is important to notice that the return ratio decreases initially from 1.23 (for $1 transfer) to 1.17 (for $3 transfer), and then starts increasing.1 as explained previously, given that the transfer is less than or equal to $2, the division is unequal and unfair. however, any transfer greater than or equal to $3 is fair since it gives the responder the control to make an equal division of the allocation. as such, we created a dummy variable, fair, to signify whether a transfer is fair or not. fair is set equal to 0 when the transfer is $2 or less, and equal to 1 for all other transfers ($3 and more). as figure 1 portrays, responders’ return ratios are more for $1 and $2 (unfair transfers) than $3 (fair transfer). however, return ratios increase for fair transfer amounts of $3 and more. we have also added a plot of ‘fair return ratio’, which is calculated based on the sole objective of the responder to equalize payoffs. it is important to notice that as responders are not supposed to return any amount if transfer made by the proposer is less than $3. therefore, the fair return ratios are zero when proposer transfers $1 or/and $2. 1 using the levene test, homogeneity of variance among return ratios $1, $2 and $3 has been tested and established. 7 figure 1 average return ratios by transfer made by proposers note: the transfer amount (𝑡) ranges from $0 to $10. the responder receives three times the amount of the transfer (3𝑡), and decides how much he/she wants to return (𝑟; 𝑟 ≤ 3𝑡) to the proposer. figure 2 portrays what percentage of return ratios is less than 1 and what percentage is 1 and above, by transfer amounts. it is evident that the percentage of return ratios that are 1 or above is more for $1 and $2 transfer amounts, than when $3 is transferred. figure 2 characterization of responses by return ratios using panel data regression, we establish evidence of reciprocal reactions to unfair actions. since each participant made 10 choices, we treated participants as the panel variable and their 10 choices by transfers (transfer) as the time variable. the dependent variable in this regression is return ratio. the hausman test was done to determine that a random effect panel data regression model is appropriate for the data. five different regression models were tested to check the robustness of the relation. the variable descriptions are presented in table 1. the regression models control for some of the demographic characteristics of the respondents, such as gender, siblings, income, race and psychologic reaction to feelings hurt. the coefficient on transfer is positive and significant at the 1% level in all five models, supporting the economic 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 1 2 3 4 5 6 7 8 9 10 a ve ra ge r et u rn r at io ( r/ t) transfer made by the proposer, dollars (t) average return ratio (r/t) std. dev. fair return ratio 0 10 20 30 40 50 60 70 80 90 100 1 2 3 4 5 6 7 8 9 10 pe rc en ta ge o f r es po ns es transfer by the proposer, dollars (t) return ratio < 1 return ratio ≥ 1 8 literature on reciprocity in the trust game (positive reciprocity). the coefficient on fair is significantly negative (at 5% level), suggesting that return ratios are significantly greater for unfair transfers than fair ones (negative reciprocity). this result shows the existence of negative reciprocity and retaliation to unfair transfers (by the proposer) in the trust game. the results also suggest that respondents who earn their own living (independent), in contrast to those who are dependent on their parents, return comparatively more. although there is no multicollinearity issue in the regression results, we have dropped independent in model 5 to make sure household income (income) is consistently insignificant. it is interesting to observe that the return ratio of respondents who cry when feelings are hurt (cries) is significantly more than of respondents who withdraws themselves as feelings get hurt (withdraws). the result indicates that respondents who supposedly get the maximum impact by others’ actions, are those who care the most about other people’s feelings as well. except for the above-mentioned variables, no other factors seemed to be significantly determining the value of returnratio. table 1 demographic survey and variables description variable description obs. mean std. dev. min max returnratio amount returned (by responder) divided by mount transferred (by proposer) 1,240 1.27 0.57 0 3 transfer amount transferred by the proposer (between $1 and $10) 1,240 5.50 2.87 1 10 fair 1 if transfer is $3 or more; 0 otherwise 1,240 0.80 0.40 0 1 age age of the respondent 1,240 23.94 5.65 18 49 brothers number of brothers 1,240 1.04 0.98 0 4 sisters number of sisters 1,240 1.00 1.02 0 4 male 1 if responder is male; 0 otherwise 1,240 0.51 0.50 0 1 independent 1 if the responder supports himself/herself by selfincome; 0 if parents support the responder 1,240 0.75 0.43 0 1 income household income: 0 if under $25,000; 1 if $25,000 $29,999; 2 if $30,000 $34,999; 3 if $35,000 $39,999; 4 if $40,000 $49,999; 5 if $50,000 $59,999; 6 if $60,000 $84,999; 7 if over $85,000 1,240 2.92 2.63 0 7 cries 1 if the respondent cries when feelings hurt; 0 otherwise 1,240 0.15 0.35 0 1 argues 1 if the respondent argues when feelings hurt; 0 otherwise 1,240 0.18 0.38 0 1 withdraws 1 if the respondent withdraws herself when feelings hurt; 0 otherwise 1,240 0.68 0.47 0 1 aframer 1 if respondent is african american; 0 otherwise 1,240 0.19 0.39 0 1 amerindian 1 if respondent is african indian; 0 otherwise 1,240 0.02 0.13 0 1 asian 1 if respondent is asian; 0 otherwise 1,240 0.19 0.39 0 1 hispanic 1 if respondent is hispanic; 0 otherwise 1,240 0.21 0.41 0 1 paclslander 1 if respondent is pacific islander; 0 otherwise 1,240 0.02 0.13 0 1 nonresident i if the respondent is nonresident alien; 0 otherwise 1,240 0.02 0.15 0 1 other 1 if other; 0 otherwise 1,240 0.15 0.35 0 1 white 1 if the responder is caucasian; 0 otherwise 1,240 0.22 0.41 0 1 9 table 2 data description and panel data regression result (dependent variable: return ratio) model 1 model 2 model 3 model 4 model 5 coefficient std. err. coefficient std. err. coefficient std. err. coefficient std. err. coefficient std. err. transfer 0.03*** 0.004 0.03*** 0.004 0.03*** 0.004 0.03*** 0.004 0.03*** .004 fair -0.06** 0.03 -0.06** 0.03 -0.06** 0.03 -0.06** 0.03 -0.06** .03 independent 0.23* 0.12 0.23** 0.11 0.21* 0.11 0.21* 0.11 income -0.02 0.02 -0.02 0.02 -0.02 0.02 -0.03 .02 age -0.01 0.01 -0.003 0.01 -0.002 0.01 -0.004 0.01 0.003 .01 brothers -0.04 0.05 -0.04 0.05 -0.04 0.05 -0.05 0.05 -0.05 .05 sisters 0.01 0.05 0.003 0.05 0.02 0.05 0.02 0.05 0.02 .05 male 0.18 0.10 0.14 0.09 0.11 0.09 cries 0.29** 0.15 0.24* 0.14 argues -0.05 0.13 -0.04 0.12 aframer -0.15 0.15 amerindian 0.10 0.39 asian -0.04 0.15 hispanic -0.12 0.14 pacislander -0.29 0.41 nonresident 0.15 0.32 other -0.01 0.16 constant 1.16*** 0.26 1.08*** 0.22 1.07*** 0.20 1.16*** 0.21 1.21*** 0.21 chi-squared 80.72 78.88 72.33 75.41 70.79 observations 1240 1240 1240 1240 1240 5. conclusion trust and reciprocity play a crucial role in economic interactions. besides demographic determinants, so far trust (measured by the transfer made by the proposer) was believed to be the only action that controls the reciprocal reaction of the respondent in a pure trust game. based on the results of this study, we propose that transfers made by the proposer trigger a positive reciprocal behavior in the responder via the desire for equality and a feeling of obligation, and a negative reciprocal behavior due to the desire to humiliate or to reject the bond of alliance in reaction to an unfair transfer. therefore, in the pure trust game set-up, trust and reciprocity (return ratio determined by the responder) should maintain a u-shaped, rather than a linear relation. the results indicate that transfers made by the proposer may not only indicate the trust he/she puts in the responder, but also how strongly they want to make more than the responder and do not want to lose that control. while we believe that the evidence in this study is compelling, future experiments should be run with monetary incentives tied to decisions. efforts should be made to separate out trust and reciprocity from intention-based or unconditional other regarding preferences (j. c. cox, 2004; j. cox, walker, & schoon, 2007). as the responder cannot materially hurt the proposer, the responder must believe that a rejection of the allocation hurts the proposer psychologically. therefore, future studies need to investigate the proposer’s expectations from desired allocation and test whether the responder seeks to act in a way opposite to the proposer’s belief to hurt him. that is, future research should explore fairness intentions and distribution preferences of both the proposer and the responder in trust game scenarios (falk, fehr, & fischbacher, 2008). that way, the offered explanation about the u-shaped relation between transfer made by the proposer and the return ratio will be further validated. finally, evidence suggests that the return ratio increases with economic freedom. that is, economically independent responders reciprocate more favorably than their counterparts. 10 participants were also asked how they react when their feelings get hurt. in response, they mentioned that they either cry, or argue, or withdraw themselves from the situation. result suggest that respondents who ‘cries’ when their feelings get hurt return significantly more than others. this indicates that people who are most affected by the actions of others, known or unknown, are also those who care the most about feelings of others. both the results point to the importance of psychological characteristics of participants. therefore, trust game experimental studies should also work on the psychological profiling of the participants and tie their responses to their beliefs, socio-demographic and psychological characteristics. acknowledgements we acknowledge support from the commission of diversity and inclusion, university of north florida (codi research grant, 2014). we are thankful to dr. russell triplett (faculty, department of economics and geography) for his useful comments and reviewing our work. however, the opinions expressed 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(2012). rejection of unfair offers in the ultimatum game is no evidence of strong reciprocity. proceedings of the national academy of sciences of the united states of america. https://doi.org/10.1073/pnas.1212126109 microsoft word 9 (18-28) dugiel 133 electronic trade in the world trade organization difficulties in negotiating an agreement? wanda dugiel warsaw school of economics, poland ewa latoszek warsaw school of economics, poland received: october 7, 2018 accepted: november 5, 2018 online published: december 4, 2018 abstract the aim of the study is to present the premises that make it difficult to reach a multilateral agreement on electronic commerce in the world trade organization. electronic commerce at the end of the second decade of the 21st century is an inseparable element of international trade, as a result of the digital revolution leading to lower costs when companies enter the global market. they often take into account the digital revolution of the state when creating new business models, especially in china, which has obtained the world's leading position in the field of digital services export. increasing competition in the field of digital services, in the absence of regulations on electronic commerce in the wto, will increase the interest of developed countries, including australia, the united states, the european union, japan, african countries to solve the subject of e-commerce in regional integration agreements. the problems with reaching an agreement on electronic commerce in the wto result not only from the specificity of trade in electronic form but from the general strategy of trade liberalization in other sectors. keywords: international trade; electronic trade; e-commerce; world trade organization; digital economy. 1. introduction electronic trade at the end of the second decade of the 21st century is an inherent element of international trade and is becoming increasingly important for businesses operating in the face of the growing importance of the digital economy. it is estimated that after 2020 there will be a rapid increase in e-commerce transactions that enterprises will use. electronic commerce is conducive to economic development, thanks to the increase in employment, which is why there is a great interest in this type of exchange for developing countries. new digital technologies, including the development of the internet of things, allowing the connection of devices using international journal of economic behavior, vol. 8, n. 1, 2018, 133-143 134 a computer network, as well as the dissemination of big data, allow the development of industry infrastructure, health care, agriculture (unctad, 2018). thanks to these technologies, new business models are created, as well as the method of trade exchange in goods and the flow of services. the aim of the study is to present the premises that make it difficult to reach a multilateral agreement on electronic commerce in the world trade organization. the analysis starts in point 2, in which the role of e-commerce in international trade is presented. the following section 3 refers to regulating e-commerce in the wto. finally conclusions, regarding the study goal are drawn. 2. the importance of e-commerce in international trade all inventions and new technologies have always changed the way of exchange in international trade over the years, in the 20th century mainly thanks to containers, inventions in transport, and in the xxi due to the digital revolution, especially the development of the internet. the digital economy, mainly via the internet, allows the customer to contact the seller in the short term, often using electronic platforms. the concept of digital economy, which don tapscott distributed in his book entitled "the digital economy: promise and peril in the age of networked intelligence" covers the issues of dissemination of knowledge as a basic element of the national economy, by digital means (tapscott, 1995). in the digital economy knowledge will be transferred using digital devices as well (rupali). the development of the digital economy radically changes the activities of companies on the market. companies will be forced to change the business model in the modern global economy (harvard business review, 2017). new inventions in digital technologies change production processes in the industry sector, services (mainly financial and telecommunications). electronic commerce leads to lower information costs due to the lack of the need to be present on the local market (freund, hufbauer, and jung, 2016). the operation of the digital economy favors the defragmentation of production between countries, and the separation of the traditional value chain into the whole world, which then translates into the operation of the global value chain (ravenhill, 2017). enterprises, unlike the traditional business model, do not deal with the whole of the tasks in the value chain, but they only play a specific role and perform selected tasks. in business models that allow the introduction of new technologies, companies use new forms of searching for distribution channels and customer acquisition as well as increasing productivity (gassmann, frankenberger, and csik, 2013). innovations, technologies and internet development force the creation of various new forms of business models, so that enterprises can increase profits from global operations and gain a competitive advantage over other companies. along with the trade of products having a material nature, there was also the exchange of computer software and the use of online platforms. with electronic commerce it is much easier to conduct foreign trade transactions, due to the creation of a new supply chain that differs from traditional international trade (international trade centre, 2017). companies do not have to be located in a given geographic market, because information about a product or services is found on the internet. advertising costs may be reduced. the great importance of the digital revolution, very fast technological changes and e-commerce transactions lead to lower information costs, market entry for companies, and new opportunities for profit and acquisition of outlets. they are conducive to the development of international trade. in the terminology of the world trade organization (wto), the concept of electronic commerce, popularly referred to as e-commerce, concerns the digital exchange of goods and services, mainly using the internet or computer networks (world trade organization, 2015a). 135 thus, the concept of electronic trade and e-commerce can be used interchangeably. electronic commerce includes the exchange of goods that subscribe to both material nature and digital goods in a way that enables "access to products" for consumers (business to consumer) and for entrepreneurs. the concept of e-commerce covers both technological equipment, infrastructure, and information transmission processes. e-commerce applies to the entire industry sector, individual industries, producers and users, information exchange and business operations on the global market via the internet (mann, eckert, and cleeland knight, 2000). there is a rapid development of the computer industry, which will have an impact on changes in the structure of the industry. as part of e-commerce, the most common transactions are in the form of business to business (b2b), business to consumers (b2c), and have a small share in e-commerce, replacing customers to customers and business to government (unido, 2018). in the first research on the interdependence of using e-commerce and the productivity of companies, it was noted that companies that conducted online business decreased the transaction costs of their operations. the results of scientific research, which included companies from the european union conducting business activity via e-commerce, showed that online exporters are more efficient, thanks to mainly improved stock policy (duch-brown and martens 2018). such a fast growth in e-commerce is possible thanks to the development of the internet, various forms of electronic payments. in the last twenty years, access to the internet has increased on a global scale from 4% to 40% of the total population in the world (oecd, 2017). electronic commerce accounted for almost 17% of total retail sales in china, while in the united states almost 9%. investments in the development of financial technologies in china allow internet users to use e-commerce. the largest e-commerce companies in china have created various forms of electronic payments (chorzempa, 2018). for companies, the largest companies in the electronic commerce in the world alibaba group in china created services in the form of advertising. trade exchange involves various difficulties for companies related to the creation of a virtual store or online platform, and the preparation of this platform from the technical side, i.e. coding and editing images. the most important part of e-commerce are the electronic transactions occurring between enterprises, which in 2015 reached the level of almost 90%, while transactions between enterprises and consumers account for only about 10% of the total e-commerce (figure 1), (unido, 2018). electronic commerce in the form of transactions occurring between enterprises is many times higher than in the form of electronic transactions between enterprises and consumers. according to unido and international trade center, e-commerce accounts for around 12% of all international trade (unido, 2017). the united states plays the leading role in ecommerce transactions, which reached usd 6.4 trillion in 2015, and china's transactions with enterprises worth almost usd 620 billion in 2015 ranked highest in the case of transactions between enterprises and consumers. the united states is one of the largest countries with the share of e-commerce transactions in the economy, in which the value of transactions amounted to over 7 trillion dollars in 2015. in e-commerce transactions, the forms of business to business exchange prevail. in japan and in south korea the share of business to business in total ecommerce amounted to 96% in 2015, 91% in the united states, 91% in germany, 90% in spain, 90% in canada, 89% in france, and 87% in australia, 76% in the uk, 69% in china (figure 2). 136 figure 1 – share of individual exchange forms in e-commerce in 2015, in % source: data for 2012 come from unctad, 2015, p. 12. data for 2015 come from unido, 2018, p. 6. figure 2 – countries in the world with the largest business-to-business (b2b) share in the economy, in % in 2015 source: unctad, 2017, p. 28. the importance of emerging economies in e-commerce is growing. china occupies the largest number of people using the internet (pencea, balgar, 2016). in china there is a rapid growth in retail sales over the internet, innovations allow the use of more and more new forms of business. china is also one of the most important exporters of digital goods as well as services. in 2013, china's share in online sales in the world was 35%. 89 90 4 8 7 2 82% 84% 86% 88% 90% 92% 94% 96% 98% 100% 2012 2015 business to business business to consumer other 137 such a large share in e-commerce in the world strengthens state policy in china in promoting e-commerce throughout the country, with particular emphasis on rural areas (couture, faber, gu, and liu, 2018) . the share of e-commerce in china in gdp is the highest among countries in the world and amounted to 7.05% in 2015, followed by the following countries: great britain (6.12% of gdp); south korea (4.7%); united states (3.32% of gdp); france (2.97%); japan (2.77%); canada (2.3%); germany (1.97% of gdp); australia (1.8% of gdp); spain (1.68% of gdp) (figure 3). figure 3 – the share of e-commerce in gdp in countries with the greatest importance of ecommerce source: unido, 2017, p. 14. to measure the intensification of business to consumer transactions on the internet, unctad has developed an e-commerce index. the unctad index contains the degree of security of conducting electronic transactions, which must be secured due to payments and personal data necessary to deliver goods or services, access to the internet because the transaction is carried out online and digital products are also delivered electronically (unctad, 2017). the countries with the fastest development of business to consumer are luxembourg, south korea, and japan. in these countries, the majority of consumers made purchases via the internet. electronic commerce in the form of business to consumer is possible due to the access of consumers to the internet (figure 4). 7,05 6,12 4,7 3,32 2,97 2,77 2,3 1,97 1,8 1,68 0 1 2 3 4 5 6 7 8 china united kingdom south korea united states france japan canada germany australia spaina the share of e-commerce in gdp the share of e-commerce in global gdp 138 figure 4 – the ten most important economies in the world according to the electronic trade index unctad business to consumer 2017 source: unctad 2017a, p.10. with the increase in the importance of e-commerce, countries are adapting their economic policy to the new conditions of conducting international trade. the european union has adopted a policy of creating a digital single market (european commission, 2015). one of the most important issues in the regulation of e-commerce is the issue of collecting personal data through digital networks. a proposition to create the so-called digital sovereignty of persons and digital freedom pass for the security of providing internet services (snower, 2018). along with the flow of digital services, the importance of the provisions on the protection of personal data has increased, in particular, the document of the council of the european union of 2018. general data protection regulation (gdpr) (mattoo and meltzer, 2018). e-commerce leads to increased trade, and the flow of services, some countries around the world. the united states, the european union and canada are increasing the possibilities of access to internet services while maintaining data security (aaronson, 2012). 3. electronic trade in the wto the exchange via electronic transmissions concerns goods and services; therefore, it is regulated in both the gatt 1994 and the gats. the dilemmas associated with regulating the issue of e-commerce in the wto forum concerned the question of qualifying digital goods in terms of goods or services. panagariya proposed the definition of electronic transmission as a flow of services because there is no exchange of goods at the border (panagariya, 2000). the issue of e-commerce was not included in the negotiation topics of the doha development round, whose negotiations began in 2001 (wunsch-vincent, mcintosh eds., 2004). in 1998, the definition of e-commerce covering both production as well as distribution and marketing activities on the market, i.e. sales and delivery of goods, as well as services by electronic means, was adopted in the work on regulations regarding e-commerce in the wto (world trade organization, 1998). wto activities for foreign trade regulation concerned the infrastructure necessary for the development of e-commerce. wto activities in the field of international services were to cover the scope of the flow of services, i.e. the mode of delivery 96,5 96,4 96,4 95,9 95,5 95,1 94,6 93,8 93,5 93,3 89 90 91 92 93 94 95 96 97 139 of services from one country to the other, or through commercial presence (article i of the gats), most-favored-nation clauses (article ii of the gats), transparency (art. ii gats), increasing the share of developing countries in international service flows (article iv of the gats), national regulations and standards (article vii gats) and competition (article viii, article ix of the gats). in terms of trade in goods, issues of market access, rules of origin and standards were discussed. in the case of intellectual property protection in e-commerce, protection and enforcement of copyright, trademarks, new technologies and access to technology. the wto was to draw up a program on the impact of e-commerce on the economic development of developing countries. the moratorium on the non-application of duties in e-commerce was agreed in the form of a decision of the geneva ministerial conference of 1998 and was subject to renewal at the next wto ministerial conferences every two years. in december 2017, the wto members adopted a declaration on e-commerce. at the eleventh ministerial conference of the wto in buenos aires, there were problems with the renewal of the moratorium on the non-application of customs duties in the case of electronic transmissions. in the case of decisions on the work on e-commerce, a draft decision was prepared to extend the decision (world trade organization, 2017a) on the non-imposition of customs duties for electronic transmissions to the next ministerial conference in 2019. the attempts to renew the mandate are contained in document wt/l/274. wto member states concentrated in the african group, which is formed by a group of countries at the world trade organization multilateral trade negotiations, recognized that the renewal of the moratorium should be subject to discussion, and states should have the right to establish national regulations and data protection and security of electronic transactions (world trade organization, 2017b). proposals for e-commerce were submitted by countries such as japan, russia, the european union, costa rica, singapore, china, bangladesh, india, and the african group. in the next wto documents, the decision was made not to introduce duties on "electronic transmissions" until 2017 (world trade organization, 2015b). progress in regulating ecommerce has not been achieved at the ministerial conference in buenos aires in december 2017. india, in retaliation for the lack of concessions from the united states in agricultural trade, has not signed a moratorium on the collection of customs duties for electronic transmission (shawn, 2017). due to the lack of arrangements for the adoption of an agreement in the field of e-commerce, some countries such as australia, the united states, and the european union have decided to draw up regulations in this area according to national regulations or in several-party agreements. work on e-commerce is important for high-tech companies like apple or google. the growing importance of e-commerce has led to the inclusion of this topic in the work of the world trade organization. these works began in 1998 at the second ministerial conference in geneva (world trade organization, 1998). during the second ministerial conference, the states accepted the commitment to develop the wto program on the development of electronic commerce in the world, in particular taking into account the economic interests of developing countries and not to introduce tariffs for electronic transmissions. the wto consultation process with countries on regulating e-commerce at the multilateral level has begun. the proposals of russia, japan, the european union, singapore, china, bangladesh, and india have influenced. the issues of e-commerce were included in agenda 2030, as an objective 9 for innovation, due to the great importance of e-commerce in the economic development of countries. 140 the skeptical approach to regulating the issue of e-commerce in the wto results from worries of developing countries about the deterioration of their competitive position in international trade due to the poor infrastructure in these countries. unctad data shows that companies in most of the developing countries do not use the opportunity to sell on the internet. the developed countries and emerging economies, china and russia play the most important role in e-commerce. internet trading platforms can play a large role in accessing international global trade. amazon, alibaba and ebay platforms offer companies from developing countries the opportunity to register as part of a given platform and provide services (unctad, 2015). developing countries in the wto forum, thanks to the need to renew the moratorium on e-commerce, want to gain greater market access to developed countries for other products. the issue of supporting the moratorium on e-commerce by developing countries depends on equipping these countries with technological factors, as well as resources in the form of knowledge capital to service a variety of technical devices. the rapid development of e-commerce requires increased digital security related to the appeals procedure securing consumer interests as well as the quality of goods. digital technologies lead today to changes in business models. the functioning of the digital economy requires multilateral regulation in the wto. trade in the form of e-commerce still requires regulation on a global scale at the world trade organization (wto). the development of the digital market, however, is very diverse between developed and developing countries. the fast growth of digital connections is observed in africa, south america. with the skeptical attitude of developing countries to regulating e-commerce in the wto and retaliatory actions in multilateral trade negotiations resulting from the lack of concessions in the liberalization of agricultural trade for developing countries, the importance of bilateral agreements is growing. interest in regional agreements also results from the development of the digital revolution (oecd, 2017). in many regional agreements, provisions have been made on e-commerce and digital services. in the first regional trade agreements, starting from 2001, they contained provisions on electronic commerce (e-commerce). issues of e-commerce are provided for in contracts such as tpp, which have not yet entered into force. the provisions on e-commerce were included in the european union's trade agreements with singapore (chapter 8) and vietnam (chapter 8). the free trade agreement with singapore was signed on 19 october 2018, with particular emphasis on data protection. these provisions apply to digital trade. in the case of the framework agreement on partnership and cooperation between the eu and vietnam, signed on june 27, 2012, the provisions of the agreement concerned the issues of electronic signature, rules for storing information, consumer protection in e-commerce. the conclusion of the provisions on e-commerce was a priority for developed countries. in 2008, the european union signed the cariforum agreement, which included provisions on e-commerce. the decision on e-commerce was not included in agreements signed by least developed countries. 4. summary and conclusions electronic commerce in the wto forum was regulated in the form of a decision of the ministerial conference in geneva in 1998, called a moratorium in which there was a commitment not to set tariffs on electronic transmissions. this moratorium has been subject to renewal every two years at successive ministerial conferences since 1998. for the first time, such important difficulties in extending the moratorium at the ministerial conference in buenos aires resulted from the difference of views of wto member countries on the further liberalization of international trade, in particular, agricultural trade. developing countries, in 141 particular india, are using the possibility of blocking work on regulating e-commerce in the wto in order to strengthen their role in negotiating other issues in multilateral trade negotiations. the increase in the importance of e-commerce cannot mean the exchange of goods and services with poor regulation of the security of personal data being transferred. furthermore the development of e-commerce cannot mean an offering in the sale of products exclusively by electronic means, as the consumers are also accustomed to traditional methods of sales and payments when exchanging goods and services. references 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(eds.), (2004), wto, e-commerce, and information technologies, from the uruguay round through the doha development agenda, a report for the un ict task force markle foundation, new york. microsoft word 8 (19-02) amole 121 leadership styles, organizational politics and employees` commitment in selected public and private organizations in lagos state, nigeria ik muo olabisi onabanjo university, nigeria adebiyi j. abosede olabisi onabanjo university, nigeria jonathan ehimen ekpudu federal university of agriculture, abeokuta, nigeria bilqis bolanle amole university of lagos, nigeria received: november 19, 2018 accepted: october 21, 2019 online published: december 4, 2019 abstract the study examined leadership styles, organizational politics and employee’s commitment using selected private and public organizations in lagos state as case studies. to achieve its objectives, it probed the direct relationship that exists between organizational politics and the leadership styles used in both private and public organization and as well as the extent to which employees’ commitment depends on leadership styles and organizational politics in both private and public organization. a descriptive survey was employed using a sample size of 112 respondents. the main research instrument used was questionnaire. data collected were analyzed using frequency and percentages; while a one-way anova and regression statistical analyses were used to test the study’s hypotheses. results from the hypotheses tested revealed a major arithmetical relationship between leadership styles and employees’ commitment; also between organizational politics and employees’ commitment in both public and private organizations in lagos state, in addition that organizational politics and leadership styles used in both public and private organization have significant difference in their respective abilities to entrust employees’ commitment. the study concluded that there is a positive relationship between leadership styles and the level of employees’ commitment in both private and public organization and that a positive relationship also exists between organizational politics and the level of employees’ commitment in both public and private organization in lagos state. the study therefore recommended that the management should embrace situational leadership international journal of economic behavior, vol. 9, n. 1, 2019, 121-135 122 approach to attract employees’ commitment and that they should employ workers who have potential to adjust and adapt to their organizational and political culture. key words: organizational politics; employee commitment; leadership styles; affective commitment. 1. introduction organizational politics is the avocation of individual objectives and personal motives in an organization without considering how they interact with organization’s efforts to attain its objective. organizational politics denotes various activities that are linked with the utilization of regulated plans to ameliorate organizational or personal interest. studies have shown that individuals who possess political knowledge incline to be more effective in reaching more personal ability, coupled with handling job and stress demands than their counterparts who are politically naïve (jarret, 2017). organizational politics is a set of unofficial, informal activities, usually not visible to the organization to promote their ideas, heighten power, or attain other directed objectives (hochwarter, witt, & kacmar, 2000; brandon & seldman, 2004; cacciattolo, 2014; cheong, & kim, 2018; özen, 2018). organizational politics starts when an individual has his interest or agenda close to himself without considering how his activities influence the entire organization. such activities may be evident via personal disputes and power conflicts in order to promote individual status. it may also be a situation in which an individual bypasses the official channel in pursuit of objectives that may not necessarily be personal (muo, 2015). it is also noteworthy that organizational politics is not always totally being negative (muo & oghojafor, 2012). in modern organization, leadership is regarded as one of the most crucial elements that significantly regulate how the employees, managers and organization as a whole perform (wang, 2005; mkheimer, 2018). the general idea of leadership style is crucial to management in an organization as such a leader is distinguished to be the individual who fixes a path and encourages his followers to follow the path. the role of leadership in regards to organizations politics cannot be ignored. in this case, one’s action as a leader (without regard to the leadership style applied) determines how follower, voluntarily work together to achieve organizational objectives. that is the manner and way one uses his or her office as a leader determines the political climate around the organization. politics at work is usually difficult to annul whether due to personality trait or career prospects and opportunity. there are usually individual(s) (people) who utilize work place as a battlefield. hence the role of the leader in handling such a scenario, determines the political climate and the overall performance of the organization. as such, having the discernment of political conduct and the effective usage of leadership styles to guide employees in the direction of organizational goals is vital to optimizing the outcomes of organizational politics and improving one’s standing as a good leader, whose role is elaborately linked to the organization’s political climate. employee commitment is defined as the connection employees go through with their organization. it is also the extent to which an individual’s recognition as well as involvement or participation in an organization. when employees feel attached to an organization, they tend to exhibit strong confidence (belief) in and adoption of organizational set goals, and hence his readiness to put in significant attempt to help achieve the overall objectives. the coordination of employees at workplace is a vital feature of management process. some leaders do not believe that employees need to be encouraged and motivated in 123 order to achieve organizational goals and objectives. also, organizational politics particularly in the public sector has done more damage than good as such have negatively touched on the commitment of employees. most employers do not exhibit good leadership behavior in the sense that they treat employees as tools in the course of pursuing their goals. this ultimately has reduced the commitment level of their employees. since employee commitment is a tool for achieving goals and objectives of an organization, if they are not effectively motivated the turnover rate of employees will increase which in turn reduces employee productivity. this is because employees are demotivated. hence, the study evaluates organization politics, leadership styles and employee commitment in selected public and private organizations in lagos state. lagos state is a state in southwestern geopolitical zone of nigeria. it is the most economically important state of the country and largest urban area. it well-known commercial city in nigeria where majority of organizations reside. it is major financial center and fifth largest economy in africa if it were to be a country. to achieve this, the study will ascertain the extent to which leadership style affects employee’s commitment; the possible ways in which organizational politics hinders employee’s commitment; the direct relationship that exists between organizational politics and the leadership styles used in organization, and the extent to which employees’ commitment depends on the interaction between leadership styles and organizational politics. 2. review of literature and theoretical framework 2.1. theoretical framework the theoretical review embedded in this paper revolves around the following three theories which are allen and meyer’s three component model, the full range leadership model, and pfeiffer’s model of organizational politics. allen and meyer’s three component model although different authors have different definitions of ‘employee commitment’, the definition of meyer and allen (1991, 1997) captures the core issues in commitment when they defined employee commitment “as a psychological state that characterizes the employee’s relationship with the organization and has implications for the decision to continue membership in the organization”. they further pointed that an eminence exists between behavior and attitudinal commitment. in the latter approach, it is a mind-set or attitude of employees that has been used with respect to either consequences or conditions of that commitment. while former approach, regarded it as a flow of activity which functions as a vital part as employees (human resource) become committed unambiguously to assure existing behavior. for example, by continuing to be with the organization, they absorb their attitudes in proportion to the common idea of work experiences to ensure it is maintained and deflect cognitive dissonance as postulated by meyer and allen (1990). the influence to which the two approaches have on the formulation of employee’s commitment is to of a large scale. however, meyer and allen (1991), demonstrated three different types of commitment as; affective commitment, continuance commitment, and normative commitment. also, they stated that the connection an employee has towards his/her organization is moderated by the style of leadership, as well as the pattern and tempo of organizational politics. as a result, the knowledge employees acquire about the nature of politics and leadership style of their workplace significantly influences the level of commitment to their organization. 124 the full range of leadership model this leadership model was formulated by bass (1990) and consists of transactional, transformational and passive leadership styles. the multifactor leadership questionnaire (mlq) was also introduced by bass in order to assess the full range of leadership styles in the organizational scenery, which in keeping with turner and miller (2005), is the utmost extensively adopted leadership scale in the prior studies. bass (1990) model covers nine (9) factors of leadership styles/behaviors in an organizational perspective. this study only considers the transformational and transactional leadership styles. whilst there exist many theories of leadership behaviors which suggest diverse leadership behaviors/styles, transactional and transformational leadership styles have attracted the attention of different authors as better perspectives for gaining more insight on leadership behaviors. burns (1978) recognized as the first scholar to introduce transactional and transformational leadership, which proposed that they both are at opposite ends of the continuum (range) (bass, 1990). however, bass (1985) stated that transformational style of leadership widens the influence of that of transactional leadership. pfeffer’s model of organizational politics this can also be referring to as pfeffer’s theory of organizational politics. pfeffer (1981) stated that “political activities are seen to be the outcome of several conditions” the existence of these conditions will results in politics and power in the environment of an organization which enforces the constraint and demands that will be accommodated in terms of end and means. that is, by following whatever method (means) an organization acquires functions and what objectives (ends) they are pursuing. 2.2. empirical review of the past literature there have been series of studies aimed at exploring the relationships, particularly between transformational, transactional, laissez-faire leadership styles and organizational commitment (dunn, dastoor & sims, 2012; mkheimer, 2018; avolio, zhu, koh, & bhatia, 2004; rehman, bwa, wang, lawler & shi, 2004; emery & barker, 2007; limisila & ogunlana, 2007). yiing and ahmad (2009) looked at the link that exists between affective commitment and leadership behaviors such as: directive, supportive and participative in line with the controlling effects of organizational culture. they found that all the three leadership behaviors exhibit significant and positive bond with affective commitment of employees. also, in the study of limisila and ogunlana (2007) centered on performance and leadership effect and its correlation between leadership styles and subordinates commitment, they found that transformational style of leadership has significant positive correlation with affective commitment, whereas no significant bonds were observed to occur between laissez faire leadership style, transactional and affective commitment. in a cross-cultural research by dun, dastoor and sims (2012), on transformational leadership and organizational commitment, they discovered a strong positive link between transformational leadership, normative and affective commitment, but insignificant connection between continuance commitment and transformational leadership. avolio, et al., (2004) in their study affirmed a positive link between transformational leadership style and employee commitment. sun, and xia (2018) confirmed that organizational politics perception has numerous influences on workers’ behaviors. they asserted that organizational politics observation and its apparatus drive organizations and employees in precautionary measures to eradicate the negative effect of organizational political consciousness. 125 in an empirical study of ebikeseye, and dickson (2018), affirmed that there was a positive link between employee commitment to work and increase in firms’ productivity. they concluded that in order to increase productivity and peaceful relations in the work setting, management of firms need to crave the enabling and conducive environment to motivate staff to be committed to work and increase productivity. mkheimer, (2018) study acknowledged that most organizations have same styles of leadership. the results showed that, transactional leadership style has an essential impact on business success. however, transformational leadership style was found to have negative impact on business success. joo, yoon, and jeung (2012) study examined the potential role of leadership style on organizational commitment, and found a positive relationship between transformational leadership and organizational commitment. they found that group goal, vision articulation, intellectual stimulation and promotion were significant interpreters of organizational commitment. kaplan and kaplan (2018) study on the relationship between organizational commitment and work performance, the result showed that affective commitment had a positive influence on work performance, whereas normative and continuance commitment had insignificant sway on work performance. walumba, wang, lawler and shi (2004) and rehman, shareef, mahmood and ishaque (2012) examined the interaction of both transactional and transformational leadership on organizational commitment, and found that transformational style of leadership had so much more contributions to the organizational commitment level than transaction leadership style. according to the research done by edward and richard (2016), they found a positive and significant connection between intellectual stimulation, inspirational motivation, and idealized influence this is in line with ideas the individuals have about the work they are engaged within the organization. an examination of the works of the various authors above shows a gap in literature; that most studies failed to look into the moderating effect of organizational politics on leadership styles and how it will influence employee commitment. hence, this study critically looked into that direction with reference to selected public and private organization in lagos state. figure 1 below depicts the assumed relationship between the organizational politics, leadership styles, moderated by motivation, and employee commitment which is moderated by job satisfaction and organizational citizenship between behavior. their interrelationship was empirical investigate in both private and public organization to see if there exist significance difference. 3. methods a descriptive survey research design was used in this study. stratified sampling technique was used to select the public and private organizations in lagos state. five organizations each from the category of organization under study were used to make comparative analysis of the employees’ perception on these constructs' leadership styles, organization politics employees’ commitment. the public organizations were government parastatals in lagos state: ministry of commerce, industry and cooperatives, ministry of agriculture, ministry of economic planning & budget, ministry of education, lagos state ministry of establishments, training and pensions; while the private organizations encompass beloxxi group; dvls integrated combine services, guaranty trust bank plc; forte oil; and greenlife pharmaceuticals limited. the population of the study is the employees of various parastatals under consideration. a selfadministered questionnaire was used as a research instrument to capture the perception of 126 employees on the leadership styles, organization politics and employee commitment of the selected organizations in lagos state. two hundred and twenty (220) copies of questionnaire were distributed among the employees of selected organizations. out of the copies of questionnaire distributed one hundred and twenty (120) were returned, and 93% of the returned copies of questionnaire were valid and used for the analysis. the proportion of the public organization was 52% from the returned copies of questionnaire while the remaining 48% came from the private organizations. figure 1 – conceptual model showing the link between and among leadership styles, organizational politics and employee’s commitment source: developed by researchers, 2018. 3.1. measures of related variables organizational politics instrument developed by kacmar and carlson (1997) that is the perceptions of organizational politics scale (pops) was utilised for this study. this scale looked into three (3) dimensions, encompassing: “go along to get ahead” (7 items), “general political behavior” (2 items), “pay and promotion policies” (6 items); which makes it 15 items all together. employee commitment was measured using the three component model of organization commitment developed by meyer and allen (1991) emphasizes commitment as a spectacle to an organization exhibit 3 distinct components that significantly influence how employees relates towards their organization. the 3 components are; continuance commitment that is fear of loss (8 items), affective commitment that is affection for the job (8 items) and normative commitment that is sense of obligation to stay (8 items). while, leadership style was statistically measured by implementing the multifactor leadership questionnaire, (mlq) (avolio, bass, & jung, 1999; avolio et al., 2004; bass & avolio, 1993; 1994), which differentiates between transformational leadership and transactional leadership style. in accordance to mlq, transformational leadership has four (4) subscales which are inspirational 127 motivation, charisma, individualized intellectual stimulation consideration. while transactional model has 3 subscales: management-by-exception (mbe) contingent reward, and laissez-faire. data analysis data collected were analyzed using one-way anova, and multiple regression analysis were used to measure the statistical relationship between organizational politics, leadership styles and employees’ commitment in an organization, through predictive analytics software (pasw). reliability test according to the responses that obtained from the pilot study, using cronbach alpha to determine the internal consistency and reliability statistics of the items. the reliability statistics for the measurement are shown in table 1. table 1 – reliability statistics sn variables items cronbach's alpha 1 organizational politics 15 0.685 2 employees commitment 24 0.768 2a affective commitment 8 0.756 2b continuance commitment 8 0.701 2c normative commitment 8 0.725 3 leadership styles 9 0.821 3a transformational leadership 5 0.948 3b transactional leadership 4 0.699 4 overall reliability 48 0.866 source: field survey, 2018 4. data analysis and results this section presents the data analysis and its clarification. the techniques used were the frequency distribution tables and percentages, while one-way anova and regression statistical analysis was adopted for the study hypotheses. 4.1. bio-data characteristics of the respondents table 2 below shows that majority of the respondents (54.5%) were within age group of 31-40 years. also, the table shows that there almost equal distribution of gender among the respondents that participated in the study. hence, high skewness of responses due to gender differences was eliminated. in addition, that majority of the respondents has at least a university degree and was married. furthermore, majority of the respondents sampled from both public and private organization in lagos state, had over 10years, but less than 15years working experience. 4.2. comparative analysis between public and private organization in lagos state this section presents the comparative analysis on the perceptions of respondents from public and private organization on organizational politics, employee commitment and leadership styles. the results have been presented using means and standard deviation analysis. analysis of variance (anova) was used to show the significance difference with the aid of statistical software package (spssstatistical package for the social science version 20.0). 128 table 2 – bio-data distribution of respondents variables n % variables n % age group 20 30 years 28 25.0 marital status single 23 20.5 31 40 years 61 54.5 married 89 79.5 41 50 years 13 11.6 total 112 100.0 51 -60 years 10 8.9 sector private organization 54 48.2 total 112 100.0 public organization 58 51.8 gender male 58 51.8 total 112 100.0 female 54 48.2 service length 0-5years 11 9.8 total 112 100.0 5-10years 15 13.4 educational qualification ssce 1 .9 10-15years 66 58.9 diploma/hnd 22 19.6 15-20years 20 17.9 b.a/b.sc. 65 58.0 total 112 100.0 mba/phd. 1 .9 others 23 20.5 total 112 100.0 source: field survey, 2018 case one: organizational politics there is no significant difference in the insight of organizational politics in the public and private organization table 3 shows the descriptive and the anova analysis output which indicates whether there is a statistically significant difference in the perception of organizational politics between the public and private organization. it was recognized that the significance value is 0.000 (i.e, p= 0.000), which is inferior to 0.05. hence, a statistical significant difference in the perception of organizational politics between the public and private organization is established. this implies that the organizational politics in the public organization is different from that of the private organization. table 3 – one way anova for organizational politics on private and public organization organizational politics n mean std. deviatio n std. error 95% confidence interval for mean min max lower bound upper bound private organization 54 2.1500 .47296 .07130 2.7062 2.9938 2.00 3.60 public organization 58 2.8627 .49164 .05962 2.7437 2.9817 2.00 3.60 total 112 2.8577 .48228 .04557 2.7674 2.9480 2.00 3.60 anova sum of squares df mean square f sig. between groups 3.004 1 3.004 12.783 .000 within groups 25.813 110 .235 total 28.818 111 source: authors` computation, 2018 129 case two: employee commitment there is no significant difference in the way employee are committed between the public and private organization table 4 below results show that p<0.05. it is an indication that there is a significant difference in the way employee are committed between the public and private organizations. table 4 – one-way anova for employee commitment private and public organization employee commitment n mean std. deviation std. error 95% confidence interval for mean min. max lower bound upper bound private organization 54 3.0030 .39868 .06010 3.1818 3.4242 2.58 4.29 public organization 58 3.3444 .43698 .05299 3.2386 3.4501 2.58 4.29 total 112 3.3281 .42100 .03978 3.2493 3.4070 2.58 4.29 anova sum of squares df mean square f sig. between groups 2.046 1 2.046 11.494 .000 within groups 19.628 110 .178 total 21.674 111 source: authors` computation, 2018 case three: leadership style there is no difference in the leadership style used in the public and private organization table 5 shows the descriptive and the anova analysis which indicates a statistically significant difference in the leadership style adopted in the public and private organization. here also, one can see that the significance value is 0.002 (i.e., p = 0.002), which is below 0.05. hence, a statistical significant difference in the leadership style adopted in the public and private organization was acknowledged. this implies that the leadership style adopted in public organizations is merely different from that of private organization in lagos nigeria. table 5 one-way anova for leadership styles of private and public organization leadership styles n mean std. deviati on std. error 95% confidence interval for mean min max. lower bound upper bound private organization 54 3.0636 .67620 .10194 3.8581 4.2692 2.00 4.80 public organization 58 4.0618 .74293 .09009 3.8819 4.2416 2.00 4.80 total 112 4.0625 .71435 .06750 3.9287 4.1963 2.00 4.80 anova sum of squares df mean square f sig. between groups 3.020 1 3.020 5.864 .002 within groups 56.642 110 .515 total 59.663 111 source: author’s spss result computation, 2018 130 4.3. regression analysis this was conducted using the field data and the results interpreted according to the adjusted r2 values and p-values at p < 0.005 significance level. hypothesis one ho: there is no relationship between leadership style and employee commitment. table 6 exhibits the adjusted r-squared which is 0.316 meaning the independent variable (i.e. leadership style used in the study organization) accounted for 31.6percent variations in the dependent variable that is, the extent to which employee are committed to the organization as a result of leadership adopted in the organization., while the rest are explained by the other factors aside leadership styles. also, the t-statistics is 7.238 and f-statistic is 52.393 with a pvalue of 0.0000 which implies that the regression model is significant. to this end the null proposition that no significant relationship between leadership style and employee commitment was not supported thus rejected, while its alternative was accepted and this shows a fair positive significant relationship between leadership style and employee commitment. table 6 – summary of regression results dependent variable independent variable r r2 adj. r2 std. error of the estimate t-statistics f sig. employee commitment leadership style .568 a .323 .316 0.34807 7.238 52.393 0.000 source: authors` spss result computation, 2018 hypothesis two h0: there is no relationship between organizational politics and employee commitment. in addition, table 7 shows that the adjusted r-squared is 0.89 meaning that (organizational politics) accounted for 8.9 percent variations in the dependent variable that is, the extent to which employee are committed to the organization as a result of politics of the organizational, while the rest are explained by the other factors aside organizational politics. also, the tstatistics is 3.435 and f-statistic is 11.797 with a p-value of 0.001 which also implies that the regression model is significant. to this end the null proposition that there is no significant relationship between organizational politics and employee commitment was also not supported thus rejected, while its alternative was accepted and this affirmed an important relationship between organizational politics and employee commitment. table 7 summary of regression results dependent variable independent variable r r2 adj. r2 std. error of the estimate t-statistics f sig. employee commitment organizational politics .311a .097 .089 0.40191 3.435 11.797 .001b source: authors` spss result computation, 2018 131 hypothesis three ho: there is no direct relationship between organizational politics and leadership styles used in organizations. furthermore, table 8 shows the adjusted r-squared value of 0.281 that the independent variable (i.e. the leadership styles adopted in the organization) accounted for 28.1 percent variations in the dependent variable that is, the politics of the organizational, while the rest are explained by the other factors aside leadership style used in the organization. also the t-statistics is 6.655 and f-statistic is 44.293 with a p-value of 0.000 which also implies that the regression model is significant. to this end the null proposition that no direct relationship between organizational politics and leadership styles used in organizations was also not supported thus rejected, while its alternative was accepted and this exhibits a direct relationship between organizational politics and leadership styles used in organizations. table 8 – summary of regression results dependent variable independent variable r r 2 adj. r2 std. error of the estimate t-statistics f sig. organizational politics leadership style .536a .287 .281 0.40906 6.655 44.293 .000b source: authors` spss result computation, 2018 hypothesis four ho: there is no significant relationship between leadership style, organizational politics and employee commitment. table 9 shows that the adjusted r-squared is 0.310 meaning that the independent variables (i.e. the leadership styles adopted in the organization and as well as organizational politics) accounted for 31.0 percent variations in the dependent variable that is, the extent to which employee are committed to the organization as a result of politics of the organizational, as well as the leadership style used in the organization, while the rest are explained by the other factors aside leadership style used in the organization. also, the t-statistics are6.029 and 3.314 for leadership style and organizational politics respectively while their joint and f-statistic is 25.966 with a p-value of 0.000 which also implies that the regression model is significant. hence, the null proposition that no relationship between leadership style, organizational politics and employee commitment was not supported thus rejected, while its alternative was accepted and this affirms a significant relationship between leadership style, organizational politics as well as employee commitment. table 9 – summary of regression results dependent variable independent variable r r2 adj. r2 std. error of the estimate t-statistics f sig. employee commitment leadership style .568a .323 .310 .34964 6.029 25.966 .000b organizational politics 3.134 source: authors` spss computation result, 2018 132 4.4. discussion of findings based on the empirical results of the analyses above, the study finds that there is a significant difference in the perception of organizational politics between the public and private organization, and that there is a significant difference in the way employee are committed between the public and private organization and that there is a significant difference in the leadership style adopted in the public and private organization. also, the study made findings that there is a positive significant relationship between leadership style and employee commitment; that there is a positive significant relationship between organizational politics and employee commitment; also that there is direct relationship between organizational politics and leadership styles used in organization; and that there was a significant relationship between leadership style, organizational politics and employee commitment. these findings corroborate the view of yiing and ahmad (2009) where they explored the connections between employee commitment and leadership styles moderated by organizational culture, they discovered that leadership styles adopted in the study have significant and positive connections with affective commitment of employees. also, the findings support the view of walumba, wang, lawler and shi (2004) and rehman, shareef, mahmood and ishaque (2012) where they examined the interaction of both transactional and transformational leadership on organizational commitment, they discovered that transformational style of leadership had so much more contributions to the organizational commitment level than transaction leadership style. 5. conclusions, limitations and implications for future research the study has been able to affirm that organizational politics and as well as leadership styles are very effective in improving the commitment of employees in an organization. they are also very active in giving direction for their organization, as well as encourage their followers by giving control and direct group roles. the study has also shown that through effective organizational politics which aims at dislodging organization for improve performance. as such ensuring effectiveness and efficiency is the main objective of an effective leader regardless of their gender. leaders must aim to attain organizational goals always while simultaneously not neglecting the mediating effect of organizational politics. this simply implies that employers in both public and private organization should adopt leadership styles in an enabling environment, which will help them to carry along their employee in everyday activities which results in daily and measurable performance. conclusively, the study has shown that, a positive significant relationship between leadership style and employee commitment was paramount; a positive significant relationship between organizational politics and employee commitment; also that there is direct relationship between organizational politics and leadership styles used in organization; and that a significant relationship between leadership style, organizational politics and employee commitment was renowned. the above findings imply that the most effective leaders are leaders who put into practice the most effective and right leadership style with favorable organizational politics to improved and encourage and the commitment of employees in the organization which ultimately ensure organizational performance. hence, based on the conclusion the following were recommended, that managements in both public and private organization in lagos state need to pattern the way, by laying down a good example, being a role model and worthy to be followed. 133 in addition, since it was found that there was a link between employee commitment and organizational politics, the management of both public and private organization in lagos state are notified to recruit employees who will tends to become linked to the politics of the organization. before they hire workers, they will have to look for the suitability amid the individual’s goals and values and the organization’s goals and values. this study was limited to government owned and private organizations in lagos state due to time constraints and accessibility. there needs to further expatiate the scope of the study to other states by future researchers. since this study explores the use of primary data by administering questionnaire, other researchers should explore the use of secondary data from the various organizations and do a robust 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(2009). the moderating effects of organizational culture on the relationships between leadership behaviour and organizational commitment and between organizational commitment and job satisfaction and performance. leadership & organization development journal, 30(1), 53-86. microsoft word 10 (18-27) maculewicz 145 main directions of development in the defence industry sector in the aspect of globalization łukasz maculewicz warsaw school of economics, poland received: october 7, 2018 accepted: november 31, 2018 online published: december 4, 2018 abstract the defence industry is one of the demanding elements of the economy. the european defence market brings together many entities operating in various economic forms. each of these entities operates under conditions of strong competition requiring large capital expenditures. the main directions observed is the integration of member states in the field of security and defence and the concentration of defence industry, which main objective is to strengthen the european industrial and technological base, international approach to program implementation research and production, and above all, avoiding the multiplication of identical research programs and technological competence as well as seeking opportunities to reduce production costs. due to the high costs of developing new military technologies, the vanishing of the defense sector's territorial division and the merging of us, european and others of the world cannot is highly probable. at the beginning, probably in individual projects, as technology develops, consolidation can be permanent. keywords: defense industry; collaboration; globalization; defense and security; international projects. 1. introduction the defence industry is one of the most capital-intensive and labour-intensive sector of the economy. in 2014, the turnover on the defence market among enterprises operating in the european union amounted to eur 97.3 billion. in addition, production, maintenance and overhauls of military equipment as well as research and development in the field of defence and security generate 0,5 million direct and 1.2 million indirect jobs (european parliament, 2018). since 2010, the expenditure of eu member states in the area of defence and security they do not reach a level lower than usd 270 billion; moreover, since 2014, the expenditures have been systematically growing, reaching a level of approximately usd 285 billion in 2017 (beraud-sudreu, 2018). the european defence market brings together many entities operating in various forms of economic activity, beginning with small sole trader’s enterprises and ending with large corporations with the majority share of the state treasury. each of these entities operates under conditions of strong competition and specialized production, requiring large capital international journal of economic behavior, vol. 8, n. 1, 2018, 145-155 146 expenditures (research and development, intellectual potential, know-how). realisation of public contracts in the fields of defence and security area have a specific character where holders of budgetary funds equally focus on tactical and technical characteristics and the quality of purchased military equipment as well as security of supply and availability of maintenance potential, binding parties to the contract, often for many years. highly specialized production, mainly in the high-tech area, makes the european defence market an oligopoly, on the one hand, where only a small part of enterprises are able to cope with the economic and intellectual challenges of modern military equipment (small enterprises play the role of subcontractors) and, on the other hand, monopsony recipients drastically limit the market. the main tendencies observed since the end of the 20th century is the integration of member states in the field of security and defence and the concentration of defence sector enterprises, both on the eu market and national markets. the main objectives are (1) to strengthen the european industrial and technological base of the defence sector, (2) to establish an international approach to program implementation research and production, (3) to avoid the multiplication of identical research programs and technological competence as well as (4) to seek opportunities to reduce production costs, including through outsourcing and offshoring. the purpose of this article is to analyse the main tendencies – integration and off-shoring – of changes of actors from defence and governmental side in the european defence sector resulting from globalization as well as to define factors that affect the defence economy sector which can be observed from the end of 20th century. due to the nature of the work, the following research methods will be used in this paper: content analysis and data analysis, as well as a historical-comparative method. these methods will be used for in-depth analysis of available data. the comparative and descriptive method will fulfil the main role. hence, an analysis of phenomena taking place in the european defence sector of the economy will be carried out. this article will firstly examine the phenomenon globalization, subsequently, the two main tendencies of change will be analysed, following by highlighting the factors that affect this sector and lastly conclusions will be presented.. 2. globalisation under the concept of globalization of the economy different elements are comprised such as the processes of organizing and conducting production, exchange and flows of capital on a global scale and treating entities by the whole of the world as the one common market. the factors determining the economic development of the processes of economic globalization are: − the development of technical means of communication, − liberalization of foreign trade, − reduction of barriers, aiming to improve flow of goods and capital (winiarski, 2006). according to g. kołodko (2003), globalization is understood as a historical process of liberalization and in the wake of this accelerating integration, previously largely in the isolation of functioning commodity markets, capital and, to a lesser extent, labour force in one commodity market. thus, as a result of the process of globalization, elements of the global economic organism are emerged, which is connected by numerous bonds. from g. shangquan (2000) perspective, economic globalization refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. 147 analysing above definitions of the phenomenon, it can be concluded that the main element conditioning the process of globalization is the integration of entities thanks to the liberal organizational bases and appropriate technological conditions. globalization is a multifaceted process of the wide spectrum of human activity, where the most visible sphere will be the economic space, but the international flows of ideas, people, cultures, social models, religions have a significant impact on every area of human activity. analysing statistical data, it can be concluded that global trade and capital flows at the turn of the 20th and 21st centuries were growing at a faster pace than the global product. in the intervening years 1980-2006, there was almost a six-fold increase in global exports of goods, while the value of global gdp increased four times. the value of foreign direct investments in 1980 was 4.7% of the worldly gdp, while in 2005 it increased to 20.7%. sales of multinational enterprises reach a value that is twice as high as global trade (polish ministry of economic affairs, 2007). as noted by g. kołodko (2003), globalization processes should be looked at objectively. therefore, globalization should not only be comprehended as new markets, sales, growth and transfer of technologies, but also as the marginalization of less developed entities and the collapse of existing enterprises, which as a result of historical and political factors, do not have adequate technological facilities to compete with economic giants on the open market. however, from the other hand, integration and cooperation creates additional opportunities for all entities participating in the market, including those that are at a relatively lower level of economic, organizational, and technological development. however, it should be borne in mind that the opening of markets also brings additional risks, the amount of which is determined by the adopted strategy of economic development. the increase of exchange between economies, the increase in the liberalization and integration of trade markets, deregulation of capital flows, and above all the unification of laws that determine a given business activity significantly affect the course of action and conditions of enterprises operational activity. globalization of the economy leads to wide activity, which is manifested by the dispersion of production in order to seek ways to reduce operating costs. in conditions of highly specialized production, the main determinant of production is knowledge; therefore, companies can flexibly choose the location of the production lines, without being dependent on primary products and energy. in addition, the technological progress in the area of communication made it possible to divide the production process, including its fragmentation and placement in various places around the world, as well as the involvement of a wide range of subcontractors. as mentioned before, globalization is a phenomenon that carries with it a certain risk, however, with regard to the economic sphere of advantages, it is much more than disbenefits and should be considered as a positive economic process. such a position can be justified by the following advantages: − it creates conditions for cooperation of entities in the creation of economic and legal programs, − it will enable the development of multinational enterprises, − it gives the possibility of unlimited transfer of technology and the flow of labour, − it drives the development of transport and communication. 3. the impact of globalization on the defence sector as other sectors in the eu, the defence sector was heavily influenced by globalization. the characteristics of this phenomenon affecting this specific sector are the strive for joint actions and off-shoring. 148 3.1. striving for joint action the eu aims at joint actions in order to strengthen the industrial and technological base and to find synergy in the aspect of implementing technologically advanced defence programs. one of the best example of an international approach to the implementation of joint design and construction of military equipment was the program for the construction of the european multirole aircraft eurofighter typhoon. the program was implemented as a part of the cooperation between germany, italy, spain and the united kingdom by the eurofighter gmbh holding from three european companies: alenia aeronautica, bae systems and eads. the program was the largest and one of the first joint armament programs carried out on the european continent, which was a success and resulted in the establishment of permanent cooperation of eu countries in the field of military equipment production. through the implementation of cooperation, the following benefits have been achieved in a wide range of fields in the area of economics and technology. 1. about 105,000 highly qualified employees in the armaments sector were involved in the typhoon program (germany 20,000, italy 20,000, spain 25,000, wb 40,000). 2. the sub-suppliers sector covered around 50,000 jobs. 3. the aircraft has been designed in such a way as to meet the design assumptions and battle space requirements for 40-45 years. this period of aircraft life cycle generates permanent employment over the years for some employees participating in the project. 4. the high level of technological advancement of the program required high qualifications involved in the project engineers and additionally stimulated the development of many technologies, including management, software, and pilot training system. 5. earnings of people employed in the implementation of the project were higher by 60% than average earnings in the eu. 6. many of the applied solutions have been directly implemented into other branches of production (automotive, electronic, construction of airbus a380 aircraft). the technology of carbon composites developed during the project, flexible connection of composite materials or integrated avionics has been applied (spill-over effect) in civil flight control systems, jet engine technology and the automotive market, among others in formula 1 cars ferrari and mcclaren. these technologies have been estimated at eur 7.2 billion (hartley, 2006). the implementation of the joint project was key to building self-sufficiency and autarkic abilities in the area of high-tech equipment. additionally, through the use of modern models of project management and supervision of the institution representing nato governments (netma nato eurofighter and tornado management agency), the program achieved high efficiency (costs increased by 14% compared to planned ones, while delivery time was delayed by 54 months if compared to a project implemented only by one country usa, f/a 22 where costs increased by 127%, while the delay was 117 months) (hartley, 2006). the above program, particularly the achieved benefits, was crucial for the future perspective of the defence sector, both in relation to the manufacturing branch as well as the member states administrations. great britain, france, germany and italy in 1996 signed an agreement on the establishment of the organisation for joint armament cooperation occar (organisation conjointe de cooperation en matiere d’armamnet). subsequently belgium and spain joined the agreement. currently, the range of countries involved in joint programs consists of 13 member states. abovementioned countries form part of a permanent agreement, while the netherlands, turkey, poland, sweden, finland, lithuania and luxembourg cooperate in various armaments 149 programs without having the status of a member of the agreement. since the beginning of the occar activity, the portfolio of operational programs of armaments has increased to 13 complicated projects, the implementation of which will absorb eur 60 billion (occar, 2018). in 2018, the organization will allocate over eur 3 billion to finance technical modernization of the member states armed forces. the result of occar's work is the implementation of the following projects: − tactical and strategic airlifter airbus a400m, − eurocopter tiger combat helicopter, − fremm multi-mission frigates, − surface to air antimissiles fsaf paams, − counter battery radar – advanced weapon locating system cobra, − multirole armoured vehicles boxer − the european secure software defined radio essor, − multinational space-based imaging system musis, − lss logistics support ship, − european medium altitude long endurance remotely piloted aircraft system male rpas, − mmcm maritime mine counter measures, − multinational multi role tanker transport aircraft fleet mmf, − multirole offshore patrol vessel ppa. each of the above projects brings together from several to dozen member states in a joint effort, enabling them to participate in organizational and technical as well as production terms by invoking elements of national economies in order to mobilize defence enterprises, acquire innovative technological capabilities and seek new cooperation opportunities. it is worth noting that in the case of the french-italian fremm frigates project, the italian government is facing the lack of sufficient financial resources, but due to the overwhelming benefits of the implementation of the program, i.e. substantial economic and employment benefit not only for navy shipyards, but also for subcontractors, the government decided to take out a loan from the ministry of industry instead of financing the purchase of the said frigates from the national defence budget (defence industry daily staff, 2008). besides, it is indicated that it is more profitable to finance the mentioned armament project even in the perspective of increasing the budget deficit. on 12 july 2004, the european defence agency (eda)1 officially launched its activity, which on the basis of successes of occar was the embodiment of the ideas of robert schumann, jean monnet and konrad adenauer on the level of defence cooperation, but it was also the response of eu member states to the challenges of globalization on the armaments market. the main assumption of eda is to implement the vision of the european armaments market and the wide cooperation of member states on the basis of the production of new weaponry systems. however, due to the limited tools and various threats to the sovereignty of individual member states, eda activities at this stage consist in simplification of the search for the armaments which are suitable for each states requirement (turczyński, 2014). in implementing the common security and defence policy, 23 eu member states signed a notification on permanent structured cooperation pesco on november 13, 2017 (european 1 in july 2014, the european council approved the plan for the establishment of the eda, however the actual activity began at the beginning of the next year, by the end of 2004, the 2005 budget was adopted, and the structure and rules of the agency's operation were built. 150 council, 2017). countries participating in pesco approved in december 2017 a declaration on the first 17 projects that will be implemented under this instrument. the projects are run by leading countries, from a few to a dozen participating countries, and several countries with observer status. they are an attempt to strengthen cooperation in specific areas with each different composition of participants. the projects are divided into two categories some aim to increase the possibilities of participating in eu missions and operations (eg. european medical headquarters). the second is to support the development of military capabilities (such as the armoured infantry fighting vehicle). participation of individual countries and the content of projects shows that pesco’s focus on a wide range of possible areas of cooperation is to enable eu countries to cooperate in developing organizational capabilities for military cooperation and building joint industrial capabilities in the field of arms production by involving specific industrial sectors of participating countries projects. this is another step towards striving for the unification of investment plans in order to increase the level of security and defence, which should result in the growth and unification of eu industrial defence capabilities. at the industrial level, the concentration processes were parallel to the institutional association of the member states. the main example of the consolidation of european armaments companies is the second largest aviation company in the world, the airbus group, which was created as a result of the re-branding of the eads (european aeronautic defence and space system consisting of the german dasa, spanish casa and the french aerospatiale matra). to sum up, on the european level several attempts have been made in order to develop joint actions in the defence economy sector. 3.2. case study – mini globalisation efforts in the eu are made to face the difficulties and obstacles of globalization in the defence sector. the polish government has successfully implemented a project that consisted in the consolidation of dispersed industrial entities, which could serve as a case study for the eu in order to implement a similar project on a european or perhaps international level. this project is a specific example of the phenomenon of striving to integrate the industrial sphere to be more competitive and to meet the challenges of the common market. polish armaments group (a national polish champion in armaments production) was created on november 26, 2013 by the minister of the treasury as the entity. the main purpose was to meet the state security and defence needs in the field of research, development, production, servicing, maintenance, modification, modernization and repairs of military equipment and its promotion and marketing.2 the chief assumptions to establish a consolidated leader in the defence sector was to effectively use the potential of domestic industry, to enable the correlation of investment and research and development activities, as well as to eliminate mutual competition between domestic defence companies that compete for participation in the modernization of the armed forces of the republic of poland (walczak, 2018). the entity is the result of consolidation with the majority share of the treasury for which ownership supervision is carried out by the minister of national defence, which gathers more than 60 companies in the armaments sector, employing 17,500 employees, achieving a total of 4.5 billion zlotys of annual turnover (polish armaments group, 2018). an unambiguous assessment of the consolidation effects of the polish armaments industry is beyond the scope 2 § 4 of the articles of association of polska grupa zbrojeniowa s.a. uniform text of the articles of association of the company, prepared on the basis of notarial deeds of 28 august 2014 (rep. a 14556/2014) and of 8 may 2015 (rep. a 7193/2015), as worded in the national court register on june 10 2015. 151 of this study and it is not possible at this stage, although attempts are made to investigate this issue, whose results indicate an ambiguous evaluation of the process.3 however, bearing in mind that the above mentioned consolidation of defence sector entities consisted of focusing independent enterprises with separate management bodies which belongs into one capital group, the effects of the evaluation of the carried out consolidation may indicate the validity of such solutions in the future. what is interesting, we can find great similarity in the goals and paths to achieve them, between the integration of entities within the framework of globalization and the consolidation of entities within the national market. the situation of consolidated companies within the domestic market may be in some sphere a reflection and testing ground for giants in the global world. 3.3. offshoring or the way for a create new product: export of production capacities besides the attempt for joint actions, another element characterizing the armaments sector in the globalization era is offshoring. it is an occurrence involving the transfer of operational processes on an international scale by transferring own competences to subsidiaries or third parties and building cooperation networks at the scientific and production level. one of the main reasons for using offshoring models in the company's activities is to reduce costs and to search for capital and labour resources necessary for the further development of the company. from the perspective of the enterprise realizing the production of armaments, the natural feature of its operational activity is the striving to reduce production costs or optimize the production process. on the other hand, each country should spend budgetary resources in a rational and most effective way. therefore, governments will strive to achieve the greatest benefits resulting from the purchase of armaments. it turns out that in the sphere of technical modernization of the armed forces, both from the perspective of suppliers and contracting entities, it is possible to achieve a certain level of synergy and mutual benefits in the form of lowering costs and optimizing the production process, as well as engaging domestic industry, increasing its development possibilities and protecting jobs. good example of above-mentioned situation may be the shipbuilding industry. modern warships are one of the most expensive and technologically advanced weapon systems. therefore, the contracting authorities will seek the possibility of the largest return of funds spent, including by establishing their own technological capabilities based on technology transfer and including their domestic companies to the supply chain of the main supplier and even the production and sale of weapons based on the license granted, as well as the involvement of indigenous industry in long-term process of warships maintaining. in the case of the french naval concern naval group, it can be concluded that offshoring combined with the transfer of technology has become not just a way to improve the financial condition of the company but one of the basic products offered on the armaments market. naval group is a key entity that performs tasks in the field of defence and security for the french armed forces, in particular in the area of shipbuilding. the company manufactures surface vessels, submarines, including submarines with atomic propulsion, carrying ballistic missiles with atomic warheads constituting the core of the atomic force of deterrence in accordance with the defence doctrine of france. nevertheless, most of the ship's production is directed to export, in a specific production model. naval group through technology transfer and support in the 3 research project "consolidation of the polish defense industry in the conditions of a competitive european armaments market" carried out at the faculty of management and administration of the jan kochanowski university in kielce (commissioned research work no. 614571). 152 area of qualified personnel and management programs enables armaments importers to build production capacity in the field of armaments based on license agreements in line of french know-how. this solution allows establishing the production, maintenance and repair potential, in consequence the importer can build an appropriate level of security of supply and the availability of operational weapons required in accordance with its defence doctrine and raising the level of investment on the importer's market through the implementation of capital and labour-intensive projects based on infrastructure and human capital of the indigenous industry. naval group has subsidiaries all over the world, among others canada, brazil, chile, egypt, saudi arabia, ireland, india and australia, which are involved in the production processes for the domestic armaments market and production aimed at export as well. the french manufacturer is currently implementing: 1. building process of 4 submarines for brazilian naval forces based on their own project. the production potential is established in brazil based on technology transfer from france. in addition, under the brazilian-french agreement, in line of the competences transferred from the naval group, brazil develops its own capabilities in the nuclear sector. 2. delivery of 4 warships to egypt with the transfer of technology enabling the implementation of french service solutions throughout the life cycle. 3. establishment of technical and organizational capabilities to support operation and training of malaysian submarines and the transfer of shipbuilding technology. 4. establish technical capabilities to secure the operation of 9 warships in saudi arabia. 5. the program of building of 6 submarines for india on the basis of own project, in line of the production potential established in india based on technology transfer from france. naval group's operating model indicates an additional product that appears on the armaments market, namely along with military equipment as the main element of the contract, production capacities, knowledge and the ability to manage complex armaments programs are offered. it is worth noting that this production model is used by the largest players on the armament market as a standard offer due to the fact that member states are primarily interested in access to modern technologies and treat armament purchases as an impulse for the economic development of the domestic market. hence, off-shoring of production is a common tendency due to globalization. 4. conditions of the common european armaments market due to the specificity of the european market, several unique conditions exist in the common european market. the 23 member states of the european union are at the same time members of the north atlantic treaty organization, which obliges each member to (the north atlantic treaty, 1949) "separately and jointly, by means of continuous and effective self-help and mutual aid, will maintain and develop their individual and collective capacity to resist armed attack" (article 3). the effect of the aforementioned obligations is the aspiration of most eu member states to acquire the synergy of international military cooperation and development of individual defence potential in line with the legal regulations of the washington treaty, while building these capabilities (in the field of defence and security procurement) based on the legal regulations of the european union upon the defence market applying the principle of free competition. 153 in most of the member states, individual abilities in the field of defence and security are based on the defence system of the state, which one of the elements is the industrial defence sector which brings together state and private entities. bearing in mind the above circumstances and the specific, i.e. still more national than the consolidated character of the european defence market, member states are interested in maintaining full sovereignty of their defence capabilities and security, pointing to all elements of the state's defence system, strongly emphasizing the autonomy of supplies and services for the armed forces. state security requirements, preservation of its sovereignty and integrity in the possible situation of crisis and war, oblige the contracting side to guarantee security of supply and the possibility of using military equipment on the highest level during the process of armaments acquisition. guarantee which is realized on the basis of civil law agreements in line of the content of eu law may turn out to be insufficient and in conditions of a changing geopolitical situation may result in the state's dependence in the area of supply and exploitation of armaments (constituting the quality of military capabilities of the state) from third parties in such important sphere is the sovereignty of the state. therefore, member states use the available methods to autonomies from third parties (economic interventionism, i.e. through the follow the article 346 of the treaty on the functioning of the european union) to protect the defence potential established in the territory of a particular member state. such behaviour additionally limits competition on the defence market. however, it is impossible to achieve the autarky in this regard. the requirements of the modern combat space require the most modern technical solutions in the field of weaponry. an example of limited possibilities of building an autonomous economy in the field of defence and security are states from eastern part of europe, especially states from behind the iron curtain such as poland. despite attempts to consolidate and reform the polish defence sector, the economic and political transformations that have begun in 1989 affect the armaments industry, resulting in the loss of the possibility of producing modern, competitive military equipment and opportunities in the field of new technologies development (zamelek, 2013). a necessary condition for development and competitiveness of polish entities is innovation based on technology transfer from foreign companies. under such conditions, preserve the autonomy of supplies and services in the field of armaments is extremely difficult, limited by the need to administer the eu defence procurement law for military equipment purchasing. considering the external factors and limited european defence market, it turns out that the necessity of cooperation on the market with other entities also applies to the largest actors in the european economic area. in order to search for new markets around the world, the european defence industry must be competitive in relation to other global entities, primarily from the usa (sipri stockholm international peace research institute, independent international institute dedicated to research into conflict, armaments, arms control and disarmament, publishes a list of 100 largest armaments exporters every year. in 2016 in the top ten there were only 3 companies from outside the usa: airbus group in 7th position, followed by italian leonardo and french thales in 9th and 10th places respectively) (sipri, 2017). in 2017 (fiscal year, from 01/10/2017 to 30/09/2018), the united states allocated usd 523.2 billion for armaments expenses (amadeo, 2018). in 2016 in usa, nearly usd 72 billion (vetterkind, 2018) was spent on research and development related to military technologies, while eu countries spent about eur 6.1 billion (eurostat, 2018) on the development of identical technologies. significant financial resources for development and investment, as well as armaments procurement spent by the armaments sector and the governments of noneuropean countries make the european defence market adapt its operational strategy to the conditions of globalization in order to be able to compete effectively in the old continent and in third markets. 154 for that purpose, the enterprises of the european defence sector, taking into account the main aim of purchasers, i.e. securing defence and security needs, will strive to achieve higher economic dynamics, by taking advantage of economies of scale which are the results of international trade, effective allocation of capital and increasing qualifications of human capital and know-how companies involved in international projects (kołodko, 2013). hence, the eu conditions such as protectionism of indigenous economies, the necessity of individual and common development of military capabilities and development of technological base with forerank know-how are pivotal in taking under consideration in the defence sector activity and development. 5. conclusions the challenges of the global market, mainly the wide range of competition and technical advancement of modern military equipment and capital-intensive research and development work, result in a tendency to connect both the production side and the governments in the armaments sector. based on the previous examples, it can be assumed that the process of consolidation of enterprises will develop and the member states will search for new areas of cooperation. due to the high costs of developing new military technologies, the vanishing of the defence sector's territorial division and the merging of us, european and other parts of the world is highly probable. at the beginning, most likely in individual projects, as technology develops and new areas of science development appear, consolidation can be permanent. more research in this field is needed, especially to analyse the short-term and long-term consequences of consolidation and above-mentioned off-shoring model. however, the importance of the defence sector in the economy has to be highlighted, not only in economic terms but also in the sphere of security. considering the protectionism of member states in relation to domestic armaments companies, a balance between a liberal open market for global armaments corporation and the protection of domestic production potential needs to be found, including, above all, jobs, will be very difficult in long-term perspective and will depend primarily on political factors and 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(2013) przeobrażenia polskiego przemysłu obronnego w warunkach otwartego europejskiego rynku. toruń. wydawnictwo adam marszałek. 129 book review: raval, v. (2020), corporate governance. a pragmatic guide for auditors, directors, investors and accountants, new york, auerbach publications. https://doi.org/10.1201/9781003031796 corporate governance, defined as the system by which companies are directed and controlled, in order to protect stakeholder interests and ensure reasonable return on investments, has evolved to address the dynamics of the markets and this evolution followed different routes and reached different destinations in corporate practice, company law, and associated institutional development of corporate enterprise. the book “corporate governance. a pragmatic guide for auditors, directors, investors and accountants”, of professor vasant raval, first published in 2020, part of the internal audit and it audit series of books that publishes leading-edge books on critical subjects facing audit executives as well as internal and it audit practitioners, brings a clear understanding of this complex scenario. the book, divided into four parts, that is, cornerstones, governance roles and structure, governance in action, and other topics, provides a picture of the current state of corporate governance in the usa. the book started with the foundation of governance, evaluating the reasons and the nature of corporate governance, indicating its significance and purpose, the main principles and its framework, underling why governance is an extremely relevant factor for the life of the company. this first part continues taking into consideration operational, strategic, and tactical risks linked to corporate governance and defining the main risk management approaches ending with the analysis of the ethical dimensions of corporate governance, and its code of conduct. the second section of the book continues identifying the key players in the area, and discussing their roles. the main figures analyzed are shareholders, the board and the management, but also the government and the regulators that apply to the conduct of the company and coregulators, facilitators, and consultants as assisting those in charge of governance with their actions which contribute to the governance process. in this scenario, the stock exchange is also taken into consideration, with a dual role of facilitating transactions and listing the company stock for trading on the exchange. this part takes into consideration also the role of the internal auditing function (iaf) that has the primary function of managing business’ risks and of the figure of the external auditor, as an outside, independent provider of assurance about fairness of financial results. subsequently section three discusses the relationship between shareholder, the board and the management, analyzing their dynamics, with a specific focus on organizational wrongdoing considered as an improper or unethical act on the part of any member or members of the organization and the explanation of the disposition-based fraud model (dfm). in the final section, the book defines the key issues in two main aspects of corporate governance, that is governance of nonpublic organizations, including nonprofit organizations, and future directions in corporate governance. when analyzing the governance of private organizations, the book makes a specific focus on family-owned businesses, as particular entities whose owners belong to a single family, highlighting the difficulties in the governance of a structure where family and business should be two separate entities, but this demarcation is not always so simple to maintain. international journal of economic behavior, vol. 11 n. 1, 2021, 129-130. https://doi.org/ 10.14276/2285-0430.2896 130 finally, as future directions of corporate governance, the business environment has been taken into consideration, evaluating factors such as the global competition and the difficulties related to the different cultures in which companies want to do their business. but also, the variable of technology, seen as a disrupter of the existing mode of doing business, causing a redefinition of jobs, shift in business model, and even displacement of older competitors; cybersecurity connected with the problem of cyber-attacks that can result in loss of data, unavailability of systems and programs, and disruption of services, and the issue of integrating sustainability practices in corporate strategy. this book is structured to be a helpful map to enter the world of corporate governance, since it merges theory and practices, thanks to the personal experience of the author as an auditor and board member. the book provides practical insights illustrating theory with recent cases, proving to be a great source of information for anyone that has to do with the ecosystem of corporate governance such as professional accountant, securities lawyer, economist, financial analyst, and auditors. i would strongly recommend this book as a quick guide for a greater understanding of the dynamics of corporate governance; it is easy to read and certainly approachable by figures with transversal skills to corporate governance. laura bravi carlo bo university of urbino, italy microsoft word 2 (19-13) obamiro 13 workforce diversity and employees’ performance: evidence from a nigerian bank john kolade obamiro lagos state university, ojo nigeria babatunde oladipupo kumolu-johnson lagos state university, ojo nigeria justice chidi ngwamaj crawford university, igbesa nigeria received: march 28, 2019 accepted: may 10, 2019 online published: may 16, 2019 abstract the study examined the relationship between workforce diversity and employee performance in selected branches of first bank of nigeria. the objective of the study is to examine the relationship between gender diversity and job satisfaction. also. examine the relationship between ethnic diversity and employee intention to quit. survey research method was adopted in this study. one hundred and twenty-one (121) copies of questionnaire were distributed and eighty-three (83) copies were returned and valid for the analysis of stated hypotheses. pearson product moment correlation (ppmc) analysis was adopted to test the relationship between variables. the gender diversity correlate with job satisfaction at a value of r = 0.891, while ethnic diversity correlate with employee intention to quit at a value of r = 0.825. the results showed a strong relationship between workforce diversity variables and employee performance of first bank of nigeria plc. alimosho branches. the study recommended that management should continue to promote equal employment and opportunity for career growth for all gender and should improve cultural awareness of the employees through social interaction. keywords: diversity; employees’ intention to quit; ethnic diversity; gender diversity; job satisfaction. introduction declining job-satisfaction and rising turnover are identified as growing problems within the banking sector (tummers, 2013). low job-satisfaction and instability in workforce is costly not only in resource terms and loss of knowledge but also to the quality of the services, the banking organization delivers (webb & carpenter, 2012). furthermore, in many countries in particular the banking sector is affected by the demographic challenge and an ageing and shrinking international journal of economic behavior, vol. 9, n. 1, 2019, 13-26 14 workforce, which highlight the empirical problem of dissatisfaction and turnover even more (bossaert, christoph, & timo, 2012). in this study, focus is on workforce diversity (gender and ethnicity) in the workplace and its possible importance for male and female employees’ job satisfaction and turnover intentions. there are many interrelated reasons for the large and growing interest in diversity issues (reskin & maroto, 2010; ibidunni et al., 2018). first, the labour force composition in many countries drifts towards larger diversity with respect to socially significant categories of difference such as age, gender, and race/ethnicity (balleer, gómez-salvador, & turunen, 2009; reskin & maroto, 2010), and many social scientists strive to determine the consequences of the changes in organisations and society at large. from an organisational perspective, some researchers find that workplace diversity can give rise to mixing and pooling of different experiences and perspectives and therefore trigger innovation, creativity, and profitability for the organisation (richard, ford, & ismail, 2006; lukasz, 2018). however, opinions on diversity matters differ, and the optimism regarding diversity’s mending of inequalities and promotion of innovation and profitability is challenged by insights from long-standing research on organizational demography, which points out that organisational diversity often diminishes group cohesiveness and even leads to conflict and hostility among co-workers from different categories and hence low job-satisfaction (jain & kaur, 2014). the overall opposition between diversity optimists and pessimists appears to be relatively unmediated. representing both theoretical/analytical perspectives and normative attitudes, they often talk past each other rather than interact and enrich each other. hence, based on a review of relevant literature, we account for several contrasting understandings of how gender and ethnic diversity in the workplace can be related with female and male employees’ well-being at work. it is against this backdrop that a study of this kind is imperative in the banking sector in nigeria. 1.1 statement of the problem workforce diversity has become a significant aspect in the modern-day world of work. in this study, an examination of this construct is important due to the socio-economic and political changes that have taken place in the nigerian banking sector. as stated in the introduction, these changes were driven by various legislative measures which led to an improvement in workforce diversity (dhe, 2015). however, these legislative measures precisely focus on tackling matters of past injustices and discrimination in organisations rather than on the business need of diversity and how it influences employee behavioral outcomes such as employee performance. given this, organisations have not been focusing much on the effects workforce diversity but on the legal side of it (van walt & du plessis, 2010). besides the above, most studies on workforce diversity were conducted outside of nigeria and most of them were focused on manufacturing firms and secondary schools (selvaraj, 2015; shifnas & sutha, 2016). furthermore, workforce diversity has not received enough attention in examining the variables that may influence employee performance (beziibwe, 2015). most studies about employee performance primarily focused on aspects such as training and financial resources as perceived variables that may influence employee performance (gao, 2016; sila, 2014). given the above, this study is aimed at investigating the effects of workforce diversity on employee performance in selected branches of first bank in lagos nigeria by considering the effects of gender diversity and ethnic diversity on job satisfaction and employee intention to leave respectively. 1.2 objectives of the study the main objective of this study is to examine the relationship between workforce diversity and employee performance in an organization. the specific objectives of this study are to: 15 1. examine the relationship between gender diversity and job satisfaction. 2. examine the relationship between ethnic diversity and employee intention to quit 1.3 research questions 1. is there any significant relationship between gender diversity and job satisfaction? 2. is there any significant relationship between ethnic diversity and employee intention to quit? 2. literature review 2.1 diversity diversity is the real or perceived differences between individuals. scott and sims (2016) opined that human beings no matter the diversity are all naturally equipped with different talents and aptitudes. evans and henry (2007), said diversity means the mixture of workforce from different socio-cultural backgrounds working together in an organization. it could be seen as the characteristics of a social grouping that reveals the degree of objectives or subjective differences existing among groups (gupta, 2013). scott and sims (2016) defined workforce diversity “as a strategy that promotes and supports the integration of human diversity at all levels and uses focused diversity and inclusion policies and practices to guide this approach in work environment” . all these definitions simply show that diversity is all about these characteristics that make us different or similar to one another. in an organizational setting, a diverse workforce consist of a mixture of employees from various genders, ages, races, ethnic backgrounds, religious beliefs and so on. often diversity is distinguished along the primary, secondary and tertiary or organizational dimensions. differences among employees can be categorized into two aspects; primary differences such as; age, etc. and the secondary differences such as; educational background, communication style (aydan, 2016). the primary dimension reveals the key dissimilarities among diverse individuals as well as the highest impact on initial encounters, it could be quickly detected and it also serve as a filter through which people view the world. it includes visible identity characteristics such as; gender, age, sexual orientation, physical abilities, ethnicity, race (sayers, 2012). secondary differences such as; educational background, communication style, marital status, organizational role and position, religion, geographic location, income, work experience and work style, are those qualities that are not noticeable in the first encounter and can even change throughout different encounters. (sayers, 2012). according to griffin and van fleet (2014), factors contributing to increased diversity within the workplace are globalization, government legislation and judicial decisions, and the composition of the labour force. 2.1.1 gender diversity according to powell (2011) gender is the physiological inference of someone being either male or female. the study of gender diversity focuses on how individuals believe that males and females differ. these gender variations influence the manner in which individuals react to the behaviour of others in the work settings or any other group coalition. gender diversities are visible in prejudice, stereotypes, and discrimination. in the last decades, those organizational barriers that hinder women from advancing to the top in their career have been a vital area in organizational research. assefa, (2014) in their study discovered that women are almost if not completely absent when it comes to occupying senior positions in organizations. however, male directors often form an elite group at the top of the corporate world and only very few women are able to breakthrough these glass ceiling into this 16 elite group, despite making inroads into middle management. this point out that gender in the board of directors in some big organization is a barrier for career advancement. assefa, (2004) argued that this is a matter of concern, because the talents of women are not being fully utilized. the private sectors is seen and characterized as influential, powerful, financially important and generally not controlled by the state. historically, the private sector, including the board of directors has been male dominated where men have controlled the majority of high-level positions and especially those related to power (healy, kirton, & noon, 2011; abdussalam, 2018). one of the most prevailing metaphors used to describe women’s absence in senior organizational positions has been that of the ‘glass ceiling’. mavin (2016) said the phrase ‘glass ceiling’ was made up in the 1960s. this is used to describe a subtle obstacle that is so clear but yet very powerful that it can hinder women from claiming up the managerial ladder. glass ceiling was coined to describe those organizational practices and processes which creates difficulties and limitations in which women encounter when trying to attain the highest position of their particular field. here, women may be unable to reach the top of the management hierarchy even though they can see it (scott & sims, 2016; simbarashe, hlanganipai, wiseman & tlou, 2019). removing the glass ceiling and other obstacles to women’s success, represents a major challenge to organizations. as such, those policies that promotes equality in pay and other benefits programs for women; policies that promotes equality in pay for jobs of equal value and encourage other benefit programs of special interest to women are needed in organizations. 2.1.2 ethnic diversity ethnicity could be seen as an assembly of individuals who share common cultural traditions and customary practices and also provide their members with a self conscious identity as a nation (sayers, 2012). ethnic diversity implies diversity in language, religions, races and cultures. there has been an increase in multicultural workforce in the organization for utilizing greater participation and synergy to improve and increase both employee satisfaction and business performance. a moderate level of ethnic diversity has no effect on team performance in terms of business outcomes i.e. sales, profit, and market share. however, if at least the majority of team members are ethnically diverse, then more ethnic diversity has a positive impact on performance (gupta, 2013; simbarashe et al., 2019). following the raise of diversity in recent times, there has be a raise in work groups with the intention of making increased participation to enhance employee and organizational performance as a whole. however, in as much as the nature of the composition of employees is speedily getting more and more varied in terms of ethnicity, age, gender, education, and so on. similar attention has been growing with respect to the effect of these diversities in academic institutions (scott & sims, 2016). the growth of multi-cultural in organizations today comes as a result of the increase of different cultures in society and it thus spread through the ancestral, educational, and religious circles. scott and sims (2016) said the increase in performance of teams comes as a result of the diverse cultural composition of employees and this is seen as the benefit of embracing various ethnical perceptions for finding solutions to problems and enhancing the outcome of team members after they have learned ways in which they can make use of their dissimilarities for their advantage. according to harrison and klein (2007) firms can experience negative consequences of having demographic diversities like race/ ethnicity, nationality, gender, and age. it is important to note that individuals from the minority groups are more likely to be less satisfied with their jobs, less committed to the organization, have problems with their identities and feel or experience discrimination (forma, 2014). nevertheless, as the minority group grows, most of the problems encountered tend to fade away. based on the study of ngao and 17 mwangi (2011) ethnicity can stand as a replacement or substitute for cultural background and ethnic dissimilarity can bring about positive creative and innovative performance among members, seeing as it expands the point of view of employees in the organization. 2.2 employee performance durga (2017) defined performance as the act of executing a task or an accomplishment or achievement. he adds that employee performance is how well an employee is effectively fulfilling his/ her job requirement or discharging his/ her duties so as to achieve good results. o'flynn, ricciotti, nicholas, lau, sammarino, and fisher, (2001) said employee performance is defined using three criteria. first criteria, is that employees’ output meets the standard of performance set by the organization’s external customers. secondly, employee performance can be defined in terms of how the social processes utilized in the performance of their jobs enhances or maintain the capability of the employees to work together on subsequent group tasks. finally, that employees’ satisfaction were met instead of them being frustrated by the group performance. performance is an individual’s behaviour and results. it is also seen as the way in which people get their work done (armstrong, 2012; ayat mohammed, 2019). however o'flynn, et al. (2001) argues that the performance of employees is not truly representative of what a group performance is. rather, it is the personal experience of group members and the subsequent ability of the employees to perform in the future that also defines the employee’s performance. they argued that there are multiple dimensions when it comes to rating of performance seeing that different constituents have their different performance criteria and access to data. 2.2.1 job satisfaction according to dixit and bhati (2012), job satisfaction is an affective and emotional response to various facets of one’s job. hafiza, shah, jamsheed, and zaman (2011) describes it as being an emotional response that results from the employee’s perceived fulfillment of their needs and what they believe the company to have offered. even though in recent times researchers have tried to replicate current theoretical footings of job satisfaction, jain and kaur (2014) definition which happen to be one of the initial definitions of this model is still the most cited. they defined job satisfaction as any combination of psychological, physiological, and environmental circumstances that causes a person truthfully to say, i am satisfied with my job (jain & kaur, 2014; kim, kim & han, 2018). in general, most definitions cover the emotional feeling an employee has concerning their job. this could be the job in general or their attitudes towards specific features in the physical work setting, such as: their colleagues, salary or working conditions (hope, obianuju, & chibuzoh, 2017). 2.2.2 employees’ intention to quit intention to quit is generally conceptualized as an employee’s conscious and deliberate readiness to leave from his or her organization (guchait & cho, 2010). though, it is not considered as an actual behavioural outcome (kehoe & wright, 2013), it is still one of the key factors responsible for the actual turnover. according to kehoe and wright, (2013), there exists a strong association between behavioural intentions and actual turnover. fugate, prussia, and kinicki (2012) consider employees' intention to leave a very costly affair especially when it is characterized by cognitive withdrawal. in an organization with different ethnic groups like nigeria where competitive pressures are very high, the retention of employees can prove highly beneficial for achieving a sustainable competitive advantage (kundu & gahlawat, 2016; silvestrelli, 2018) and hence, it is worth to find out the factors responsible for lowering intention to leave among employees. several studies have found that the efficient use of diversity policies 18 considerably helps in lowering voluntary turnover or increasing employee retention rate (boon, hartog, boselie, & paauwe, 2011; kehoe & wright, 2013). guchait and cho (2010) have reported that the application of bundle of management practices including staffing, training, appraisal, equal employment opportunity, working conditions, etc. results in lowering the intention to leave among employees. 2.3 social identity theory this study was guided by the social identity theory proposed by trajfel and turner (1979) as it considers attributes such as age, gender, ethnicity and education, which is being investigated in this study. the social identity theory explains that employees have a tendency of classifying themselves based on groups in which they fit in. such group maybe be based on age, gender, ethnicity and education, amongst others. according to the authors, these groups are the basis of egotism and self-confidence or agony and low self-confidence. in most instances, a group will develop high self-confidence through discriminating and prejudging members of other groups, what the trajfel and turner (1979) describe as in group and out group classification. these discriminatory practises and biased perceptions, for example on race may result into racism which can further lead to constant political and economic battles like the case of whites and blacks in south africa and zimbabwe. this theory further explained that an employee work behaviour is defined by the inside principles of the group to which they belong. in consequence, this directly influences the performance of the employee.this theory opens up the need for this study to investigate how the phenomenon of gender diversity and ethnicity diversity contribute towards employee performance at first bank of nigeria through identifying their effects. 2.4 empirical review in view of the relevance of workforce diversity in enhancing employee performance, it was evident that in the literature that workforce diversity stimulates employee performance. for instance, eugene, lee, tan, and yang (2011) carried out a study on the effects of gender diversity and job satisfaction at the malaysian airline. the first objective of this study is to determine the relationship between workforce diversity and job satisfaction. this study found out that there was a significant positive relationship between gender diversity and job satisfaction. furthermore, eugene et al. (2011) found out that a 10% increase of women in airline industry for the past five decades resulted in an increase in productivity and gpd by 5% and 1%, respectively. kyalo (2015) also reported similar results in a study conducted in the insurance sector in kenya, indicating that gender diversity was significantly related to job satisfaction. kyalo (2015) further observed that the recruitment strategies in insurance sector favour and promote women; hence, most of the insurance benefit from the varied skills and knowledge of diverse gender teams. another conducted study by ngao and mwangi (2013) in the malawian port authority revealed similar findings that gender diversity had a huge positive effect on job satisfaction and organisational performance. in support of kyalo (2015), ngao and mwangi (2013) stated that the main reason for this maybe that females and males think differently thus if their ideas are put together, they lead to better decision making, creativity and innovation and improved job satisfaction vis-a-vis employee performance. in addition, kyalo (2015) found gender diversity positively related to job satisfaction. based on these findings, gender diversity was found to be positively affecting job satisfaction even though it was not an area of concern in the organisation (selveraj, 2015). based on the second objective, which is to investigate the effects of ethnic diversity on employees’ intention to quit, the results of a study conducted by odhiambo (2014) study in the education sector in kenya, ethnic diversity was found to be significantly related to employee intention to leave. odhiambo (2014) further observed that in most homogeneous schools, ethnic 19 diverse teams performed poorly as compared to homogeneous teams and ethnic diverse teams in heterogeneous schools performed better as compared to homogeneous teams. ngao and mwangi (2013) also reported that increased ethnic diversity results in improved employee intention to quit in the kenyan port authority. another study by kyalo (2013) in the telecommunication sector in kenya reported the same findings that ethnic diversity was positively and significantly related to intention to quit. kyalo (2013) further observed that most telcommunications in kenya accommodate all members from different ethnic groups to participate in problem solving and decision making thus resulting in increased team cohesiveness and performance. contrary to the above studies, a study conducted by selvaraj (2015) in singapore manufacturing industry revealed that there was no relationship between ethnic diversity and employee intention to quit. the study further concluded that employees in singapore manufacturing industry neither view ethnic diversity as a boon for them nor reject it as a white elephant, as they gave neutral responses (selvaraj, 2015). 2.5 hypotheses based on the objectives, literature review and theoretical framework, the following hypotheses can be conveyed: ho1: there is no significant relationship between gender diversity and job satisfaction ho2: there is no significant relationship between ethnic diversity and employee intention to quit. 3. methodology the study employed survey research design. this design was used because it gives greater room to study the subject matter and ensures that inferences can be made about some characteristic behavior of the population in the study. the population of the study was first bank nigeria plc. all branches of the bank share the same policies and procedures as the head office. the study selected a sample that comprised of branches of first bank nigeria in alimosho local government area (lga) lagos state. the choice of alimosho lga was informed due to the size. it is the largest lga in lagos state. the total sample size of the study was 121 employees. this comprised of all categories of employees; entry level, junior and senior employees of the bank. purposive sampling technique was adopted in this study. the sample unit possesses the particular set of characteristics e.g. knowledge, experience, etc. (dhivyadeepa, 2015; barran & jones, 2016). data were collected through the use of questionnaire. the copies of questionnaire were administered to the respondents in the five branches used for this study. the banking industry formed the basis for this study because of the industry is associated with a high rate of employee turnover activities resulting from employees’ thirst for more ethically conducive working condition (gberevie, 2010). the study population from which the sample was drawn for the study was money deposit banks formerly known as commercial banks in lagos state, nigeria. the reason for choosing this bank is because it has the largest asset base (uwuigbe, uwuigbe, igbinoba, adegbola & otekunrin, 2016). the research instrument was adopted from the studies of langford (2009), green, lópez, wysocki, and kepner (2002), and galbreath (2010) who successfully used survey questionnaire to measure gender and ethnic diversity levels. the study adopted items from previous study (adeniji, 2011) who successfully used survey questionnaire to measure job satisfaction levels. the scale for intention to quit was taken 20 from boshoff and allen (2000) study. this scale has been consistently and reliably used by various researchers to measure employees’ turnover intentions (kundu & gahlawat, 2016). the research instrument was subjected to content validity. academics specializing in human resource and organizational behaviour validated the instrument. relevant research literature was used for the content validity of the study. cronbach’s coefficient alpha was used to determine the internal consistency and reliability of the multiple item scales. the alpha value for the construct indicates that the items that formed them had reasonable internal consistency reliability of 0.728. hence the instrument is considered appropriate for the study (george & mallery, 2003). the data for the study was analysed using pearson’s product moment correlation coefficient analysis with the help of statistical packages for social sciences (spss) software. 4. results and discussion a total number of 83 copies of questionnaire were filled, returned, and usable for the study which represents a return rate of 68.6% while 38 were rejected due to large unfilled parts. ho1: there is no significant relationship between gender diversity and job satisfaction. interpretation: from the hypothesis test table 1, gender diversity was shown to have a significant positive relationship with job satisfaction with the correlation coefficient of 0.891 which is very high and probability value of 0.000 (p-value < 0.01) which is less than the significant level at 0.01, 2-tailed test. based on this result, the research hypothesis which states that, there is no significant relationship between gender diversity and job satisfaction is therefore rejected. this implies that as first bank of nigeria improves on gender equality and fair treatment among her employees, job satisfaction will be enhanced. table 1 result for the relationship between gender diversity and job satisfaction gender diversity job satisfaction gender diversity pearson correlation sig. (2-tailed) n 1 83 .891 ** .000 83 job satisfaction pearson correlation sig. (2-tailed) n .891 ** .000 83 ** correlation is significant at the 0.01 level (2-tailed) the findings from this study revealed that most of the respondents agreed that the organization does not discriminate when it comes to employing different gender into the organization and there is equal opportunity for females to develop on their career. this shows that the management first bank of nigeria plc. keeps to the diversity policies and implement its practices. this study does not support the claim of defuse arokiasany (2013) that organizational leaders prefer to hire more male employees than female because it is believed that the male have the capacity to be highly effective than the female employees. based on the result of the data analyzed and the hypothesis tested, it is evident that gender diversity has a significant relationship with job satisfaction. this result is in line with the findings of eugene et al. (2013); ngao and mwangi (2015). however, negative attitudes like stereotype, prejudice, discrimination, sexual harassment, etc. on and against opposite gender can account for the 21 negative effects of gender diversity on employee performance. this can account for inconsistence in employee performance. on the other hand, organisations that create an inclusive environment for all employees irrespective of gender and creates policies that eliminates discrimination from the workplace can benefit from gender diversity (powell, 2011). a significant relationship between gender diversity could also mean that some employees like to work with opposite gender so long as they can carry out their job professionally. ho2: there is no significant relationship between ethnic diversity and employee intention to quit. interpretation: from the hypothesis test table 2, ethnic diversity was shown to have a significant positive relationship with employee intention to quit with the correlation coefficient of 0.825 which is very high and probability value of 0.000 (p-value < 0.01) which is less than the significant level at 0.01, 2-tailed test. based on this result, the research hypothesis which states that, there is no significant relationship between ethnic diversity and employee intention to quit in first bank of nigeria plc. is therefore rejected. this implies that as first bank of nigeria policies encourages diverse cultural composition and frown on tribalism among employees, intention to quit will eventually reduced. table 2 result for the relationship between ethnic diversity and employee intention to quit ethnic diversity employee intention to quit ethnic diversity pearson correlation sig. (2-tailed) n 1 83 .825 ** .000 83 employee intention to quit pearson correlation sig. (2-tailed) n .825 ** .000 83 1 83 ** correlation is significant at the 0.01 level (2-tailed) the result does not concur with selvaraj (2015) findings, which reported that in an ethnic diverse group, there is a high probability of ethnocentric views among members, hence creating tribal conflicts, which result in reduced group cohesion and performance. bleaney and dimico (2016), support the above, stating that ethnic based conflicts negatively affect the reputation, performance and profits of the organisation. however, van knippenberg, van ginkel and homan (2013) argued that ethnic diversity brings better problem solving solutions, creativity and innovation amongst employees in an organisation. based on odhiambo (2014) argument, the reason why we found a positive effect of ethnic diversity on employee intention to quit is due to the moderating effect of ethnic demography. this means that in ethnically heterogeneous organisations (such as first bank of nigeria) ethnic identities of team members may be less salient and therefore, creating less distruction on employee performance as a . this means that ethnic diversity does affect employee intention to quit in first bank nigeria pls. majority of the employees agree that there is cooperation among colleagues. it was noticed that in first bank of nigeria where quota system policy is used as part of control measure during recruitment exercise has yielded positively on employee intention to quit. 22 5. conclusion and recommendations from the findings, the effects of workforce diversity on employee performance in organizations particularly the banking industry appears to be positively significant. the answer to the research questions is in the affirmative, confirming that there is a significant relationship between workforce diversity (gender and ethnicity) and employee performance. it is discovered that an organization that has a good mix of male and female employees is more likely to perform better than an organization that is dominated by same gender. reason being that both gender think and acts differently and if an organization embraces such diversity, then it is indirectly welcoming different ideas that the male and female employee will display. the study recommends that first bank of nigeria management should sanction negative attitudes like stereotype, prejudice, discrimination, sexual harassment, etc. on and against opposite gender of which can account for employee dissatisfaction and eventually affect the overall employeel performance. also, management should continue to promote equal employment and opportunity for career growth for all gender so as to enhance job satisfaction on the part of the employees, leading to increase in overall organizational performance in first bank of nigeria.. to encourage gender diversity, managers should create flexible working policies that can help female employees to manage their work and their personal life (work-life balance) without clashes there by . by doing this, they can be sure to find out if their policies are supporting diversity in terms of hiring both male and female, promotion and retention. management should put in place measures in curbing ethnocentric tendencies among employees. equality at all levels should be enforced irrespective of ethnic background in order to enjoy retention outcome prospects. also, management should encourage social interactions between employees. with this, employees can learn about the culture of fellow colleagues. such knowledge can encourage tolerance among the employees and knowledge of other culture can be help to successfully carried out a specific task that requires such knowledge when the need arise. ethnic diversity can help the in the bank service coverage, especially with the bank operations where they have to work with customers from different ethnic group, and having ethnic diverse workforce can improve performance. hence management should improve cultural awareness of the employees. managers should try to create a holiday calendar that is culturally diverse as this can be an avenue to create culture awareness. this can make the work environment more welcoming for the employees and can help minimize misunderstandings and enhance performance. 5.1 suggestion for future research this study was limited to the banking industry in nigeria and hence more studies should be conducted to focus on other sectors like the manufacturing industry. the study also suggests that further studies should be conducted on the relationship among age diversity, educational diversity and employee performance in other sectors. similar study should be conducted comparatively on private and public or government organization. this study focused on few workforce diversity, however similar study can be conducted focusing on how different dimensions of diversity affects organizational performance and longevity. 5.2 contribution to knowledge the study has added to existing literature on workforce diversity and employee performance by empirically validating that having a diverse workforce and creating an inclusive environment can enhance employee effectiveness. in addition, this study has contributed to knowledge by demonstrating that workforce diversity is statistically and positively correlated with employee performance and it also 23 confirmed that there is a significant relationship between workforce diversity and employee performance. moreover, since most of the studies on workforce diversity laid emphasize on one aspect of workforce diversity on employee performance, this study has brought together two important aspects of workforce diversity (gender and ethnicity) to test their influence on employee performance. hence, this study will be a reference for future research, as it will aid future studies on diversity in the workplace. finally, the study has been able to gather relevant literatures and has given in-depth knowledge about diversity issues in the workforce and how 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(2010). age diversity and the aging librarian in academic libraries in south africa. south african journal of libraries & information science, 76(1), 121-134. 53. webb, c. & carpenter, j (2012). what can be done to promote the retention of social workers? a systematic review of interven-tions”. british journal of social work 42(7), 1235-1255. microsoft word 10 (20-17) guercini c.docx 133 foreign market entry decision-making: what do we know so far? simone guercini university of florence, italy matilde milanesi university of florence, italy andrea runfola university of perugia, italy received: september 8, 2020 accepted: december 14, 2020 online published: december 28, 2020 abstract the paper proposes a systematic review of the literature on foreign market entry decisionmaking. the decision-making process in this area is particularly challenging for companies, given the lack of familiarity with an international environment characterized by increasing complexity and, therefore, a high level of uncertainty. the article adopts a systematic approach to reviewing the literature, to investigate the state of research on the topic, as well as the main theoretical approaches and decision-making processes for entering foreign markets. a total of 64 articles published in international business and international marketing journals are examined. the paper proposes a descriptive and thematic analysis of the articles and highlights the main theoretical approaches adopted, the declinations of the concept of uncertainty, and the entry modes as decision-making contexts. finally, the paper suggests future directions for research. keywords: foreign market entry; decision-making; uncertainty; entry modes; international business; international marketing. 1. introduction foreign market entry is a fundamental issue for international strategic marketing. entrepreneurs and managers find themselves making important decisions in this area, which may concern the choice of markets to enter (which markets), the geographical concentration or diversification (how many markets), the entry modes, defined in terms of competitive strategy for the foreign markets (how to compete) (kogut, 2002). foreign market entry decision-making can take on particular importance for internationalization processes. the decision-making process can be international journal of economic behavior, vol. 10, n. 1, 2020, 133-147 134 challenging due to the uncertainty that characterizes the international expansion of firms, as the foreign environment can be more complex and less familiar than the national one (cavusgil & godiwalla, 1983), especially in the case of smes (milanesi et al., 2020). the condition of uncertainty that characterizes decision-making differs from the condition of “risk”, which implies that the probabilities of outcomes are known and the optimal option can be calculated (knight, 1921). uncertainty can have multiple sources, such as the introduction of new products, services or the founding of a new venture (mcmullen and shepherd, 2006), or rapid and unpredictable changes in technology, people, markets, quality, and schedules (de meyer et al., 2002; artinger et al., 2015). uncertainty is related to entrepreneurial decision-making, often characterized by limited information and a lack of data from past experience (busenitz and barney, 1997). uncertainty is acknowledged as the primary characteristic of the international expansion of firms (mascarenhas, 1982). sources of uncertainty for internationalizing firms are related to unfamiliarity with operating in a new environment, foreign exchange, different cultures, political risk, labor restrictions, infrastructural difficulties (mascarenhas, 1982; johanson and vahlne, 1977; 2009). the decision to internationalize and the decisions concerning the foreign market entry modes have been described as procedures characterized by great uncertainty (acedo and jones, 2007; liesch et al., 2011). decision-making under uncertainty can refer to the adoption of rather simple decisionmaking rules, namely heuristically-based decisions (guercini, 2019; guercini and runfola, 2020). an example is given by the analysis of foreign markets that can follow rules of thumb such as imitation of competitors; previous experiences of the organization and decision-makers; the definition of thresholds on key factors (cut-off). heuristics originate in the cognitive science domain and refer to rules that arise when information, time, and process capabilities are limited. thus, heuristics are rules of thumb that decision-makers rely on to simplify complex problems and/or information processing tasks (newell and simon, 1972). the adoption of heuristics for decision-making is debated, as it can lead to biases (tversky and kahneman, 1974), or it is capable of effective solutions without using a lot of information and processing (gigerenzer, 1996; gigerenzer et al., 1999). thus, the adoption of heuristically-based decisions is particularly true for foreign market entry decision-making, as shown by guercini and milanesi (2020) who investigate heuristics in international business and show that foreign market entry is the main area in which simple rules are adopted, including simple rules such as imitative behavior, previous experience, anchoring heuristics or improvisation. starting from this background, this paper intends to explore the state of the literature on the dissemination and effectiveness of decision-making rules in relation to foreign market entry. in particular, the article proposes a systematic review of the literature on foreign market entry decision-making, based on contributions published in the top-ranked journals of international business (ib) and international marketing (im). the review allows a deeper understanding of how decisions are made, whether heuristics are adopted and which type, and thei outcomes of decision-making. additionally, the paper argues that studying foreign market entry decision-making improves the understanding of how managers and entrepreneurs weigh different entry modes and adjust their choices over time. to this aim, the paper is structured as follows. in the next sections, the research questions, the methodology, and the main results of the systematic literature review are presented; the paper ends with a discussion of the results and future directions of the research. 135 2. methodology the paper proposes a structured systematic review of the literature in order to investigate the current state of research on foreign market entry decision-making. a review of the literature that follows a structured systematic approach must have the characteristics of objectivity, transparency, and replicability (tranfield et al., 2003). more specifically, a systematic review adopts reproducible methods and procedures to identify, select, and analyze prior studies and develop a research agenda (paul and criado, 2020). to this end, the systematic review followed several phases (schmeisser, 2013; loock and hinnen, 2015). the review began with a “planning” phase aimed at establishing a procedure for developing a transparent, replicable, and systematic research process. in this phase, the following research questions were defined: rq1. what is the current state of research on foreign market entry decision-making? rq2. what are the main theoretical approaches and the decision-making processes emerging from the literature? the systematic review of the literature then continued with the “research” phase, in which the scopus database was adopted as the data source, since scopus is the largest abstract and citation database of peer-reviewed literature and allows a clear and replicable keywords search. the initial identification of the articles was conducted using a keyword search, consistent with the aforementioned objective of the present study. the following keywords were used: “market entry”, “entry mode”, “entry strategy”. these keywords were combined, through the boolean and connector, with other keywords – “decision making”, “uncertainty” and “cognition” for a total of 9 search strings, limited to the title of the article, keywords, and abstract. the research has not been limited to any specific time period in order to obtain a broad vision on the topic and its development in a chronological sense. the keyword search focused on the top-ranked international academic journals dealing with ib and im topics, thus excluding books, essays, and conference proceedings. in this sense, journal quality was taken as an indicator of study quality (narayanan et al., 2011). for the selection of journals, we relied on studies conducted by dubois and reeb (2000), griffth et al. (2008), and xu et al. (2008), which identified six leading journals: journal of international business studies (jibs), management international review (mir), journal of world business (jwb), international marketing review (imr), journal of international marketing (jimktg) and international business review (ibr). based on tüselmann et al. (2016), the journal of international management (jim) and global strategy journal (gsj) were also included. the keyword search in the 8 selected journals resulted in a total of 69 articles. each article was read independently by the authors in order to verify that the subject actually concerned the foreign market entry decision-making, and therefore the actual adherence to the research objectives and eligibility of articles. at the end of this check, 64 articles were included in the review. the systematic review of the literature ended with a “reporting” phase concerning the descriptive and thematic analysis of the selected articles. such an analysis is developed in the next paragraph. the descriptive analysis is aimed at providing a broad view of the studies on foreign market entry decision-making, in terms of temporal trend, articles by journal and most influential articles (citation analysis). the thematic analysis includes a deeper examination of the selected articles in terms of theoretical approaches to the study of foreign market entry decision-making, how uncertainty is addresses and the main entry modes as decision-making contexts. 136 3. analysis of the selected articles 3.1. temporal trend and most influential articles the descriptive analysis proposed in this section allows answering to the first research question of the study concerning the current state of research on foreign market entry decision-making. the 64 articles resulting from the systematic review of the literature (see the appendix) were published in the period 1996-2020 (the review stopped in january 2020). the temporal trend of the publications is shown in figure 1. figure 1 – articles by year there have been peaks in more recent years, in particular in 2008, 2015, and 2018. this can be attributed to a renewed interest in decision-making issues, following the change in the international scenario, with the opening of new markets and the emergence of new ways of approaching foreign markets. table 1 shows the distribution of the articles in the 8 selected journals. 64% of the articles are published in two journals: journal of international business studies and international business review. table 1 – articles by journal journal articles journal of international business studies 23 international business review 18 international marketing review 8 journal of world business 5 management international review 5 journal of international management 4 global strategy journal 1 journal of international marketing 0 tot. 64 as regards the type of articles, only one (chi et al., 2019) is a review concerning the real options theory in ib, while the remaining are empirical articles. additionally, an analysis of the 137 number of citations received by the selected articles allows us to identify some of the most “influential” articles. the total citations of the 64 articles are 4114. the article that has received the most citations so far is that of johanson and vahlne, with 1663 citations, published in 2009 in the journal of international business studies, in which the authors revise their well-known uppsala model of internationalization published in the same journal in 1977. other 8 articles exceed 100 citations. table 2, therefore, shows the 9 articles that exceed 100 citations: 14% of the articles collect 68% of the total citations. there are 10 other articles that exceed 50 citations. this suggests that the scientific interest in the subject under study is evident. table 2 – articles with more than 100 citations authors title year journal citations johanson, j.,vahlne, j.e. the uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership 2009 jibs 1,663 acedo, f.j., jones, m.v. speed of internationalization and entrepreneurial cognition: insights and a comparison between international new ventures, exporters and domestic firms 2007 jwb 185 slangen, a.h.l., van tulder, r.j.m. cultural distance, political risk, or governance quality? towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research 2009 ibr 168 chandra, y., styles, c., wilkinson, i. the recognition of first time international entrepreneurial opportunities: evidence from firms in knowledge-based industries 2009 imr 158 petersen, b., pedersen, t., lyles, m.a. closing knowledge gaps in foreign markets 2008 jibs 146 chi, t., mcguire, d.j. collaborative ventures and value of learning: integrating the transaction cost and strategic option perspectives on the choice of market entry modes 1996 jibs 140 nielsen, b.b., nielsen, s. the role of top management team international orientation in international strategic decision-making: the choice of foreign entry mode 2011 jwb 139 evans, j., treadgold, a., mavondo, f.t. psychic distance and the performance of international retailers: a suggested theoretical framework 2000 imr 113 kumar, v., subramaniam, v. a contingency framework for the mode of entry decision 1997 jwb 101 tot. 2,813 138 3.2. thematic analysis of the selected articles starting from the descriptive analysis of the most influential journals and articles, the systematic review continues with a thematic analysis that allows answering to the second research question of the present study concerning the main theoretical approaches and the decision-making processes emerging from the literature. in particular, three main areas of analysis emerge from a thorough reading of the selected articles. the first area concerns the study of the theoretical approaches underlying the 64 selected articles. in fact, the decisions regarding foreign market entry are traced back to several perspectives. as is well known, for example, in their reformulation of the uppsala model, johansson and vahlne (2009) explicitly affirm the relevance of the network vision as a key theoretical context for a greater understanding of the ways companies go abroad, a theoretical conceptualization that, moreover, it is the basis of the concept of liability of outsidership. there are articles that confirm the relevance of this network perspective (ojala, 2015), broadening the decision-making spectrum of entry methods, for example, also addressing the issue of re-entry into a market (vissak et al., 2020). a common ground of all these contributions may be interpreted taking into consideration how the decisionmaking about foreign market entry is related to the ability of export decision makers for finding players who may act as “gatekeepers” to the new markets (guercini and runfola, 2010), and let the company deals with the difficulties of entering a foreign market. however, the network view is only one of the theoretical approaches adopted. the article by acedo and jones (2007), one of the most cited in the sample, has cognition as its starting point of theory, according to a psychological as well as managerial conceptualization, considered central to the understanding of the speed in the processes of entry into a foreign market. li and parboteeach (2015), on the other hand, draw on the institutional theory to understand the impact of imitative behaviors on foreign market entry decisions, specifically emphasizing the role of the cultural variable in favoring or not such behaviors. the theoretical assumptions are, therefore, various in the contributions considered, even including the real options theory (li & rugman, 2007; chi et al. 2019). following these contributions, the decision-making regarding foreign-market entry is then related to a set of different variables that comes from different theoretical perspectives. in this sense, it is not possible to give priority to some with respect to others. however, different theoretical lenses contribute to elaborate some features of the decision-making, for example to what extent is imitative or if it is faster for some actors in comparison to others. a second issue emerging from the systematic literature review concerns how the concept of uncertainty is approached by the selected articles and how it relates to entry decisions. the issue of the perceived distance between the market of origin and the market of destination assumes centrality in many studies, given that it is considered one of the elements capable of generating liabilities in the process of foreign development of companies, affecting the processes of internationalization. the conceptualization of the distance between markets is interpreted according to different meanings, for example as a geographical distance rather than a linguistic distance. there are articles that specifically address the psychic distance (treatgold & mavondo, 2010; baack et al. 2015; ojala et al. 2015) as a particular aspect on which to decline the uncertainty and difficulties in deciding to enter a foreign market. however, there are other contributions that emphasize the role of different dimensions connected to the perception of uncertainty, such as the concept of country familiarity proposed by clark et al. (2018), the environmental uncertainty explored by tseng and lee (2010), or the uncertainty in its endogenous and exogenous dimensions (sears, 2019). from this second set of contributions, it emerges that foreign market entry is a decision that is based on “perceptions” that are almost individual by decision-makers to face uncertainty. it is then clear that the extent to which some of those sources of “distances” may be perceived as fundamental, can guide the process of 139 entering a foreign market. the literature shows different causes of uncertainty, but it seems to highlight the need to further study and elaborate perceptions of differences among international markets as a crucial aspect of foreign-market entry decisions. a third area emerging from the systematic literature review concerns the entry modes that are considered decision-making contexts to understand the relationship between the formulation of judgment and the management of uncertainty in international decision-making. in fact, in the selected articles, decision-making is declined with reference to the traditional ways in which companies enter a foreign market, albeit with different emphasis between the different forms. there are articles that focus on exports (morgan & katsikeas, 1997; freixanet et al. 2018), while a relevant part focuses on forms that can be perceived as riskier, such as foreign direct investments ( boeh & beamish, 2012; dermibag et al. 2010; li & rugman, 2007; ma & delios, 2007) or international joint ventures (sartor & beamish 2018; lópez-duarte & vidal-suárez, 2010; mcnaughton, 1996). additionally, there is also an emphasis on the heuristically-based decision with reference to specific entry modes. in particular, the extant literature on the choice of entry modes, which assumed that the mode of entry is a single-stage rational analytic decision by the manager, is challenged by kumar and subramaniam (1997) who propose a contingency framework for the entry mode decision in which an alternative strategy of decision is discussed. in the so-called ‘cybernetic decision strategy’, decisions are made by considering a few critical alternatives, according to a hierarchical process, and the decision rules follow some (non-specified) heuristic established through prior cognitive processes. however, the effectiveness of decision-making is not warranted. maitland and sammartino (2015) investigate cross-border acquisitions in which heuristics are seen as powerful cognitive tools that enable, rather than limit, decision-making in dynamic and uncertain environments. authors examine the cognitive efforts of senior decision-makers of an inexperienced multinational, as they assess a potential acquisition in a politically hazardous country. in this context, heuristics allow building small world representations of a very uncertain strategic context. to summarize, this third area emerging from the analysis investigates both the context where decisions making of foreign entry are assumed, such regarding how export or alternative modes are adopted, and the “tools”, such as heuristics (guercini and runfola, 2020) that may support the process of decisions making. 4. implications, future research, and conclusion foreign market entry decision-making: what is the current state of research and what are the main theoretical approaches and the decision-making processes emerging from the literature? these are the questions that the present study was aimed at answering. the analysis of the articles in this systematic review of the literature highlights how the topic, despite having its roots in past influential contributions, seems to have been the subject of renewed interest in recent years. understanding how companies decide on the entry of foreign markets is a crucial topic for international marketing and international business scholars. as already underlined, this can derive both from the growing degree of globalization of economies and from the fact that decisions on international development represent for many companies, including small and medium-sized ones, the main way to grow. this article represents an attempt to systematize the contributions in the literature while highlighting the main directions for future research and possible gaps to be addressed by scholars interested in decision-making for companies in their entry mode strategies. the review shown that three main areas of research, related to the theoretical perspectives used to explain the decision-making process (with a great relevance of the network-based view), how the concept of uncertainty may be considered and the relationship between decisions to be assumed 140 and different market entry modes. however, we believe that advancement in research of decision making may be directed towards the understanding of some issues that are related to the ones described in the review. a first relevant research direction and potential gap to be addressed concerns the analysis of the differences between decision-making approaches with reference to the different entry methods. although the entry mode has been addressed in the research as a context of decisions, there is still space for contributions aimed at proposing an overall and comparative picture of differences and commonalities when actors should decide on different entry modes. this is particularly true if we consider different entry mode decisions by the same decision-maker. the distinction between direct and indirect methods may imply a different way of dealing with uncertainty on the part of the same business decision-maker (see for example ekeledo and sivakumar, 1998 or slagen et al., 2009), even in the same company with respect to different entry modes. the level of uncertainty that characterizes forms of direct export is certainly different from that represented by methods of direct entry into foreign markets. how does this level of uncertainty relate to decision-making? what rules do businesses follow with reference to the different entry methods? what common paths and what differences among the alternative forms of entry? in our view these are research questions, deserving still further research by academics. a second research direction concerns the relationship between uncertainty and decisionmaking in the comparison between companies with different sizes and in the comparison between smes and mnes. previous research, at least in the contributions analyzed in our review, seems to have considered a concept of uncertainty that is generally valid for all types of companies. however, the international decision-making has been studied both with regard to smes (francioni et al. 2015) and to mnes, that have been associated with more rational behaviors (aharoni et al., 2011). on this issue, however, there is still space for new knowledge regarding decision-making on market-entry. future research should be oriented to understand how the uncertainty at the level of individual decision-makers and at the organizational level is declined in the case of mnes and smes and what are the solutions implemented to reduce this uncertainty, thus highlighting differences and similarities in the case of the two types of companies. the third direction of research concerns the ways in which technology can support companies in their decision-making processes regarding market entry decisions. the previous systematic review does not propose technology as a crucial issue for foreign expansion. however, if we consider the wider and more recent debate in management, technology is assumed to play a relevant role in the future, especially if it may act as a reducer of uncertainty in any field of decision-making. as highlighted in the literature, marketing and management processes must now relate to the opportunities and challenges that new technologies, such as artificial intelligence or automation may relate to decision-makers (guercini, 2020). the new technologies can favor the process of entry into foreign markets, representing a modality (guercini and runfola, 2015), and guarantee an extremely rich and useful information base also for small-medium enterprises. in this context, a relevant research gap concerns, how do new technologies relate to the management of uncertainty in decision-making? how can new technological paradigm such as artificial intelligence, be adopted to support business decisionmakers? this is an area that deserves further research by academics, given the role that technologies are taking and will take on for theoretical development and managerial practice. although the study aims to contribute to the theoretical debate on decision-making in foreign market entry, it can show some implications for practitioners. the implications are twofold. first, this paper emphasizes the importance of conceiving the decision about entry modes from an individual as well as an organizational perspective. managers should be aware 141 that the decision under question can be linked to personal as well as organizational routines to be effective. second, our paper shows some “solutions” suggested by the literature, both in terms of heuristics or networking behavior that can help in the decision-making process and to which managers may rely on to face uncertainty. this study has also some limits. as for the methodology, the systematic review is based on a list of journals, whose selection followed specific criteria, that, however, do not cover the full range of academic journals in the international business and international marketing fields. this may limit the scope of the review, and additional research is required to extend or redefine the journals considered for the review. additionally, a series of contributions was excluded, such as book chapters, editorials, conference papers, notes and letters, which might lead to an interpretation bias due to the reduced number of reviewed literature pieces. finally, as the screening and thematic analysis is based on a reading of the articles by the authors, thus using a manual literature review technique, this could have led to unintended biases. in conclusion, this contribution represents an attempt to provide an insight into the state of the art of the literature on foreign market entry decision-making. our research, although preliminary, shows a growing interest in the topic and the need to provide an overview of what has been proposed so far in the various contributions published in the top ib and im journals. this contribution has tried to provide an initial response to these systematization needs. references 1. aharoni, y., tihanyi, l., & connelly, b. l. 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gap and aims to identify the types and importance of the promotion tools applied by invs from this region. it presents the results of the multi-mode method (cati combined with cawi) study of 297 polish small and medium invs. it shows, that they rather do not apply a very diversified set of promotional tools. the most common tools applied by them on the foreign markets are trade fairs and exhibitions, internet advertising, pr, personal sales and internet tools other than internet advertising, with the most importance given to pr. the most differentiated set of promotion tools is applied by companies operating both on the b2b and b2c market. keywords: invs; promotion tools; marketing capabilities; central and eastern europe countries; b2b; b2c. 1. introduction small and medium-sized enterprises (smes) are commonly considered crucial engines for growth, job and wealth creation. during the recent decades, several phenomena, such as globalization processes, technological development and increasing heterogeneity caused important market changes which affected smes behavior and ability to compete in the international arena (bocconcelli et al, 2018). those changes are also applied to smes that internationalize rapidly soon after their foundation known as international new ventures, the development and activities of those highly performing smes that participate actively in crossborder trade represent nowadays an optimistic and contemporary trend for international business (cavusgil & knight, 2015). although the phenomenon of invs internationalization has attracted academic and practitioner interest, the scholars around the world have focused mainly on invs from international journal of economic behavior, vol. 8, n. 1, 2018, 101-115 102 developed countries. little is known about newly born international firms operating in posttransformation economies, such as central and eastern europe (cee) countries that after 1989 have abandoned an economic system based on state ownership and a centralized control of production, starting the construction of free-market economy. after joining the european union many of them, including poland, have been on track toward the level of europe's most advanced economies and now are experiencing the emergence of new ventures, including global startups. they are also important for emerging countries in terms of innovation generation, creation of new products and the development of own business models that contribute to wealth and jobs creation (baranowska-prokop & sikora, 2017; nardali, 2017). despite its dynamic economic and technological development, this part of europe has been neglected as a source of marketing science development and is grossly underrepresented in the literature. the scarcity of studies refers also to marketing capabilities (martin et al., 2017) and especially, the promotion and sales tools used by invs to support sales and speed up their international expansion. the present article aims to fulfill this research gap and to identify the types and importance of promotional and sales tools used by invs from cee post-transformation countries, taking as example invs from poland. the choice of the article and selecting polish invs was also motivated by previous studies of polish invs that revealed their lack of promotional effectiveness including shortcomings in using non-standard forms of promotion (danik & kowalik, 2015). 1. literature review 1.1. marketing challenges faced by invs the emergence of companies that internationalized just after creation is closely linked to the internationalization of smes and over the last decades has attracted both academic and practitioner interest. this type of firms is known as invs (mcdougall, shane, & oviatt, 1994), global start-ups (oviatt & mcdougall, 1995), born globals (knight & cavusgil, 1996; madsen & servais, 1997) and instant internationals (preece et al, 1999). according to knight (2015), invs are companies that undertake international business at or near their founding. they are characterized by a high export share in total turnover (over 25%) reached within the first years of internationalization, wide geographical scope of expansion, and so-called global vision and international experience of their managers. the invs are also known by their international business commitment, superior international business networks, offering high-value goods and flexibility to adapt to evolving environmental conditions (rialp et al., 2005). although invs are positively associated with high innovative skills, including an ability to access effective r&d and distributions channels (madsen and servais, 1997), they face continuous uncertainty and huge internal and external challenges connected with survival and success in foreign markets. luostarinen and gabrielsson (2002) defined four types of challenges: financial, sales and marketing, research and development (r&d) and managerial that invs need to overcome. according to rennie (1993), those challenges are due to the lack of resources, management transition issues, financial access, market information and lack of innovation in their business. their markets often are characterized by high growth and turbulence (nardali, 2017) and they must compete with well-established and trusted firms with an international reputation and established brand names which are depositors of trust and market acceptance (mort et al, 2012). in terms of newness, invs are unknown entities to potential customers which often translate into a lack of trust in their abilities and offering. although marketing is considered to be of utmost importance for the success of the smes and a major driver of performance among invs firms, invs are experiencing marketing challenges that cannot be dealt with the general marketing perspective (mort et al, 2012). 103 nardali (2017) stated that new ventures have distinct characteristics that distinguish them from larger, more established organizations, highlighting that newness and small size they encounter in their marketing efforts must be considered. also, the turbulent environment triggers marketing challenges related to limited information available for marketing planning and marketing decisions, very low predictability of market and unstable relationships with crucial partners (gruber, 2004). lack of innovative marketing techniques is also one of the internal obstacles encountered by the invs on the way to their success (luostarinen & gabrielsson, 2006). according to luostarinen and gabrielsson (2006), invs underestimate marketing resources needed to enter into global markets. the other possible factors are connected to the late hiring of the sales and marketing people. this is why the invs are challenged to establish internal structures and processes by defining new roles and tasks which, due to resource scarcities and lack of experience in marketing, is a demanding task. it is also worth noting that marketing planning in central and eastern europe countries is relatively not developed (hooley et al, 1996). kobylanski and szulc (2011) stated that smes in cee are usually implementing marketing actions only on a small scale. they are influenced by the owner/manager’s marketing skills, knowledge and attitude, but due to organizational limitations, those activities tend to be very simple, intuitive and not coordinated. smes approach to marketing is entrepreneurial and reactive. many decisions are made in an intuitive way, rather than based on the information. as stated by kowalik (2015) polish-based invs have more individualized and flexible approach to clients which is emphasized as an important competitive tool. because of the small size of the organization and limitations regarding finances and personnel, young companies seek a high degree of effectiveness and efficiency in the marketing efforts, developing low-cost creative solutions (e.g. guerilla marketing) to produce a strong impact on the marketplace (gruber, 2004). 1.2. marketing capabilities of invs to overcome those marketing challenges, it is important to develop marketing capabilities (mcs) and tools. mcs play a major role in invs development and are suggested to be key drivers of the accelerated internationalization of highly performing global smes (weerawardena et al., 2007). according to day (1994), they can be considered as the skills and competences the firm possesses that help it to understand changes taking place in its markets, together with those that enable it to operate more effectively in the marketplace. mcs were defined by day (1994) as the integration processes designed to apply the firm's collective knowledge, skills and resources to the market-related needs of the business, enabling the business to add value to its goods and services, adapt to market conditions, take advantage of market opportunities and to meet competitive threats. according to ripolles & blesa (2012), those competences are related to market information gathering, sharing and dissemination, launching successful new products and customer and supplier relationships development. the invs with marketing capabilities are able to develop expertise that allows them to confront new information and challenges in a more timely and opportune manner. by developing them, the firms will be able to identify and carry out the changes their business opportunities require in order to meet better the demands of their foreign customers. mcs are firm-specific and can represent knowledge diffusion within a country or region (cortez & johnston, 2018). weerawardena et al. (2007) argued that the most critical capabilities in invs internationalization and international performance include a market-focused learning capability, internally focused learning capability, networking capability, and marketing capability. such capabilities in combination with superior qualifications of company founders (such as having an international entrepreneurial orientation, a general learning orientation, and prior international experience) allow invs to develop high-value-added products and services 104 that facilitate early internationalization. vorhies and morgan (2005) identified eight specific market capabilities with impact on firms': pricing, product development, channel management, marketing communication, selling, market information management, marketing planning and marketing implementation. according to francioni, pagani and castellani (2016), the role of marketing-related factors is addressed mainly by the availability of marketing capabilities and adoption of ict (information and communication technology)/web technologies for access and interaction in foreign markets. falahat et al (2018) highlighted that emerging market invs with an entrepreneurial orientation and networking capability are more likely to develop a robust marketing strategy. these capabilities are strongly associated with superior performance in foreign markets. zhou et al (2012) stated that invs need to deploy marketing capabilities to support choices about how the venture will compete to reach target customers and achieve desired goals. 1.3. promotional tools used by invs marketing strategies are implemented through segmentation, targeting and positioning. marketing as tactics/methods focuses on the use of marketing mix known as 4 p's: product, place, price, promotion and it is related to the implementation of marketing strategy (reijonen, 2010). the selection of international marketing strategies and its implementation using, among others, promotional and sales tools is one of the most difficult tasks for the invs. according to martin et al (2017), promotion capability can be considered as the skills and accumulated knowledge which exporters use to effectively deliver marketing messages. sending offers and personal sales are one of the most important tools applied by the invs. as invs are small in business scale dealing with a small number of international firms and partners, so they prefer to use personal contacts to manage their relationships with important customers instead of impersonal marketing through mass promotions. they rely more on personal networks than well-organized sources of customer information (kim et al, 2011) and in many companies, invs business is built on the positive nature of the staff and customer interactions and relationships (gilmore, 2011). moreover, the ability of the owner/manager to have meaningful dialogues and interactions with customers is often the unique selling point of the business (stokes, 2000). such interactions with customers rely on word-of-mouth communication (wom) which are considered the most influential ways of promotion and consist of informal, person-to-person communication (stokes, 2000). despite its weakness related to non-controllability and selflimiting to the boundaries of the networks, it suits well companies with limited resources (reijonen, 2010), such as invs. it can also be considered as a source of innovative ideas (stokes, 2000). according to reijonen (2010), the survival of a firm is often dependent on sales, so that, marketing activities in small firms are commonly related to selling processes. taking into account that start‐ups and smes generally have small budgets to spend on promotion, they need to promote their business by word of mouth and other below the line activity. companies also rely on referrals, recommendations, certificates and awards won in contests which boost their visibility, credibility and legitimacy. the invs firms demonstrate a number of techniques to enhance it, including prizes, international accreditations, participation at international conferences and seminars or media recognition used to authenticate their products (mort et al, 2012). it is worth highlighting that having a network of overseas customers increases credibility not only at the international level but also at the domestic level (francioni et al, 2016). participation in trade fairs and exhibitions is perceived as one of the main tools helping not only to close the first contact with potential clients, winning sales leads, promoting the company but also managing the relationships and gaining a good reputation (falay et al, 2007). 105 sponsoring is related to financial or in-kind support of an activity and is used primarily to reach specified business goals. it has primarily been used in connection with sports stars, sporting events and teams, but it is becoming more widespread in relation to cultural and other events (hansen & scotwin, 1994). as a promotional tool, sponsoring can include sponsorship of press rooms, an international lounge, a speaker or vip room, an awards reception, educational programs and others. it helps to enhance the invs image, shape consumer attitudes and raise brand award. it can be also used to drive sales and showcase product attributes. taking into account that invs internationalize their products and services in different countries, with different cultures and different languages, the "culture-of-origin" plays a crucial role to understand publics' behaviour, affects the way in which communication is conceptualized and constructed in global public relations (rittenhofer & valentini, 2015). cross-border public relations (pr) can be viewed as an implicit part of their everyday approach to building and sustaining business relationships. international trade is also boosted by the internet, virtual proximity to markets and cost reductions related to business transactions. the possibility to connect the world anywhere and at any time gives entrepreneurs from emerging markets a great opportunity to participate in the global markets (martin et al, 2017). technological and scientific developments in the ict sector in the last years have penetrated the business arena, changing the ways firms organize, manage their resources and implement communication activities and promotional tools (bocconcelli et al, 2016). invs seek innovative combination and recombination of resources in the use of online marketing and strategic publicity (mort et al, 2012). the inclusion of ict and web technologies by invs can be considered as factors facilitating the expansion in foreign markets. ict tools, such as company websites, online videos, documents and social network tools serve as a very important communication and sales tool and can be a very useful way for smes to expand their marketing activities because of its cost‐effectiveness and possibility to reach a wider or specific target market. its adoption and proper use is still constrained by the characteristics of the owner/manager, the organizational culture and available financial resources (bocconcelli et al, 2016). according to gilmore et al. (2007), e‐marketing activities allow entrepreneurs to advertise their products and services more widely at less expense. the invs can use e‐mail as a marketing tool to raise awareness of promotional activities which help them to decrease the costs of printing materials, such as catalogues and glossy brochures. digital marketing may be helpful also to collect information about potential foreign markets and enhance their creditability and visibility by creating a professional image with an efficient website. sinkovics et al. (2013) analyzed the drivers and performance of two approaches to supporting export marketing using the internet: the internet as an alternative or a substitute to a physical market presence and the internet as a sales channel. his research showed the positive relationship between online channel support and export performance, but no relationship between the adoption of the internet as an alternative to a physical presence and export performance. social networks also play a mediating role in the relationships between inward and outward internationalization, helping to speed up the process and make it more profitably (nardali, 2017). companies also claim to have high-quality distribution partners responsible for the sales in foreign countries who were carefully chosen, well-trained and managed under a great attention. networking is used by invs as a promotional tool to develop a range of alliances and collaborative partnerships. it is also helpful to connect to lead markets, contact foreign customers, suppliers and distribution channel representatives (nardali, 2017) and can also be viewed as a way to overcome the scarcity of resources (bocconcelli et al, 2016).according to martin et al (2017) sales service capabilities enable firms to use pricing skills to respond quickly to customer changes, so it is important to attract and retain personnel that could provide invs 106 pre-and-after sales technical support, availability, expertise and quality. invs should strongly invest in marketing capabilities centered on promotion, along with service based on sales and distribution. 1.4. differences between b2b and b2c promotion selling products and services to consumers is driven by desires, needs and emotions, while businesses are often motivated by more logical and rational considerations, such as price, business relationships or time-saving. smes and invs operating on both b2b and b2c markets use different types of promotion and sales tools. as the b2b buyers require often much more information and individual approach than b2c customers, the promotional tools involving personal communication, such as personal sales or trade fairs, are used more frequently on b2b than on the b2c market, whereas advertising is perceived to be more important in the b2c companies. also, in online communication more attention is paid to relationship building with b2b customers, therefore, instruments such as online events and product demonstrations are popular, whereas b2c marketers prefer online display advertising and sales promotion (jensen, 2006). regarding marketing strategy and according to cortez & johnston (2018), b2b segments are more important to invs than b2c segments, since these can be reached with more limited marketing budgets than traditionally globalizing companies have. 2. research questions taking into consideration past research, we can suspect that polish invs may tend to use rather a low cost (due to limited resources) and not very advanced (due to limited marketing competencies) promotion tools. moreover, we expect some differences in the application of promotional tools depending on the type of markets (b2b vs b2c) the companies operate on. however, our literature studies do not provide us basis to formulate hypothesis regarding the type of promotional tools applied by polish invs in their international marketing activities. as this subject was not studied before, our study has an exploratory nature. the aim of this study is to answer the following research questions: r1: which promotional tools are applied by polish invs on the foreign markets? r2: what is the perceived importance of the promotional tools applied by polish invs on the foreign markets? r3: what are the differences in the application of the promotional tools on the foreign markets depending on the type of the customers? 3. sample description and data collection method the data was collected between 31 january and 23 february 2018 using the multi-mode method that consists in combining the cati (computer assisted telephone interviews) and (cawi computer assisted web interviews) which allows taking advantages of both of them. the cati method guarantees a high level of interview standardization and minimalizes the interviewer effect on data gathered. it enables to reach the respondents on high managerial positions and provides them with a feeling of bigger anonymity than in the face-to-face interviews. this method allows to enhance the data quality and to reduce the interviewing time. the questionnaires coding and entering data into the computer are eliminated in this case (malhotra 2010, p. 213). moreover, the costs of this method of data collection are relatively low. the advantages of cawi are: allowing the respondent to see the questionnaire, making 107 the questions easier understood, low costs, quick access to partial data, lower risk that the respondent will make a mistake, anonymity of the respondents (wójcicki, 2012). combining cati and cawi method allowed us to avoid the most important deficiencies of each of them, i. e. potential problems with understanding the question (some respondents need to see the question on the screen, which is not offered in case of "pure" cati, some other require additional explanation from the interviewer, which is not possible in case of "pure" cawi), overuse of "don't know" option, which is typical for cawi or not using it, even if it would be justified in a given case, what can happen in case of cati (porritt & marx, 2011) and not answering the e-mail request for participating in the study or discontinue to fill in the questionnaire, what is more common in case of cawi. the gus (polish central statistical office) database combined with the bisnode database updated at the end of 2017 and containing information about companies operating in poland served as a sampling frame. the firms were drawn out of the population of 8750 existing and active polish firms with 10-249 employees and belonging to the industrial processing (manufacturing) sector of the polish classification of activity. a randomized algorithm in the software for telephone surveying was used to draw the respondents, by an external marketresearch agency, which also conducted the interviews. the interviews began with screening questions eliminating companies not fulfilling the criteria described below. among the companies meeting our preconditions, the response rate was 78.4%. the firms in our sample were selected using the following criteria: manufacturing companies incepted after 1997, not being a result of a fusion or takeover, never being a subsidiary of a foreign company, having at least 25% export share in total sales. the respondents were persons responsible for the cooperation with foreign partners, mainly sales/export/marketing directors or firm owners. sometimes also sales/export/marketing managers. these respondents were chosen, as they were expected to be most knowledgeable about the studied topics. such a use of single key decision-makers and other individuals possessing the most comprehensive knowledge about the internationalization process is such as ceos, managing directors or senior managers is widely adopted in the studies on invs and international entrepreneurship (e.g. rialp et al., 2005, mort and weerewardena, 2006). the final sample comprised 297 companies. half of them were established between 1997 and 2000 and only a few of them were incepted after 2009 (3%). most of them (93%) had exclusively polish capital. 146 firms were small companies with 10-49 employees and 151 employed 50 and more people. only 9 companies reached the average sale over 10 million euro (table 1). table 1 – size of the companies under study (number of companies) avarage sales (million euro) total 0-2 2-10 10-50 number of employees 10 49 72 74 0 146 50 249 1 141 9 151 total 73 215 9 297 source: own elaboration. 150 of the companies under study sold their main products on the b2b market only. 81 were active both on the b2b and b2c market whereas only 66 companies were operating on the b2c market exclusively. most of the companies started exporting within 1-3 years from inception, however about ¼ of them went abroad in the first year and 26% after 3 years from 108 being established. about half of the sample (131 companies) internationalized intensively reaching 25% export share in total sales within the first 3 years from inception (table 2). table 2 – type of market and internationalisation speed (number of companies) time to reach 25% export share in total sales total type of market up to 3 years over 3 years b2b time to start exporting (years from inception) up to 1 year 36 14 50 1-3 years 35 29 64 over 3 years 0 36 36 total 71 79 150 both b2b and b2c time to start exporting (years from inception) up to 1 year 11 4 15 1-3 years 24 21 45 over 3 years 0 21 21 total 35 46 81 b2c time to start exporting (years from inception) up to 1 year 8 2 10 1-3 years 17 18 35 over 3 years 0 21 21 total 25 41 66 total time to start exporting (years from inception) up to 1 year 55 20 75 1-3 years 76 68 144 over 3 years 0 78 78 total 131 166 297 source: own elaboration. 4. results and discussion the companies under study were asked to reveal the five most important promotional tools applied in the international markets and to indicate their importance starting with 5 = most important. all the respondents indicated at least one such tool with public relations being most frequently perceived to be the most important one (21.5% of indications), closely followed by trade fairs and exhibitions (20.2% of indications). nobody perceived sponsoring to be the most important promotional tool on the foreign markets (table 3). three of the companies under study did not mention any more promotional tools. the first of them promoted their products only at the trade fairs and exhibitions, the second one applied internet tools other than internet advertising (i.e. social networks) and the third one was using promotional tools other than listed in the questionnaire. the promotional tools most frequently mentioned to be the second in importance by the remaining companies were again fair trade and exhibitions (20.2% of indications) followed by internet advertising (18.2% of indications) and public relations (13.5% of indications). 109 table 3 – ranks of the promotional tools rank 1st 2nd 3rd 4th 5th promotional tools no % no % no % no % no % traditional advertising (flyers, posters, tv, radio) 22 7.4 9 3 13 4.4 4 1.3 5 1.7 personal sales 46 15.5 32 10.8 21 7.1 3 1 5 1.7 sales promotion 15 5.1 20 6.7 13 4.4 6 2 5 1.7 public relations 64 21.5 40 13.5 22 7.4 3 1 5 1.7 sponsoring 0 0 2 0.7 0 0 1 0.3 1 0.3 trade fairs and exhibitions 60 20.2 60 20.2 33 11.1 13 4.4 2 0.7 word of mouth marketing 9 3 29 9.8 31 10.4 18 6.1 4 1.3 internet advertising 28 9.4 54 18.2 33 11.1 9 3 13 4.4 other internet tools (i.e. social networks) 44 14.8 39 13.1 8 2.7 10 3.4 6 2.0 promotion by distributors on foreign markets 8 2.7 9 3 16 5.4 13 4.4 5 1.7 other 1 0.3 total 297 100 294 99 190 64 80 26.9 51 17.2 source: own elaboration. 190 respondents perceived at least 3 marketing tools to be the most important, 80 indicated 4 important marketing tools and only 51 respondents admitted that 5 marketing tools are important for them on the international market. figure 1 shows the results of the analysis of the promotional tools ranking and table 4 descriptive statistics of all the promotional tools mentioned by the respondents (the scale in the descriptive statistics reflects the place in the ranking). figure 1 – number of companies applying given promotional tools on the foreign markets and the importance of these tools 5=most important, 1=least important among top five applied promotional tools source: own elaboration. 0 20 40 60 80 100 120 140 160 180 traditional advertising (fliers, posters, tv, radio) personal sales sales promotion public relations sponsoring trade fairs and exhibitions word of mouth marketing internet advertising other internet tools (i.e. social networks) promotion by distributors on foreign markets other 5-most important 4 3 2 1-less important 110 table 4 – most important promotional tools on foreign markets – descriptive statistics for the whole sample promotional tools n min max m sd traditional advertising (fliers, posters, tv, radio) 54 1 5 3.72 1.32 personal sales 106 1 5 4.05 1.08 sales promotion 57 1 5 3.58 1.24 public relations 134 1 5 4.16 1.02 sponsoring 4 1 4 2.75 1.50 trade fairs and exhibitions 169 1 5 3.96 0.99 word of mouth marketing 91 1 5 3.23 1.02 internet advertising 137 1 5 3.55 1.17 other internet tools (i.e. social networks) 107 1 5 3.98 1.17 promotion by distributors on foreign markets 51 1 5 3.04 1.22 other 1 5 5 5 source: own elaboration. among all the promotional tools, the trade fairs and exhibitions seem to be the most popular ones (see table 4). one of the reasons for attaching such a great significance to this promotional tool could be the characteristics of the sample. half of the companies under study is operating only on the business to business market, on which trade fairs and exhibitions are one of the most important promotional tools, as they allow to meet the potential clients in person and present the product advantages. however, a more thorough analysis shows that this explanation is not correct. companies operating only on the b2c market and both on the b2b and b2c market tend to take advantage of trade fairs and exhibitions even more frequently than companies operating only on the b2b market (taking into consideration their share in the whole sample) – see table 5 and figure 2. one can explain the popularity of trade fairs and exhibitions by their multi-functionality. they serve not only as the promotional tool but also allow to gather the market knowledge and to meet existing customers, existing and potential intermediaries and other network partners. it can be therefore one of the most efficient marketing tools applied abroad. as the sample consists of small and medium enterprises (smes) it can also not be excluded, that the companies under study do not possess resources allowing them to apply the costlier promotional tools. the second popular marketing tools is internet advertising. this tool is not as frequently perceived to be the most important promotional tool as trade fairs and exhibitions, pr, personal sales and other internet tools, however altogether the companies under study tend to use it very often as a tool complementary to the more important ones. the third frequent but perceived as the most important one by the companies applying it is public relations. such a high place of this tool is rather surprising as using it requires quite a deep knowledge of the foreign local media. efficient use of pr can be therefore a sign of high marketing competences of the companies under study. on the other hand, similar to the promotional tools discussed above pr activities can be conducted without the high costs involved, therefore it can be applied by smes. both the internet tools other than advertising and the personal sales are also ranked very high by the companies applying them. social network promotion is again a very cost-efficient marketing tool. it is popular both on the b2b and b2c market. the personal sales, in turn, are almost inevitable in case of more complex products, especially those manufactured or custom 111 made in a non-series process in response to a specific order, therefore it is more common on the b2b market (table 5). table 5 promotional tools and the market type – cross table promotional tools the main product is sold on the total (number) b2b market n =150 both b2b and b2c market n=81 b2c market – n=66 number % n number % n number % n traditional advertising (fliers, posters, tv, radio) 22 14.7% 21 25.9% 10 15.2% 53 personal sales 60 40.0% 24 29.6% 23 34.8% 107 sales promotion 18 12.0% 24 29.6% 17 25.8% 59 public relations 72 48.0% 33 40.7% 29 43.9% 134 sponsoring 3 2.0% 1 1.2% 0 0.0% 4 trade fairs and exhibitions 72 48.0% 55 67.9% 41 62.1% 168 word of mouth marketing 49 32.7% 21 25.9% 21 31.8% 91 internet advertising 66 44.0% 44 54.3% 27 40.9% 137 other internet tools (i.e. social networks) 57 38.0% 24 29.6% 26 39.4% 107 promotion by distributors on foreign markets 19 12.7% 24 29.6% 8 12.1% 51 other 1 0.7% 0 0.0% 0 0.0% 1 source: own elaboration. figure 2 promotional tools and the market type source: own elaboration. 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% traditional advertising (fliers, posters, tv, radio) personal sales sales promotion public relations sponsoring trade fairs and exhibitions word of mouth marketing internet advertising other internet tools (i.e. social networks) promotion by distributors on foreign markets other b2c market% both b2b and b2c market% b2b market% 112 in order to test which of the companies under analysis apply a more diversified mix of promotional tools, we've introduced an index representing a number of tools used by a given company and then conducted a univariate analysis of variance. a one-way between subjects anova was conducted to compare the effect of market type on the differentiation of the promotion tools applied. there was a significant effect of market type on the number of tools applied by the companies under study at the p<.05 level for the three market types [f(2,294)=4.017, p=0.019]. post hoc comparisons using the bonferroni procedure indicated that the mean score for the b2b market (m=2.9, sd=1.1) differed significantly for both b2b and b2c market (m=3.3, sd=1.1). however, the number of the promotion tools applied by the companies operating exclusively on the b2c market (m=3.1, sd=1.1) did not significantly differ from the number of promotion tools applied by companies operating exclusively on the b2b market or on both b2b and b2c market – see table 4. table 6 one way anova results type of market levene statistic n m std. deviation std. error 95% confidence interval for mean min max f sig. lower bound upper bound b2b .611 .544 150 2.93 1.06 0.09 2.76 3.10 1.00 5.00 both b2b and b2c 81 3.35 1.05 0.12 3.11 3.58 2.00 5.00 b2c 66 3.06 1.14 0.14 2.78 3.34 1.00 5.00 total 297 3.07 1.08 0.06 2.95 3.19 1.00 5.00 source: own elaboration. the companies operating both on the b2b and b2c market seem to apply the most diversified promotion mix closely followed by the companies selling their products on the b2c market exclusively whereas the b2b promotion tools are least diversified. these differences can be explained by the market conditions. the companies selling their products to the different types of clients have to use both tools typical for the b2b and b2c market, and the companies operating on the b2b market only may limit their promotional activities to the small range of tools allowing them direct communication with their clients. however, although the observed differences are statistically significant, they are not very big. for all of the groups, the average number of tools is about 3. the t-student test did not reveal any significant differences between the companies internationalising intensively directly after their inception and other companies regarding the application of promotion tools. 5. conclusions and implications the marketing tools applied mostly by polish invs on the foreign markets are trade fairs and exhibitions, internet advertising, pr, personal sales and internet tools other than internet advertising. sponsoring is hardly applied aby invs on their foreign markets. promotion by distributors, sales promotion and traditional advertising are also not very common. although trade fairs are the most popular tools, public relations is perceived as the most important one. companies operating both on b2b and b2c markets apply the most differentiated set of promotion tools on their foreign markets. they use trade fairs and exhibitions, internet 113 advertising, promotion by distributors and traditional advertising more frequently than companies selling their main products exclusively on b2b or b2c markets. pr and personal sales are more popular in case of b2b companies than companies operating on b2c or both b2c and b2b markets, whereas companies selling their products to b2c customers only apply internet tools other than internet advertising (i.e. social networks) more frequently than other companies. with this study we contribute to the call for more research focused on invs from central and eastern europe which until now have been underrepresented in the literature. as discussed above polish invs tend not to use very diversified promotional tools what may be an indicator of their limited promotional competencies. these limits seem not to concern the tools requiring good relationship building competencies such as fair trades and exhibitions and pr and the internet promotion tools. therefore, we would suggest polish policymakers invest in training programs for polish exporting smes allowing them to enhance the missing competences, what could boost their international growth. 6. limitations and future research the study is the first one investigating the application of promotion tools by polish invs. although the results are limited to companies originating in poland, we cannot exclude that they refer also to firms from other cee countries or generally, to invs, therefore we propose to repeat it on the samples from other countries. it would also be advisable to compare the results with the sample of smes not achieving the 25% of export in their total sale or the companies, which do not export at all. conducting the statistical analysis, we have encountered some limitations resulting from the scale applied to investigate the ranking of the importance of promotion tools. although this scale corresponded with the study objectives and allowed us to answer the research questions, we would 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(2012). the effects of early internationalization on performance outcomes in young international ventures: the mediating role of marketing capabilities. journal of international marketing, 20(4), 25-45. microsoft word 8 (18-26) kowalik.docx 117 international new ventures learning processes and their role in international marketing izabela kowalik warsaw school of economics, poland received: october 7, 2018 accepted: november 5, 2018 online published: december 4, 2018 abstract learning processes of the small and medium sized enterprises (sme) are of special importance for their internationalization, as they may lead to gaining the learning advantage of newness. the current literature suggests that the dynamic capabilities concept may help in understanding how the learning processes lead to the development of marketing capabilities necessary for foreign expansion of smes. this study aims at identifying the learning processes of international new ventures (invs) and analysing their role in international marketing. the results of individual interviews with four polish inv’s founders and managers are presented. the studied companies are similar to the foreign ones with respect to the information gathering sources and processes. when looking for market opportunities they often rely on informal sources of intelligence and „congenital” knowledge of the founders. these sources substitute for firm-level international experience at early stages of international development. at the later stages of expansion they are supplemented with more external knowledge and sometimes also “grafting”, or purchasing expert knowledge. keywords: enterprise learning processes; international new ventures; international marketing. 1. introduction fast learning of small and medium-sized enterprises (sme) is of special importance for their internationalization, as it leads to outrunning the competitors, despite the limited financial and physical resources. the developed learning capabilities of smes lead to identifying, analysis and evaluation of market opportunities connected with the current customer needs. however, the relationships between learning and early internationalization are still not well researched (bruneel et al., 2010; miocevic and morgan, 2018). it is suggested that the dynamic capabilities concept could enable a better understanding of how the organizational learning processes lead to developing resources necessary for sme marketing activity in the foreign markets (bocconcelli et al. 2018; lonial and carter, 2014). moreover, according to the learning advantage of newness (lan) concept the born-global companies, also called international new international journal of economic behavior, vol. 8, n. 1, 2018, 117-132 118 ventures (invs, oviatt and mc dougall, 1994), thanks to the “in-born” knowledge-gathering capabilities can identify market opportunities faster, which leads to their successful expansion (sapienza et al., 2006; zahra et al., 2000). this study aims at identifying the learning processes of invs and specifying their role in international marketing. the following research questions will be analysed: what marketing information sources are used by invs? how do the various learning processes contribute to the invs’ marketing activity abroad? how do the knowledge-gathering processes change during the internationalization progress? in the initial section of the study the theoretical background behind the concept of organizational learning as a dynamic capability leading to internationalization has been presented. secondly, the results of earlier research concerning the influence of learning on early internationalization of smes have been summarized. finally, the results of a qualitative study conducted on four polish invs from the industrial processing industry, concerning their learning capabilities have been described, followed by conclusions and the study’s implications. 2. organizational learning: sources and processes the dynamic capabilities encompass the structures and processes enabling the companies to reconfigure their resource base, in order to face the requirements of the changing environment and to gain a sustainable competitive advantage (teece, 2014). sok et al. (2013) define the learning capability as a „bundle” of interrelated processes functioning in an enterprise to diagnose learning needs, and the firm’s unsuccessful activities, to communicate the lessons learnt from previous experiences, and to gather new and relevant knowledge to undertake the firm’s business activities. this capability leads to gaining an advantage over competitors by the faster recognition of market opportunities and faster new product development and implementation. sapienza et al. have stated that analyzing internationalization through the dynamic capabilities lens is appropriate and complementary with the so-called resource-based theories (2006). in specific, the learning capabilities and knowledge resources should influence international expansion, because when entering foreign markets, companies have to acquire, disseminate and assimilate new knowledge, to be able to compete and develop even if they do not have earlier practical experience (autio et al., 2000). weerawardena et al. specify three types of firms’ learning capabilities, important for sme internationalization:  market – focused learning capability, i.e. „the capacity to build, integrate, and reconfigure technical and non-technical knowledge acquired from the firm’s customers and competitors”, this knowledge is later transformed into actionable knowledge which may be applied in international markets,  network learning capability, i.e. „the capacity to build, integrate, and reconfigure technical and non-technical knowledge generated through external links and institutions”, the knowledge may lead to exploring the appearing opportunities and to entering new, valuable contacts (e.g. know-who).  internally focused learning capability, i.e. „the capacity to build, integrate, and reconfigure technical and social (non-technical) knowledge generated through internal sources” including experimental learning, r&d, technical and social learning (weerawardena et al., 2015; zahra et al., 2000). 119 when analysing the learning capabilities of invs, one should take into consideration the information sources, processes of its acquisition and subjects most important for internationalization. in this respect pellegrino and mcnaughton (2015), and fernhaber et al. (2009) mention three main external sources of international knowledge: alliance partners, venture capital and proximal companies, plus one internal source the earlier foreign experience of top management of the company. on the other hand, casillas et al. classify internal sources as those connected with experiential knowledge, acquired during business activity abroad, and external sources – those collected from industry organizations, external consultants and top management’s “congenital” knowledge acquired earlier (casillas et al., 2009). fletcher and harris (2012) have included direct experience of the firm and its managers among internal knowledge sources, on the other hand, according to them, the external sources include partners, suppliers, clients, consultants, industry and governmental organizations plus the newly hired managers. another classification of the routine organizational behaviors, connected with knowledge management, includes two processes related to foreign expansion (levinthal and march, 1993):  market exploration, including searching for knowledge about new, or already entered markets,  market exploitation, including application and development of already acquired knowledge about the current markets. however, this classification has been recently extended, to include four types of learning processes of internationalizing companies (pellegrino and mcnaughton, 2015). the new typology proposed by the mentioned authors includes congenital learning, based on earlier experience of the founders and employees of the company (see also: bruneel et al., 2010); vicarious learning, through partners in the process of internationalization; grafting, e.g. by hiring the local specialists in the target market, or acquiring the local companies, and experiential learning of the organization (see also: johanson and vahlne, 2009). this classification seems to be most exhaustive and comprehensive, as it takes into account both the founders of invs as well as the other workers and partners, as the learning process members. the above classification is reflecting the earlier works of yeoh, who has analysed so-called social learning and market learning processes of the invs (2004). according to this author, social learning is a process of acquiring new knowledge and/or capabilities connected with new market entry, identification of foreign clients, managing risks connected with conducting activity in the specific foreign markets. market learning concerns gathering new knowledge connected with adjusting the offering to various foreign target markets, managing numerous foreign partners (distributors and licensees), monitoring client needs, and market trends. it seems worthwhile to investigate which of the mentioned processes are applied in internationalizing smes. 3. learning and rapid internationalization it is assumed that at the early lifecycle stages on the international market the smes have intrinsic learning capabilities, exceeding those of older rivals, and leading to a learning advantage of newness (sapienza et al., 2006; zahra et al., 2000). the hypothesis about lan existence is based on an assumption, that the rapidly internationalizing companies have fewer deeply embedded procedures and face a lower cognitive complexity and structural rigidity, than their larger partners. thanks to this, they recognize market opportunities earlier and react faster to them, which leads to the successful expansion, growth and other advantages. 120 rapid internationalization can stimulate the assimilation of knowledge to the company knowledge base, which in turn leads to better export results (autio et al., 2000; sapienza et al., 2006). the lan existence is particularly connected with three types of organizational advantage: structural – connected with the smaller number of routine processes and internal constraints, and with the recognition of market opportunities. secondly there is the so-called cognitive advantage, which means that young firms come across fewer “competency traps” than the older ones, and they are not isolated from certain knowledge types. lastly, the positional advantage of the smaller firms is due to a lower number of ties with local partners and the smaller resistance to engage in relationships with foreign markets. baum and sui have analysed statistical data concerning the export activity of 116 invs from canada (2013) and identified differences in learning “tracks” among invs and traditionally internationalized companies. they have shown that shortly after starting export, the invs learn much faster, which is reflected in the numbers of innovations introduced to the market. however, after certain time this advantage diminishes and „traditional” exporters introduce innovations more systematically. the authors connect this with the higher resource constraints of invs compared to “traditional” exporters. as fletcher and harris (2012) have proved, based on case studies of 10 internationalized firms, vicarious learning from network partners, is necessary to get product/technology knowledge and knowledge about conducting business abroad. on the other hand, learning by purchasing knowledge (grafting) is more often the source of knowledge on products, than about the market and internationalization process. pellegrino and mcnaughton (2015), based on a study of 4 born global firms from new zealand, have shown that early internationalization is mainly stimulated by congenital experience of the company owners, which is supported by vicarious learning and active search for market opportunities. various types of learning have different importance at the different internationalization stages. congenital learning, supported by network information and marketing research significantly influences the smes’ competitive advantage, their initial offering, market scope, and speed of entry at pre-internationalization stage. however, learning by experience, and vicarious learning, monitoring the environment and noticing the changes, become more important at the early internationalization stage, when companies start to concentrate on gathering the knowledge concerning foreign markets and internationalization processes. finally, at later stages of internationalization, learning by experience and other, more expensive learning types (e.g. grafting) get more important. zhou et al. (2010) have studied 435 young invs from china and found that the development of firm’s learning capabilities leads to advantages connected with the early internationalization, in the form of quick foreign sales growth, especially in relatively larger and more cost-efficient companies. therefore, the learning processes should be constantly developed and the already acquired knowledge should be integrated into the company’s knowledge base and disseminated among workers, to bring concrete results. similarly, blomstermo et al. (2004) in a study of 206 swedish companies have shown that those who internationalized earlier, collected much more knowledge about the foreign markets than those who internationalized later. knowledge gathering was also analyzed as an antecedent of market capabilities of invs by the study of weerawardena et al. (2015) on a large sample of invs from the usa and australia. according to that study the american invs, who use the market-based learning processes, have better marketing capabilities than the “traditional” exporters, and thus they can introduce products to foreign markets more quickly. in those companies also learning from network partners and internal learning lead to increased innovativeness and successful internationalization. on the other hand, the australian invs used similar processes, but learning from contact network did not matter to them to such extent as to the us-based invs. the above 121 review leads to establishing the study goal, which centers on identifying the role of various learning processes in the internationalization of invs. 4. methodology in the presented study a qualitative approach was chosen due to the research problem nature and in order to include a broader perspective of marketing activity of the rapidly internationalized companies. the purposive sample selection technique was used to choose four polish companies complying with the rapid internationalization criteria, specified by knight et al. (2004), i.e. smes internationalized within 3 years from founding, with polish capital only, who reached the export level of at least 25% of the total sales in the period of 5 years from inception. in each of the studied companies semi-structured interviews with the company owner/board member and a sales/marketing department worker were conducted, in order to be able to obtain information on managing the company in the foreign markets, with an emphasis on marketing topics. the interviewed persons were up to 45 years-of-age, and with at least a few years of experience in export activity. the interviews lasted from c.a. 1-1.5 hours in case of the managers, to c.a. 30-45 min. in case of the sales/marketing department employees, as in that group they did not include the more strategic topics. the card-game method was applied during the interviews, to enable interviewed persons to express more freely their opinions on the researched topics, and to make up a hierarchy of the concepts within international marketing activity of the companies (muethel and hoegl, 2007). the interviews and card game proceeded along the following steps: each of the concepts shown on cards was described by the interviewed persons, the hierarchy of concepts from the perspective of the company marketing activity was assembled, and the relationships between the concepts were indicated with arrows, the interviewed persons commented on differences in roles of separate concepts in their activities in the local and foreign markets apart from the game several open and semi-open questions were asked concerning among others: internationalization beginnings, entry sequence, introduced products, learning sources and modes, performance. the data obtained, after transcription, was analysed according to the principles of content analysis, i.e. (malhotra and birks, 2006; srnka and koeszegi, 2007) categories of content were established based on the literature, used earlier to prepare the interview scenario (deductive approach). later the set of categories was supplemented with concepts spontaneously appearing during interviews, concerning e.g. influence of organizational culture on internationalization (inductive approach). moreover, the obtained categories were split into smaller units of content, called subcategories. as a result, the hierarchy of 17 supercategories (e.g. company beginnings), reflecting the questions from scenario, 44 main categories (e.g. external reasons for establishment) and lower subcategories (e.g. high importance of customer responsiveness) was formed. the prepared set of categories was applied to code the transcripts. as a result of two rounds of coding and an intercoder consistency analysis (srnka and koeszegi, 2007) a set of 1140 quotations was obtained. next, to assess the importance of separate categories for the interviewed persons, the frequency of their occurrence was calculated with use of specialized software, and divided by the total numbers of quotations in each interview. such an approach is based on the assumption that the repetitions of words reflect the focus of attention and the topics with central role for the speakers (thiétart, 2008). 122 maxqda for windows was used for the intercoder consistency assessment, frequency analysis and analysis of different categories co-occurrence. table 1 studied companies’ characteristics (a) (b) (c) (d) industry (specialisation) manufacturing (building materials; styrofoam) manufacturing (packaging lines for cosmetics) manufacturing (sorting and packaging lines for food products; fruit) manufacturing (plastic packaging-bags and packaging foils) year of establishment 1991 2000 2010 2007 internationalization beginning 3 years after establishment 2-3 years after establishment 1-2 years after establishment 2-3 years after establishment level of exports compared to total turnover over 90% over 25% 50-70% over 30% time of reaching 25% of export sales in total sales volume within 3 years from inception within 5 years from inception within 5 years from inception within 3 years from inception inv type export startup export start-up export start-up multinational trader rate of exports growth (last 5 years) 15% n.a. (positive) 90% 60% company size medium-sized medium-sized medium-sized small source: own study. 5. results among the cards describing the entrepreneurial marketing concept there were those reflecting the learning processes and information gathering (table 2). tables no. 2-6 present the results regarding the frequency of occurrence of quotations, the categories’ meaning for the studied invs, and the relationships between separate content categories. quotations regarding learning were included in 4 main categories and there were 44 main content categories in the interviews. as the frequency analysis has shown, the learningrelated quotations made up c.a. 14% of all quotations in the interviews (tab.2). this can be considered a high number, compared to the relatively low average share of main categories regarding learning (9%) and it means that learning and information gathering are important processes from the perspective of marketing activity of invs (thietart, 2008). firm b, the producer of innovative packaging lines for cosmetics, engaged strongly in internal r&d, had the strongest focus on learning, which is evident from table 2. among the learning sources mentioned by the interview participants those connected with cooperating partners’ network and with the clients prevailed. the interpretation of „research and development” concept by the studied invs shows, that it is mostly based on companies’ own experience and internal experiments (tab. 3). only in company a – the oldest one – constant cooperation with a research institute is quoted. in all invs r&d is perceived as a key factor of foreign expansion. this concept corresponds with internal learning defined by weerawardena et al. (2015), and knowledge exploitation (levinthal and march, 1993) concepts. 123 in some companies (e.g. „c”) experiential learning (johanson and vahlne, 2009) is explained as „the market itself verifying the new product concepts”. the „knowledge infrastructure” concept (tab.4) interpretation was ambiguous to the respondents, and was not always connected with primary role in international marketing and expansion. there were even mentions of some tools being introduced (crm, encyclopedia of marketing, project management programme), but too late (firm a). there were also mentions of experimenting with not well-known tools (firm b). these findings show that so-called grafting or knowledge acquisition is still not popular among the studied invs, apart from one oldest company (a). however the internal, informal knowledge exchange is important in serving the foreign clients. the concept of „market information gathering” (tab.5) was interpreted as activities of monitoring the competition and legal/technological environment. also in this process the informal knowledge sources prevail, but they are used spontaneously, without the predefined procedures, mainly through the intermediaries and partner networks. the interpretation of this concept corresponds with network learning (weerawardena et al., 2015), and vicarious learning (pellegrino and mcnaughton, 2015). when talking about market information the espondents also pointed to the “gut feeling” and intuition’s role in searching for foreign markets. the congenital learning of founders (bruneel et al., 2010; pellegrino and mcnaughton, 2015), and not the formal external sources seem to be the basis of undertaking the foreign market activity. 124 table 2 frequency of quotations in categories related to learning individual interview results category of content respondents e1. r&d f 2. knowledge infrastructure g 2. market information gathering l 1. learning sources total no. of quotations related to learning percent of all quotations in an interview l 1.1 learning from network partners l 1.2 learning from clients l 1.3 learning from competitors l 1.4 learning from internal r&d l 1.5 learning from formalized sources l 1.6 other sources of learning firm a respondent 1 8 11 6 7 2 0 1 4 2 41 16.7% firm a respondent 2 0 2 4 1 0 0 0 2 0 9 7.2% firm b respondent 1 7 2 6 1 1 1 0 1 3 22 11.4% firm b respondent 2 2 2 3 7 6 1 3 1 5 30 24.0% firm c respondent 1 2 4 2 0 2 0 2 2 3 17 8.1% firm c respondent 2 3 2 2 2 1 0 0 2 1 13 13.1% firm d respondent 1 2 2 2 2 2 1 2 1 3 17 15.2% firm d respondent 2 1 2 2 0 0 0 2 0 0 7 21.9% total 25 27 27 20 14 3 10 13 17 156 13.7% source: own study. 125 table 3 main category „research and development”: interpretation and role in international marketing (cross case comparison of quotations) firm a b c d category meaning research and development – that’s the basic activity, or one of basic activities of the company. without r&d we will be out of the market in 3-5 years. (...)in our case r&d is on one hand – to develop new products but also to adapt products to the new markets’ characteristics or other climate zones, other continents, metric systems. in each case the company should have an r&d (system) or something which is in the company dna. there must be each product’s “guru”. somebody who knows what he wants to develop. r&d – a kind of basic thing. so – first thorough knowledge what market we are entering, to whom we are offering. so even if we go to another country, we must know exactly to whom we are going. it is not that we are going to check if we are lucky or not. no, no. thorough knowledge and preparation – from the basic elements. (...) in our case, of course we have serious research, we have people to conduct it, but the market later verifies on its own our ideas. sometimes the political factors also verify the market, but generally yes (the r&d is needed). i have to say yes – (r&d is necessary) to introduce innovations, because the clients, the market, are becoming more and more demanding. also the clients want to be introduced to the product – so this is followed by the r&d. role of the concept in international marketing basic role (of r&d) – so to say – technologically, via expenditures on r&d, on building the network, on innovations introduction, we have become the european leader. without the r&d this internationalization would not have taken place, would not have been a continuous, persistent, developing process. this (role) is due not always to the client needs or to understanding the r&d role, but to the internal conviction that this is the right direction. that e.g. software should rather be an accompanying service and not a product … of course r&d is indispensable. it’s not that we are trying for it to be so – this is just true. from r&d stem the quality systems in our company, internal and external quality systems. they stem from r&d, and they are later installed in the robots, so they can function in the way that they do. they need to have this software, so the machinery is also equipped with this software, so – to say – in our company, the machinery without r&d would be just mechanical – and now it is – complete. we are at the stage of applying for technological credit. and r&d is crucial in that request. without it we would not have applied. this is connected with the fact that we are introducing a new innovative product, which has not been manufactured on mass scale in our country. source: own study. 126 table 4 main category „knowledge infrastructure”: interpretation and role in international marketing (cross case comparison of quotations) firm a b c d category meaning knowledge infrastructure: databases, crm systems. we were not aware – well it’s interesting – last year we bought the crm system, but we should have done it 5 years before. we were not aware of that… q: of its importance? of its importance (...). this is a marketing and sales system, it produces in a simple way information in excell tables, which are very easy to be used by the production department. so to say – we have such a system for project management. so when there is a project we know that the client needs a given machinerythen we have a system in which we can exchange internal company information. (...) it will be merged with crm, so it will introduce organized infrastructure to conduct marketing activity, just how it should be. so – e.g. connecting the service persons (with clients), who can fix something over the internet, this is very important for them. so sometimes when there are large installations, the clients go online, and many problems can be diagnosed from a distance. (the concept was not clear) role of the concept in international marketing ... so we have created a marketing knowledge database, working in the way that in one folder we have something called a “marketing book” and in it we have all notes connected with very broadly understood marketing. this is all about collecting data – about advertisements (...) when the new employee comes, we do not have to teach him the abc, but he opens and reads the notes, put down in a very clear way, by somebody else. so if one has a product, one can start its promotion, targeting, networking, contacting the clients, communicating and convincing them to one’s innovations and entering the market. if you have the knowledge infrastructure and integrated business processes, the process can go on – and without it – the process would stop. and then the fall in sales can follow q: so one cannot function without the other? that’s right, this is the process and the infrastructure – so the kind of basics. so they have to be in place from the beginning. knowledge infrastructure is very important in our company. this is also shown by the division of tasks – everyone has their area and they do not interfere with others. we have a separate man for every purpose. q:so do you have any kind of a system like crm or other databases? no we don’t have such systems. we want to introduce iso quality management, which will allow better quality control and improve the flow of information. q: so you have a kind of internal library with data? yes, about the clients who cooperated with us, and who still cooperate. source: own study. 127 table 5 main category „market information gathering”: interpretation and role in international marketing (cross case comparison of quotations) firm a b c d category meaning a very important thing to be checked during expansion is what the competitors are doing in a given market and how they do it. and if it works… q: so some kind of market monitoring right? yes it’s the best to copy something, because if someone already has developed something then it’s not worth discovering america again. at least at the beginning, when it’s clear that a sme has not enough resources to conduct a complex market analysis, to invest in winning the appropriate partners, but it rather has to be smart then to spend a lot ... (...)„market information gathering”, yes – that’s what we do in a file called “marketing book”, with a division among markets. q; and this market information refers mainly to promotion? o: no it refers to competitorstheir offering, the pricing level, the size of sales network, the certificates they have. so we have to gather information -to cut the long story short – we have a vision of our products. at that moment we have to gather information concerning the target groups, to define the innovation to be introduced. so the formal data is constantly monitored, reviewed, as it is the need of the day. it’s not that we want to find something special about this information – we simply want to know what is the reality there (in that market) besides – it’s obvious, all industry news, and also trips, trips, going from client to client, by our dealer of course. so of course we conduct analyses. we base it on our client’s suggestions – those whom we sent samples already… role of the concept in internatio nal marketing q: so rather there isn’t such regular scanning, search for information? no absolutely, no. it works rather on the basis of a network of contacts. the friend comes and says “you see i heard that it’s possible, there’s a market for x at the moment. there are high margins so we can try…” so we do not carry out a formal, sort of research, because we would also have to know what to ask about... frankly, we would not know what to ask about. so this is rather intuitive action. so it looks like thiswe are looking for market segments, we analyse where there is a gap in the market, where there are no solutions, or the segment is growing. we build the product for this segment, we target this market and we have to be capable to introduce it globally – or rather regionally. q: so such formalized marketing research is rather rare? yes, yes, we do not have such a thing. like reports – you say – no, we do not have it. q: so it’s rather collected via the dealers you have, via the partners? yes, or via the sales people who travel. q: and when it comes to some market research, surveys of secondary data – is it important in your activity? it is also important, because we need to know the client needs. source: own study. 128 by use of maxqda for windows the co-occurrence of separate content categories was later analysed. the results are presented in table 6. table 6 frequency of co-occurrence of the content categories representing learning with other interview topics main categories and subcategories of content f 3 .1 p ro d uc t in n ov at io ns h 1 .2 r es p o n di n g t o c li en t n ee d s h 4 .2 p ro m o ti o n a n d s al es n 1 .5 r el at io n sh ip s w it h in te rm ed ia ri es h 2 .2 c o m m u ni ca ti on w it h cl ie n ts s 6 .1 f o re ig n m ar k et s e1.2 research and development experiences 12 10 0 0 0 0 e.1.1.1 research and development – high importance 2 2 4 0 0 0 f2.1 knowledge infrastructure – meaning 6 0 2 2 2 0 f2.2 knowledge infrastructure experiences 8 2 0 4 11 2 f2.3 knowledge infrastructure – key success factors 3 0 0 2 3 2 g2.1 gathering of market information meaning 0 2 0 0 0 7 g2.3 gathering of market information key success factors 0 2 9 9 2 0 l1.1 knowledge sources -from network partners 7 11 10 12 4 3 l1.2 knowledge sources from clients 7 8 4 6 0 2 l1.3 knowledge sources from competitors 0 0 0 2 0 0 l1.4 knowledge sources internal r&d 4 2 2 2 2 2 l1.5 knowledge sources – formalized sources 0 0 0 4 0 2 l1.6 knowledge sources other 3 4 6 0 0 4 l3 learningrole 2 0 0 0 0 0 total no. of quotations 54 43 37 43 22 24 note: co-occurrence means that category from a column appears together with a category from the row in one statement of a respondent. source: own study. the analysis of table 6 shows that the most learning-related quotations co-occur with “product innovations” category. this indicates a relationship between these spheres in the studied invs, especially among “product innovations” and internal “r&d” or „knowledge infrastructure”. many times product innovations were mentioned together with knowledge “from network partners” and “from clients”, which is justified by the need to respond to clients’ needs. response to client needs co-exists with learning from network and with the r&d. the concept of „gathering of market information” co-occurs with quotations concerning “promotion and sales”, and with “relationships with intermediaries”. this suggests a key role of networks in gathering market knowledge, but also the role of sales and promotion analysis. market information gathering is also mentioned in connection with foreign markets, and good relations with intermediaries enable this type of intelligence generation. moreover, the card “knowledge infrastructure” co-occurs with “communication with clients” suggesting that this is an infrastructure used mainly for communication activities. 129 6. discussion and conclusions the information necessary for foreign expansion of the studied invs is gathered through communication with partners, market and financial data analysis and reporting on product introductions. for invs this type of knowledge is easily accessible, cheap, and often connected with the congenital knowledge of the founders or their experience. according to weeerawardena et al. (2015), learning from partners also has a significant influence on invs’ innovativeness, which is similar to the presented results. tiwari and korneliussen (2018), who studied the micro enterprises from an emerging market of nepal, found that their main sources of experiential knowledge also relied on social networks, prior experience of the founders, and additionally on international fairs. in our study the fairs as an information source were also mentioned, but rather by older, richer companies, which may testify to their secondary role as a knowledge source. regarding the decisions on the foreign market choice, pellegrino and mcnaughton (2015) recommend to smes implementing structured processes of learning through distributors/dealers or going for study trips, to diminish the risks connected with internationalization. instead of this, in the polish invs spontaneous knowledge-gathering from intermediaries and customers, the so-called interorganizational learning dominates, which is considered in the literature as an important knowledge-gathering process, but is dependent on the former establishment of strong ties with partners (bruneel et al., 2010). when comparing the studied firms at earlier development stages (c, d), with the more experienced ones (a, b), one can conclude that at the initial phases of company engagement abroad, the experience of owners/founders and their informal contacts dominate as information sources. one can notice that the polish invs mainly use internal learning when developing new products, similar as reported by weerawardena et al. (2015), but also the knowledge exploitation strategy, i.e. they adjust and develop the current skills and concentrate on technologies, processes and products on the markets already served (levinthal and march, 1993). these findings are in line with the results of studies of bruneel et al. (2010), on a belgian sample, which showed that these information sources “make internationalization moving” as an initial substitute of the knowledge coming from practical experience. at the next stage of development – the fast export growth (gabrielsson and gabrielsson, 2013) – the learning from own experience and from intermediaries (vicarious learning) gains more importance. in our sample only in one, much more mature company (a) the grafting (purchasing knowledge) in the form of consulting services before crm implementation and before the foreign market choice, was applied. it is consistent with the findings of pellegrino and mcnaughton (2015), concerning the later phases of growth of invs from new zealand. to answer the question how the various learning processes contribute to the invs’ marketing activity abroad, it must be concluded, that internal learning, in the form of r&d, is needed for internationalization as an ongoing process, to develop innovations. the other important process which is market-focused learning, or the capacity to build, integrate, and reconfigure technical and non-technical knowledge acquired from the firm’s customers and competitors (weerawardena et al., 2015), is based on a network of invs’ intermediaries and salespersons. it takes the shape of informal gathering of knowledge, while almost no formalized market research is conducted. this is probably due to resource constraints, but also to the low level of trust in the formalized knowledge sources. during the interviews all the studied invs confirmed high export sales dynamics, and were confident in their good performance on the foreign markets (see: tab.1). however the lancreating mechanisms, such as for example structural advantage due to a lack of rigid organizational structures (sapienza et al., 2006) weren’t the subject of interviews. therefore it is difficult to say if the studied invs obtained the lan advantages. nevertheless, the positional 130 advantage connected with lack of pre-established ties with the home country partners, which is a prerequisite of lan, existed. apart from that, the studied invs applied the vicarious learning mechanisms, which may lead to lan. bruneel et al. (2010) have demonstrated that network learning and congenital learning of the founders have significant influence on expansion, when there is little experiential knowledge available. in the content analysis of interviews with the invs it was also shown that learning processes co-occurred with product innovations, which may be the evidence of a cause-effect relationship. 6. implications and future research the implications stemming from the presented research are threefold. first, the successful gathering of market information by invs is connected with good relations within networks and with their promotional efforts. it suggests that this information source deserves more attention during internationalization. perhaps more learning processes and using in a structured way the knowledge obtained from the dealers would be needed for the polish invs to fully benefit from fast expansion. second, it was demonstrated that the polish invs, similar as in the foreign ones, developed diverse learning capabilities, exceeding those connected only with experiential learning, described in so-called stage internationalization theories. third, it was shown that at the early internationalization stages the polish invs put emphasis on informal sources of internationalization knowledge and on the congenital knowledge of founders, which constitutes a resource necessary for successful expansion. however at the later stage of fast sales growth the internal, experiential learning processes were coupled with network learning and knowledge exploitation. that shows the changing character of learning processes at different internationalization stages, and supports results of the former studies abroad. thus, the presented study also proves that the invs coming from the transformation country behave similarly and possess similar capabilities when it comes to learning and knowledge gathering processes, as their counterparts from more mature markets. this suggests that they are currently able to successfully compete internationally. as for the future research directions, the learning mechanisms may play the role of mediators between the entrepreneurial capabilities (proactiveness, innovativeness, risk-taking) and export results, which is evidenced by results of studies on chinese enterprises (zhou et al., 2010). the analysis of similar relationships could become subject to further studies of international new ventures, also coming from post-transformation markets. acknowledgement the research was supported by the national science centre, poland; grant: “the entrepreneurial marketing concept and accelerated internationalization of new ventures. antecedents, elements and outcomes”, no. 2015/19/b/hs4/01728 and by the statutory fund of the collegium of world economy. references 1. autio, e., sapienza h. j. & almeida j. g. (2000). effects of age at entry, knowledge intensity, and imitability on international growth, academy of management journal, 43(5), 909–924. 2. baum m., sui s. (2013). learning by exporting: short term vs. longer term effects of export duration on product innovations. do born globals learn differently?, european international business academy, conference paper. 131 3. blomstermo a., eriksson k., sharma d. d. (2004). domestic activity and knowledge development in the internationalization process of firms, journal of international entrepreneurship, 2(3), 239-258. 4. bbbbbb, bbbbbb bbbbbb, bbbbbb bbbbbb bbbbbb bbbbbb bbbbbb, bbbbbb, bbbbbb bbbbbb bbbbbb bbbbbb bbbbbb bbbbbb bbbbbb bbbbbb. 5. bruneel j., yli-renko h., clarysse b. 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(2008). méthodes de recherche en management, dunod, paris 1999. 25. tiwari s.k., korneliussen t. (2018). exporting by experiential knowledge: a study of emerging market micro firms, international marketing review, 35(5), 833-849. 26. weerawardena j., mort g.s., salunke s., knight g., liesch p. (2015). the role of market subsystem and the socio-technical sub-system in innovation and firm performance: a dynamic capabilities approach, journal of the academy of marketing science, 43, 221-239. 27. yeoh p.l. (2004). international learning: antecedents and performance implications among newly internationalizing companies in an exporting context, international marketing review, 21(4/5), 511-535. 28. zahra, s., ireland, r. d., & hitt, m. (2000). international expansion by new venture firms: international diversity, mode of market entry, technological learning, and performance, academy of management journal, 43(5), 925–950. 29. zhou l., barnes b. r., lu y. (2010). entrepreneurial proclivity, capability upgrading and performance advantage of newness among international new ventures, journal of international business studies, 41, 882–905. 99 car price prediction in the usa by using linear regression huseyn mammadov carlo bo university of urbino, italy received: november 18, 2021 accepted: december 27, 2021 online published: december 29, 2021 abstract this paper studies a linear regression model to predict the car prices for the u.s market, in order to help a new entrant understanding important pricing factors/variables in the u.s automobile industry. the prediction of a car price has become a high-interest research area, as it requires significant knowledge of the field. i have applied to a highly comprehensive analysis with all data cleaning, exploration, visualization, feature selection and model building. the data used for the prediction were collected from the web portal fred.stlouisfed.org using web scraper, written in python/jupyter programming language. according to a problem solving approach, i have split it to 5 parts (data understanding and exploration, data cleaning, data preparation: feature engineering and scaling, feature selection using rfe and model building and linear regression assumptions validation and outlier removal). the points are symmetrically placed along a diagonal line in the former plot and along a horizontal line in the later plot in the examination plots of observed against forecast values or residuals versus projected values. according to the table of residuals vs. predicted, many points with extremely high residual values suggest that the model predicts one item adversely. other well-known raised residual points may possibly be significant outliers. keywords: car price prediction, liner regression, data understanding, data cleaning. 1. introduction in this paper the given purpose is to explain the price of cars in the us where the liner regression is used, and which helped to estimate predictions. respectively, an accurate estimation of automobile prices requires specialized expertise, as quality typically relies on several different features and variables. in addition, the amount of gasoline used in the vehicle and the fuel usage per mile have a significant effect on a car's price leading to regular adjustments in a fuel 's demand. this analysis is organized in this structure: • data understanding and exploration • data cleaning international journal of economic behavior, vol. 11 n. 1, 2021, 99-108. https://doi.org/10.14276/2285-0430.3049 100 • data preparation: feature engineering and scaling • feature selection using recursive feature elimination (rfe) and model building • linear regression assumptions validation and outlier removal. 2. literature review noor and jan (2017) use multiple linear regression to construct a model for forecasting car prices. the dataset was generated during the two-month span and included the following characteristics: size, cubic ability, exterior color, date of posting of the ad, amount of ad views, power steering, kilometer mileage, type of transmission, type of motor, area, registered area, layout, edition, make and model year. with the results setup researchers were able to reach 98 per cent predictability. the authors have suggested prediction model based on the single machine learning algorithm in the relevant research seen above. nevertheless, it is notable that a standard approach to machine learning algorithms did not produce impressive predictive outcomes and could be improved by combining multiple methods of machine learning into an ensemble. gonggie (2011) suggested a model that would be developed using ann (artificial neural networks) to estimate the price of a used vehicle. he considered several attributes: passed miles, estimated car life and mark. the new model was developed in order to cope with nonlinear data interactions, which was not the case for prior models using standard linear regression techniques. the non-linear model was able to forecast car prices better than other linear models with greater accuracy. wu et al. (2009) performed analysis of car price estimation utilizing a knowledge-based neurofuzzy method. they took the following characteristics into account: model, year of production, and engine size. their model of projection had comparable findings to the simplistic model of regression. they have created a specialist program named odav (optimal distribution of auction vehicles), since there is a strong demand for auto dealers to deliver the vehicles at the end of the leasing year. this method offers information into the best car rates, as well as the place where the best quality can be earned. regression model focused on neighboring k-nearest machine learning algorithm was used to predict a car's speed. this program appears to be remarkably effective, as it has exchanged more than two million vehicles. in his thesis research richardson (2009) offered a specific approach. his expectation was that more robust vehicles should be made by automakers. richardson implemented multiple regression analyses and found that electric vehicles have maintained their worth longer than regular vehicles. this has origins in urban warming issues and offers greater fuel efficiency. 3. methodology and problem solving 3.1 data understanding and exploration let's first have a look at the dataset and understand the size, attribute names etc. figure 1 shows the data types and names of the columns of the dataset and according to the estimation python is used where it helps to apply to the liner regression. 101 figure 1 − understanding the features and data observations on target variableprice the target variable price has a positive skew; however, majority of the cars are low priced. more than 50% of the cars (around 105-107 out of total of 205) are priced 10,000 and close to 35% cars are priced between 10,000 and 20,000. so around 85% of cars in us market are priced between 5,000 to 20,000. based on above observations and graph on right side (kde/green one) it appears there are 2 distributions one for cars priced between 5,000 and 25000 and another distribution for high priced cars 25,000 and above. (notice the approximate bell curve from little less than 30000 up to 45,000/50,000). data exploration to perform linear regression, the target variable should be linearly related to independent variables. let's see whether that's true in this case. figure 2 shows the tabular form of the dataset on which we will carry the operations. figure 2 − var indicators these vars appears to have a linear relation with price: carwidth, curbweight, enginesize, horsepower, boreration and citympg. other variables either don't have a relation with price or relationship isn't strong. none of the variables appear to have polynomial relation with price. 102 in linear regression assumptions validation section, we will check for linearity assumption in detail. figure 3 shows the useful insights from correlation heatmap (which shows a 2d correlation matrix between two discrete dimensions), dependent variables and independent variables. figure 3 — heatmap correlation positive correlation: price highly correlated with enginesize, curbweight, horsepower, carwidth (all of these variables represent the size/weight/engine power of the car) negative correlation: price negatively correlation with mpg var's citympg and highwaympg. this suggest that cars having high mileage may fall in the 'economy' cars category or in other words indicates that low priced cars have mostly high mpg correlation among independent variables: many independent variables are highly correlated; wheelbase, carlength, curbweight, enginesize etc. are all measures of 'size/weight', and are positively correlated since independent variables are highly correlated (more than 80% correlation among many of them) we'll have to pay attention to multicollinearity, which we will check in assumptions validation section using vif score 3.2 data cleaning: missing values and feature data type check in this section we will check dataset for missing values and check the datatypes of different features. figure 4 shows the data types and names of the columns of the dataset and meanwhile figure 5 shows the conversion of desire column. 103 figure 4 — the types of columns of the dataset figure 5 − the conversation of the column 104 3.3 data preparation: feature engineering in this section we prepare the data for model building and desire operations. enable to make future operations we prepared the data. data preparation contains drop, merge, and creating dummies. scaling features though not necessary in (multiple linear regression) mlr but it’s good to do it as it makes interpretation of regression coefficients easier 3.4 model building and feature selection using rfe (recursive feature elimination) since our dependent variable price looks to be linearly related to most of the independent variables, we are using linear regression (because of in statistics when dependent variable is linearly related to independent variable then we apply linear regression) only and no other types of regression like polynomial, random forest/boosting regression etc. massive overfitting: all features in model is never a good idea unless features are too less and all of them are important, so we used using recursive feature elimination to reduce dimensionality. first, we need to split the data into train and test as shown in figure 6. then we perform some r-square and root mean squared error (rmse) on train and test data and we obtain some values of r-square on train and test data as well and also rmse on train and test data after performing these operations as these values are clearly shown in figure 6. figure 6 – data split feature selection using rfe first we decide optimal number of features rather than arbitrarily specifying count of features to be used in model in the rfe function. from the graphs as shown in figure 7 we find: − r square for test data peaks at 13 features and at this point model generalizes well as train r2 is v close to test. train r2 keeps on increasing beyond 13 features but r2 105 keeps increasing as you add more features to train data. we have selected the number of features where model accuracy and generalization both are at satisfactory level. − rmse for test data is lowest at 13 features and beyond that it increases. train rmse at 13 also looks good, adding more features to train decreases rmse but again there is always a tradeoff between removing features (aka reducing complexity) and model performance. so, we will go with 13 features (figure 8). figure7 − features count 3.5 linear regression to detect linearity lets inspect plots of observed vs. predicted values or residuals vs. predicted values. the desired outcome is that points are symmetrically distributed around a diagonal line in the former plot & around horizontal line in the latter one. from the graphs shown in figure 9: 1. obs vs predicted shows that most of the values are closer to the diagonal line, however some are not which is a problem. 2. resi vs pred graph does not give a conclusive evidence that residuals are evenly scattered around the zero line as resi values increase with increase in predicted values, so assumption of linearity can't be confirmed. 3. there seems to be presence of outliers, which might be giving a non-conclusive enough resi vs predicted graph. some points have very high residual values; a point (~ -3000, ~ 8000) shows one value is predicted negatively by the model. there are many other prominent high residual points which could be influential outliers. 106 figure 8 − model building with optimal features figure 9 − comparation of observed and predicted values 107 figure 10 indicates the actual vs predictions price. blue label indicates the actual price of the cars and red label indicates the predicted values of the cars. figure 10 − relation of actuals and predictions 4. conclusions according to the aim and methodology of this research may apply other countries with using the same statistical analysis. the precise structure explains and indicates poses if the variables where the price fluctuated over the cars with subject to the results and according to the understanding the features and data observations on target variable price, the estimation illustrates information about, the goal variable price has an optimistic bias because most vehicles are low cost. over 50 percent of the vehicles are priced at 10,000 and approximately 35 % are priced between 10,000 and 20,000. so, in the us industry about 85 per cent of cars are priced between 5,000 and 20,000. on the basis of the above findings and graph on the right side there are 2 distributions: one for cars priced between 5,000 and 25,000 and another for high priced cars, at 25,000 and beyond. in the data exploration we have started to perform the liner regression. so, in detail, some var's seem to have a linear price relation: carwidth, curbweight, enginesize, horsepower, boreration, and citympg and certain factors either have no price relation or are not good association. neither of these variables appear to have a polynomial relation to size. in the segment validation of linear regression assumptions, we have tested for the linearity assumption. in the correlation heatmap, price is highly correlated with enginesize, curbweight, horsepower, carwidth and negatively correlated with mpg var's citympg and highwaympg, so, this means that high-mileage cars can fall into the 'economy' car category or, in other words, mean that low-priced cars often have high mpgs. in the examination plots of observed versus forecast values or residuals versus projected values, the intended consequence is that the points are symmetrically arranged in the former plot along a diagonal line and in the latter along a horizontal line. according to the residuals vs predicted table, many points have very high residual values, indicating that the model negatively forecasts one value. there are also other elevated residual points that may theoretically be powerful outliers. 108 references 1. du, j., xie, l. schroeder, s. 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(2010), “le nuove frontiere del marketing internazionale fra approccio strategico, contestualizzazione e interculturalità”, mercati e competitività, n. 4/2010, pp. 15-19. doi: 10.3280/mc2010-004002. 1. introduction 2. literature review 3. methodology and problem solving 3.1 data understanding and exploration 3.3 data preparation: feature engineering 3.4 model building and feature selection using rfe (recursive feature elimination) 3.5 linear regression 4. conclusions references microsoft word 7 (19-15) obeng 105 contractual obligation of claims. a factor influencing investors choices of capital george obeng university of education, winneba, ghana received: july 28, 2019 accepted: october 24, 2019 online published: december 16, 2019 abstract advocacy for entrepreneurship and innovation to ease unemployment is stampeded by funding. uncertainty of reward, unenforceability of rights in case of default, obscures attracting financiers. risk of investment security and returns, information opaqueness and their effect on securing funding entrepreneurship has received little attention. the study investigated how contractual obligations of claims influence choice of capital in emerging markets, as against capital structure optimality intrusion in investors’ decision. a cohort of 250 potential investors responded to structured questionnaires in a survey, and quantitative approach used to analyse the data on how contractual obligation of claims affects choice of capital. the study revealed influence of security over assets and contracted claims on decisions. perception of trust is gradually giving way to formality and choice of debt in investment decisions. developing the bond market, trade off equity, is eminent to mobilize funds to develop entrepreneurship in emerging economies. key words: capital structure; contractual obligation; entrepreneurship; information asymmetry. 1. introduction unemployment in today’s world is a canker that governments are finding it difficult to surmount. government, the largest employer, lacks the incentive and capacity to meet the high demand for jobs by the teeming youth turning out from schools and universities every year. entrepreneurship is being advocated by governments and other stakeholders, the world over, to motivate people to venture into private business (bongani and chinaza (2018; undp, 2018). emerging economies should consider new strategies on entrepreneurship development to ease unemployment in society. this should be a measure of economic growth of individual investors making the economy (esposito, 2018) than classical models of gdp and others that do not see direct improvement in the lives of the people. investment should create value and wealth, economical to sustain the interest and objectives of the investor. international journal of economic behavior, vol. 9, n. 1, 2019, 105-120 106 the interest and objectives, reward systems cherished and desired by the investor need to be protected and secured. otherwise, investors will turn away from investing in business ventures, as, “the entrepreneur is motivated by self-interest” (adam smith, in slavin, 2002; pg 86; eaton, eaton & allen 2005 pg 16). there are new and existing businesses that may want to innovate and usher in new ideas to break new grounds, but for want of finance as a motivator (fischer, malycha, and schafmann, 2019). there is a huge demand for finance by potential businesses that are not met, and others with surplus funds to invest but reluctant, for want of security. they may lack the right information on cost and benefits that may obscure economic development and growth. information opaqueness in this direction has affected finance decisions in many ways (vy le, thi bich, 2017), choices of capital and fund flow (hancock, 2009, xiaoyan, 2008). securing funds for small businesses to start up or grab an opportunity to break new grounds is a problem in emerging economies. unctad (ite/teb/misc 3-2002) revealed that access to finance has been a key element for small and medium scale enterprise (smes) to succeed in their drive to build productive capacities, compete, create jobs and contribute to poverty alleviation in developing countries. smes cannot acquire or absorb new technologies and expand to compete in global market or even strike linkages with larger firms. funding source, equity or debt, may have its own interest and reward systems. capital structure comes with it risk of financial distress to equity holders in geared firm in case of default. however, in emerging economies equity capital and its reward system is not all that prominent. corporate dividend came up in the early sixteenth century in holland and great britain when the captains of sailing ships, as entrepreneurs, started selling financial claims to investors. this entitled them to share in the proceeds, if any, of the voyages. at the end of the voyage, the profits and the capital were distributed to investors liquidating and ending the ventures life (al-malkawi, rafferty and pillai, 2010). this shows that the important security at the early stages of the development of shareholding was trust due to close relation between the parties. the time span and life cycle of the business venture was determinable to facilitate liquidation and valuation of interest and stakes of the parties. risk of uncertainty of returns and repayment was minimal and avoidable. the development of public limited liability companies to raise more funds for expanded business and projects brought in large numbers of investors from different background and interest that eroded the factor of trust. in an environment lacking relevant information to make informed decision how is capital structure theory affecting investors’ choices? where there is unpredictable level of uncertainty investors tend to be risk averse, avoid uncertainty for certainty (thornton and ribeiro soriano, 2011). craving for certainty in discomfort, unstructured or ambiguous situation investors may trade off equity for debt capital as motivator for investment performance. a business may choose and select either equity or debt capital as its source of funding according to the preference of the investor or market dictates (eaton, eaton, & allen; 2005). in the choice processes it is fundamental to receive specified needs and satisfaction in exchange for consideration given which is assured (abbott & pendlebury, 1994). each side must promise to give or do something for the other (riches & allen, 2011). simply talking about trust in business transactions is not enough for the sake of risk of default and uncertainty. the transactions and agreements preferably should be enshrined in contract as cherished by the parties. the contract should emphasized the fact about will, agreement, obligation, promise, and commitment, staying true to one’s commitment, cooperation, sanction and bond (pesqueux, (2015). for lack of assurance and contractual engagements for better and regular rewards and protection of investors’ assets, there is the possibility of trade off of equity for other financial 107 assets in different structures which this study addressed. the study investigated the effect of contractual obligation of claims on choice of capital in emerging economies, environment of information opaqueness. it is important to unveil the mystery surrounding the inhibition of flow of funds for equity investment in emerging economies. equity should have greater reward to compensate for its risk of financial distress and enjoy good patronage. however, equity has limited attraction. the study investigated the effect of reward on choice of capital, determine the extent to which risk affects finance and investment, and finally establish the extent to which quest for security on assets influences choice of financial assets for entrepreneurship development. 1.1. hypothesis a. reward system influences the choice of capital in investment and finance decision. b. risk of default influence the choice of capital type in investment and finance decision. c. quest for security is a determinant in choosing investment assets 1.2. conceptual framework the conceptual framework (figure 1) established the relationship between reward system, risk return compensation and security on assets as dependent variables, and choice of capital structure (equity and debt) as the independent variables. the reward system of interest and dividend and how they affect performance (profit), the level of the return and how they compensate for risk taken and security of investment on assets contracted, plays significant role in investment decisions. the objective then is to bring to fore the ingredient of contractual obligation for rewards in investment engagement as against trust of the sixteenth century business adventurism. this dispensation acknowledges that capital structure is a response to corporate behaviour in investment decision and not as predetermined by management (antoniou, guney, paudyal, 2019). in effect to fund entrepreneurship in smes through equity, with all the associated risks, is not attractive and feasible without contractual obligation. figure 1 – conceptual framework 108 2. literature review business serves a known interest in a given market, an opportunity that goes with reward as the self-interest and profit motive of the entrepreneur (slavin, 2002, eaton, eaton &allen 2005). the business activity must be financed by equity or debt in a preferred structure (ross, westerfield, jaffe, 2002; bodie, kane & marcus, 2002). the entrepreneur is informed by available information in making the choice. relationships evolving out of the transactions entered into should clearly specify the objectives of the exchanges made. value is exchanged for value and business should create value substantial enough to provide security and reward, as expected by the investing parties. the motivation of the investor is the protection of the value into the foreseeable future to avoid risk of loss. the relationships, objectives and exchanges may imply contractual commitment based on specific terms and conditions, which should be fulfilled satisfactorily, in an acceptable legal form of contractual obligations. the investment assets must be secured. default in the processes in terms of the commitments in the exchanges, at any stage of the transactions can spell out financial distress. the business as an independent legal person given funds has to operate and reward its contributors in relationship that contractually bind the business to honor the terms and conditions, either specifically stated or not. any anticipation on the part of the financiers that their reward may not be met and their value in the investment not secured may affect their investment ego. 2.1. self interest as investment drive the private man going into business is motivated by his earnings, profit. the invisible hand, profit motive or economic self-interest (slavin, 2002, eaton, eaton &allen 2005) in liberal economies plays a great role as to who should be in business. in any choice situation, the individual makes the choices that allow him or her to attain the highest possible ranking in his or her preference ordering (eaton, eaton &allen, 2005. pg 15-16). any anticipation of loss of the self-interest motive may turn investors off. in an environment of information opaqueness and uncertainty on the security of returns and assets, attraction to invest is lost. it should be expected that where dividend payment is at the discretion of management and uncertainty surrounding equity rewards and security, investors trade off equity for debt and other assets promising certainty of returns with contractual obligation. developing the bond market is good for entrepreneurship funding. 2.2. capital structure capital structure is the liabilities or claims on the firm’s resources, that the firm is obliged to pay rewards. the resources are used by the firm to create wealth from which rewards are paid and repay the principal. a firm can choose among alternative capital structures; issuing large or little amount of debt, floating-rate preferred stock, warrant, convertible bonds, caps and callers (ross, westerfield, jaffe, 2002; bodie, kane & marcus, 2002). capital structure theory focuses on the decision to depend heavily or not on debt sources of funding the firm’s activities, a discretion that can affect the value of the firm. the levered firm, with more debt than equity, may not be attractive to equity holders because the value of equity declines. the equity shareholder will be better off, only when the firm is able to optimize the structure and ensure a good balance between equity and debt. however, modigliani and miller (mm) (1958) observed that a firm cannot change the value of its outstanding securities by changing its capital structure; the value of the firm remains same under different capital structures. therefore no capital structure is any better or worse than 109 other. modigliani–miller theorem explains that, under a certain market price process, the classical random walk, absence of taxes, bankruptcy costs, agency costs and asymmetric information in efficient market, the value of a firm is unaffected by how that firm is financed. further, modigliani and miller (1958) hypothesized that risk to equity holders rises with leverage; as such the leveraged firm may have greater range of earnings per share or returns expectations. equity holder may earn nothing in value or value declines in bad times and may make good returns in good times better and higher than the unlevered firm may. the onerous should be on agency to make more returns to pay interest with enough to compensate equity holders for their risk otherwise investors would trade off equity for debt capital. in developing countries, some specific factors like information availability and cultural dispensation in addition to common variables across countries may influence investment decisions (booth, aivazian, dernirguc-kunt and maksimovic, 2002). 2.3. common stock common stock holders have right to vote and elect directors of the company who in turn elect corporate officers; have right to enjoy new shares issued; share proportionately in assets remaining after liabilities have been paid in liquidation; right to vote on matters of importance as mergers at the annual general meeting or at special meeting. shareholders receive their returns through dividend which is paid at the discretion of the board of directors’ declaration. there is no liability or obligation to declare and pay dividend and therefore there is no default on the part of the company or be under any threat of bankruptcy. this presents serious risk to the investor in equities. in economies with low income, equity will not be attractive means of earnings to add to limited disposable income. with small business entities the proprietor doubles as owner and agent of the firm in which case capital structure may not be a good determinant of risk and performance (phooi m;ng, rahman and sannacy, 2017). entrepreneurs in such small businesses may not attract equity as they may want to plough back profits against paying dividend and avoid dilution of control. debt capital is their best option and this call for the development of the bond market. 2.4. debt capital long term debt is a contractual obligation on the company to pay fixed sums of money as interest to bondholders at stipulated time and the principal at maturity. any default may compel the firm into bankruptcy especially where the firm has limited valuable assets to cover the debt. the interest on the bond is an expense and is a tax deductible that may limit the level of tax liability and the company having more after tax income. the contractual relation for routine and regular payment of interest and principal really edges and compel management to perform and achieve more than necessary to meet the debt obligation to avoid liquidation. debentures and bonds are long term debt and the obligation for repayment would be more than one year. in economies with weak information system and low disposable income, debt capital is attractive to investors. entrepreneurs will appreciate a buoyant debt market to tap for funds. 2.5. volatility of earnings volatility or business risk is a proxy for the probability of financial distress and it is generally expected to be inversely correlated with leverage. several measures of volatility have been used in empirical studies such as standard deviation of the return on sales, standard deviation of the difference in operating cash flow scaled by total assets, or standard deviation of the percentage change in operating income (xiaoyan, 2008). firms with high volatility in earnings face a 110 higher risk when earnings level drops below the debt service commitment. equity has higher risk and not attractive under this condition and debt with contractual terms may be preferred. 2.6. contractual obligation a contract is “a promise or a set of promises which the law will enforce” sir fredrick pollock (quoted in riches & allen, 2011). contract is defined by the oxford dictionary of english in different ways including; a) as a written or spoken agreement, especially one concerning employment, sales or tenancy that is expected to be enforceable by law b) the branch of law concerned with the making and observation of contractsthe law of contract c) enter into a formal and legally binding agreement. a contract is an agreement which legally binds the parties. the contract as an agreement should come about as a result of an offer and acceptance, contain an element of value known as consideration and the parties intend to create legal relations. an offer is a definite promise to be bound on certain specific terms. acceptance may be in writing or oral and it must be unqualified and must correspond to the terms of the offer (abbott & pendlebury, 1994; riches & allen, 2011). consideration of value, an element of exchange, is the bedrock in any negotiated contract. the consideration is some benefit accruing to one party, or some detriment suffered by the other, a promised sacrifice (riches & allen, 2011; abbott & pendlebury, 1994). parties in financial and investment transaction and decision making should be clear in their minds as to whether they want to enter into a formal and legal binding agreement defined, operational and be managed under the terms and conditions of contract law and finally to be enforceable (pesquex, 2012). the shareholders are entitled to dividend declared by management at their discretion and not under any obligation to make such declaration. the dividend is paid after all other obligations of claim owed other claimants are paid. if nothing is left after the interest of the creditors are met shareholders go with nothing. when the company fails and is liquidated, per their limited liability status, the shareholders can lose up to their investment (bodie et al 2002). bond or loan is a security that is issued with borrowing arrangement. a corporate bond provides means for private firms or company to borrow money directly from the public (bodie et al 2002). the obligation to pay reward and repay principal is documented and sealed. we can then conveniently say there is a valid contract, which is legally enforceable at the law courts. 3. methodology the research is a descriptive design using the survey research strategy for data collection. the survey strategy chosen helped address the broad nature of the work and areas covered to ensure economy (saunders et al 2007). the quantitative technique is used to analysis the data with the help of the statistical software, spss, applying the chi-square and the correlation tools to find out the relation between contractual obligation on returns and the security of investment assets and choice of capital at significant values of between 5%.and 10% the test is to establish the relationship between reward system, risk return compensation and security on assets contracted and enforceable as dependent variables, and choice of capital structure (equity and debt) as the independent variable. the reward system of interest and repayment of principal on the part of debt capital is contractual and enforceable. dividend reward to equity and repayment of capital is not contractual. reward on investment and its 111 security and avoidance of risk are major factors considered by investors but theory lays emphasis on capital structure. this work, as part of a broader study on developing the bond market, is drawing attention to the significance of these variables and their influence on investors in efforts of raising funds for smes development to ease unemployment in emerging economies. the population for the study was individual potential investors and technical persons. the possibility of covering persons in business and requires extra funding as deficit units; potential entrepreneurs who require assistance in the form of capital of any kind for their business activities and those with surplus funds ready to lend it out for some reward or returns was considered. the study selected a sample of 250 potential investors to respond to structured questionnaires. forty volunteers were selected and given the requisite training and skills to administer the questionnaires to get the best data for the study. data summary and analysis is presented under section four below. chi-square test statistics below;  2 2 1 1 , r c ij ij i j ij f e x e     was used to analyze: ‑ expected level of investment rewards effect on choice of business capital. ‑ high rewards above market average influence on choice of business capital. ‑ risk of reward systems effect on choice of business capital. ‑ contractual right for reward payment effect on choice of business capital. ‑ contractual right for reward payment effect on choice of business capital. ‑ asset secured as guarantee for capital repayment influence on choice business capital. ‑ the test came out with significant value of 0.056 for contractual obligation influencing choice of capital and 0.001for asset security. 3.1. limitations the major limitation is about data collection. majority of ghanaians are not exposed to and educated on financial markets and institutions and their objectives and functions except the banks. information is opaque and therefore investing in equity share capital is very grey to the individual investor. responses made to some of the questions by such category of individuals may be by their own cultural understanding and not a reflection of the technical position. however, it really gave the study a true picture and objective perception of the people concerning their investment dispositions. painstaking effort was made to equip the questionnaire administrators with requisite skills to understand the respondents through interaction. 4. data summary, descriptive presentation and analysis data for the study were collected through questionnaire in a survey conducted across the country for a broader work developing the bond market for economic growth. notable responses that came up from the potential investors were that they might want to take up loans, pay interest and pay back according to the terms and conditions of the loan. they were of the conviction that it will serve them right to manage the business efficiently and effectively in their philosophies and cultures. it will ensure the stability and speedy growth of the business by ploughing back profits. in summary the potential investors mince no words in advocating for stiffer controls in operations and management of the business, ensuring their independence, 112 receive regular returns and peaceful life devoid of any litigation. owners of the business may not want dilution in terms of control over the business and avoidance of risk of loss through insecurity of their limited resources. the data gathered through questionnaire has been summarized descriptively in tabular form and initial analysis done in percentages as shown in the following sections. the chi-square test-statistic is given by:  2 2 1 1 , r c ij ij i j ij f e x e     where ijf is the observed frequency for category in row i and column j ( )( )i j ij r c e n  is the expected frequency for category in row i and column .j it has a chi-square distribution,   2 , df where the degrees of freedom are defined by ( 1)( 1).df r c   the decision rule: reject oh if   2 2 ; df x  the two categorical data are related. the results from the chi-square test are presented in the tables below. the level of reward influencing choice of capital (table 1) shows that 151 potential investors prefer equity capital and 76 prefer long-term debt capital. potential investors of 107 (70.86%) out of the 151 persons who prefer share capital require reward determined by the market forces, the invincible hand. on the other hand, 61 (80.26%) potential investors out of 76 persons preferring long-term debt capital require reward determined by the market forces. in a situation where reward offered is at the discretion of managers 19 persons (12.58%) out of 151 potential accepted such condition and 9 persons (11.84%) out of 76 potential investors who prefer debt capital may take anything at the discretion of management. to accept anything for immediate needs 25 persons (16.56%) out of the 151 potential equity investors prefer to go for that and 6 persons (7.89) of the 76 potential bond investors opt for that. in analysing how the reward system may influence the choice of capital the p-values came up as 0.335 (33.5%) meaning the reward levels of investment are independent of choice of capital. table 1 – expected level of investment rewards effect on choice of business capital expected level of rewards teststatistics p-value response categories reward as determined by the market forces anything offered by my employers or investment anything that can meet immediate needs total business capital sources shares 107 19 25 151 4.563 0.335 bonds 61 9 6 76 total 168 28 31 227 113 potential investors require higher reward from their investment than market average (table 2). 132 (84.62%) respondents out of 156 who prefer share capital wish they receive above market average returns and 68 (80.95%) out of 84 persons who prefer long-term debt capital, wish they receive reward higher than average market rate. in total 200 (83.33%) out of 240 potential investors prefer reward that is higher than market average. the p-value here is 0.29 (29%) meaning the dependency of choice of capital on higher reward above market average is independent. table 2 – need of high rewards above market average influence on choice of business capital would you prefer an investment that will give a higher reward than the market average? t-statistics p-value response categories yes no total business capital sources shares 132 24 156 0.527 0.29 bond 68 16 84 total 200 40 240 fluctuations or uncertainty of returns (table 3) show mixed reaction and state of indifference. 68 (46.9%) potential equity investors accepts fluctuation and 77 (53.1%) do not accept fluctuations in returns. for long-term debt capital 45 (55.56%) of the potential investors accept uncertainty in their rewards and 36 (44.44%) do not accept such fluctuations. the overall responses show that the potential investors are divided with 113 (50%) saying yes and another 113 (50%) saying no. from the statistical analysis, the p-value is 0.134 (13.4%) the relationship between the choices of capital and reward fluctuation is independent table 3 – risk of reward systems effect on choice of business capital would you accept any form of fluctuations (uncertainty) of your reward? t-statistics p-value response categories yes no total business capital sources shares 68 77 145 1.56 0.134 bond 45 36 81 total 113 113 226 for contractual obligation on the payment of returns (table 4), 155 potential equity investors, 138 (89%) persons require contractual obligation for their return and 17 (11%) may not want contract. for 82 potential long-term debt investors, 66 (80.49%) persons want contractual relationship and 16 (19.51%) do not want contractual relation. in all 204 (86.08%) of potential investors prefer contractual relation for the payment of their returns. the statistical analysis gave p-values of 0.056 (5.6%). at 10% significant values, there is dependency and relationship between choice of capital and contractual obligation table 4 – contractual right for reward payment effect on choice of business capital would you take up an investment that gives you contractual right for payment of your reward on regular basis? t-statistics p-value response categories yes no total business capital sources shares 138 17 155 3.267 0.056 bond 66 16 82 total 204 33 237 114 investors may not have contractual right for the return and repayment of capital but to receive higher returns above market average (table 5). 116 (80%) out of 145 potential equity investors will forgo higher return and go for contractual obligation on returns and repayment of capital. 29 (20%) prefer higher returns to contract to repay capital. for potential long-term debt investors of 84, 65 (77.38%) persons prefer contractual arrangement for repayment of capital to higher returns and 19 (22.62%) prefer higher return to contract for repayment of capital. the p-value of 0.379 (%) indicates independence of choice of capital and contractual repayment of capital. table 5 – no contractual right for repayment of principal effect on choice of business capital would you take up an investment with no contractual right of return and repayment but higher return above market average? t-statistics p-value response categories yes no total business capital sources shares 29 116 145 0.22 0.379 bond 19 65 84 total 48 181 229 according to table 6, for potential equity investors of 148, 78 (52.70%) prefer their investment secured on assets of the firm to higher returns whereas 70 (47.30%) prefer higher returns to security over assets. for potential bondholders of 80, 60 (75%) prefer security over assets to high reward and 20 (25%) prefer high reward. the p-value of 0.001 (0.01 %) clearly shows strong dependency and relationship between choice of capital and security over assets table 6 – asset secured as guarantee for capital repayment influence on choice business capital would you take up an investment with no contractual right of return and repayment but higher return above market average? t-statistics p-value response categories yes no total business capital sources shares 78 70 148 10.81 0.001 bond 60 20 80 total 138 90 228 the correlation table (table 7) shows 0.117 positive correlations between contractual obligation of reward and choice of capital. this means when there is contractual arrangement to pay reward investors are prepared to offer their funds to the business. on the other hand there is -0.218 negative correlations between security over assets and choice of capital. this means the higher the risk of insecurity the lower the funds or chance to obtain funds from the financial market. returns and relationship with choice capital has positive correlation, implying the high the return the higher the chances of receiving capital from investors. the correlations here are weak and lack linearity; however, it is worthy to acknowledge the importance of indicators to make informed decisions about how to attract funds in accordance with investors’ needs and satisfaction. 115 table 7 – correlation of contractual obligation and choice of capital n. items pearson r corr spearman corr p values 1 effects of expected level of reward on choice of capital 0.111 0.127 0.335 2 effect of high reward above market average on choice of capital 0.047 0.047 0.29 3 risk of reward systems on choice of capital 0.134 4 effect of contractual obligation of reward on choice of capital 0.117 0.117 0.056 5 effect of investment without contractual obligation for reward but higher and uncertain return on capital -0.031 -0.031 0.379 6 effect of security over assets on choice of capital -0.218 -0.218 0.001 7 effect of no security over assets on choice of capital -0.127 -0.127 0.038 5. findings potential investors require valuable consideration with high premium as reward. they prefer fixed returns and reward systems to compensate them for their risk. even though the p-values shows an independence relationship with choice of capital there is the presumption that return to capital invested is fundamental and not negotiable. it gives credence to the fact that in an environment of information opaqueness investors require high premium (vy le, thi bich, 2017) weak information and low level of investors’ confidence in the investing environments persuade investors to demand higher yielding securities, an indication for preference for longterm debt/bond capital. in an emerging economy with more smes managers may be reluctant to pay dividend, therefore investors direct their attention to bonds. potential investors require contractual obligation and arrangement for payment of their return and repayment of capital invested. investors require collateral security for making funds available to business. there is strong dependency between security over assets and choice of capital potential investors presume valuable consideration as reward with high premium responses from potential investors reveal that they require valuable consideration including premium in exchange for taking up that risk. this position is presumed to be not negotiable. “the entrepreneur is motivated by self-interest” (slavin, 2002). where there is unpredictable level of uncertainty of returns and repayment of capital investors tend to be risk averse and they may require more than average for their risk. thornton and ribeiro soriano (2011), opined that the dimension for uncertainty avoidance represents preference for certainty. the p-value of 0.29 (29%) indicates the variable of reward with high premium influencing choice of capital is independent and there is little or no dependency between them. this implies the quest for risk premium is non-negotiable. 116 weak information and low level of confidence in the investing environments provide basis for debt capital another observation made is the lack of information on businesses and their performance as well as low confidence of investors in the financial systems and markets. investors may prefer equity but for information opaqueness, they trade off for debt to enjoy fixed and regular returns. in developing countries and even the developed ones most businesses are started by individuals, supported by family relatives and friends. information flow in most cases is assumed and informal with heavy reliance on trust. a case in hand in ghana is the withholding of license of two banks by the bank of ghana for their liquidity and solvency problems as announced in the ghanaian print and electronic media on monday 14th august 2017. this development puts shareholders at risk. to protect their interest in environment of opaque information investors prefer fixed and regular returns and repayment of capital. preference for debt capital with fixed returns and reward systems is high this asymmetry leads to firms preferring internal funds over external funds; however, when internal funds are no longer available, debt is preferable to equity due to the riskiness of equity (myers 1984). the capital structure decision between equity and debt is different for small firms than for large firms in part (phooi m’ng, et’al, 2017) because small businesses are usually more informational opaque than large firms. in addition, since small businesses are usually ownermanaged, the owner/managers often have strong incentives to issue external debt rather than external equity in order to keep ownership and control of their firms (berger & udell, 1998). potential investors require contractual obligation and arrangement for payment of their return and repayment of capital invested as fundamental with low confidence in the market and information asymmetry investors require that their returns and repayment to be contractual. as seen above the requirement for valuable consideration with high premium as reward and repayment would be of no sense unless matched with agreement and contractual obligation investors require collateral security for making funds available to business. investors’ requirement for valuable consideration and reward with premium against risk of uncertainty and fluctuations can be achieved when there is protection by securing their interest over the assets of the business. the p-value from the statistical analysis is given as 0.001 (0.01%) which demonstrates strong dependency between choice of capital and security on assets of the firm. 6. discussions the desire of the potential investors for valuable consideration as reward satisfies the theory of self-interest, which is the core of all economic analysis. no one is prepared to give out more than what he or she can afford. value should exchange for value to allow the investor attain the highest possible ranking in his or her preference ordering (eaton et al, 2005). the study is revealing the need for contractual relation for the receipt of returns and repayment of capital to reduce or avoid risk in an environment of high uncertainty and information opaqueness. this is much so when it comes to start-ups and family businesses. investors can make informed investment and financial decisions dependent on available information. the thought flow in and between stages of the processes of investment and financial decision is smoothened and facilitated by the right and relevant information filtering in at the 117 right amount, right value, right time and right place. in the absence of this, the market will dictate for specified terms and conditions for reward systems due potential investors and to be enshrined in contracts. the reward in itself is a right that cannot enforce itself but legal contracts sealed and as catalyst provide a medium to demand specific performance. the level and extent of contractual obligation and security available to the investor for any type of capital source will influence the choice to be made. in start-ups and family and friends business where the parties are known and familiar to themselves, it is easy to assume that the information asymmetry would be minimal. in many cases, it appears that this is so; however, there is evidence to suggest that this is still a significant issue. the investment can quite often break friendships because of lack of information and openness (hancock, 2009). it is dangerous to make money available to start up and close relation and small business with little or no contractual relation (hancock, 2009). hancock (2009) observed that if a business starts up by accessing family or friends’ finance, the signal to the market, rightly or wrongly, is that the business has no potential, there is going to be built in bias that these businesses are going to fail. potential investors may then insist on collateral and covenants to secure their investments beyond what they can reasonably acquire as information. start-up enterprises are able to provide little, if any, of these artefacts to alleviate the problem. one reason given by the bank of ghana for closing down the ut and capital banks was the inability of the banks to comply the condition to improve their capitalization and to improve their balance sheet (daily graphic august 15, 2017). the inability of the banks to comply may stem from the fact that issuing new shares may not be taken up or may be priced down to the disadvantage of existing shareholders. the banks then may resort to adding more debt stock eventually weakening their balance sheet. when investors are satisfied with the security of regular returns and retrieval of their capital eventually, a business is assured of funds for its operations. investors prefer the bird in the hand of cash dividend rather than the two in the bush of future capital gains (al-malkawi, rafferty & pillai 2010). dividend payment is seen as an important form of information to investors. dividend policy provides means of gauging managers’ view about how future performance might be. an increase in dividend payment tended to be reflected in stock prices (al-malkawi, rafferty and pillai, 2010). dividend policy can provide a benchmark for investors to make informed decision, the absence of which creates anxiety for investors. for safety and security investors may opt for contractual and secured investment assets, that is, they trade of equity capital for debt capital. 7. conclusion the study investigated the effect of contractual obligation of claims on choice of capital in emerging economies as part of a study of developing the bond market for entrepreneurship growth. there is advocacy to encourage entrepreneurship to ease unemployment but for want of finance in environment of information opaqueness where flow of funds from equity for investment is not attractive and debt may be preferred (vy le, thi bich, 2017)). reliance on debt also faces the challenge of capital structure theory of financial distress. the study sought the relationship between reward system, risk return compensation and security on assets as dependent variables, and choice of capital, equity and debt, as the independent variables. it is to advocate a source to be tapped to support entrepreneurship. it came out that investors require valuable consideration as returns with high premium. these does not influence choice of capital but fundamentally not negotiable. however, the study reveals significant dependency between collateral obligation and quest for security over assets (collateral) and the choice of capital. 118 by implication investors want their return on investment and repayment of principal to be protected in legal contracts and secured on assets of the firm. potential investors prefer debt or bond capital. this preference supports the fact that the business environment in most emerging economies is weak in information flow, suggesting information opaqueness. this cannot help investors to make informed decision in their investment drive. in such situations quest for debt capital and security over assets is prominent notwithstanding the capital structure theory. myers and majluf (1984) drew attention to the use of debt to avoid the inefficiencies in a firm’s investment decisions that would otherwise result from information asymmetries. history of corporate dividend in holland and great britain, saw captains of sailing ships, issued financial claims to investors, which entitled them to share in the proceeds, if any, of the voyages. at the end of the voyage, the profits and the capital were distributed to investors liquidating and ending the ventures life (al-malkawi, rafferty and pillai, 2010). the security at the early stages of the development of shareholding was trust due to close relation between the parties. the time span and life cycle of the business venture was determinable with certainty to facilitate liquidation and valuation of interest and stakes of the parties. today with large public limited liability companies, investors require relevant information backed by law to make informed decision. in the absence of which, equity will be traded-off for debt capital with predetermined rate of return, repayment of principal embodied in contract and possibly backed by secured assets. developing the bond market is a possible means to raise funds for entrepreneurship for growth. 7.1. recommendations and suggestions for further research implication from the study is that capital structure is a response to corporate behaviour in investment decision and not as predetermined by management. in effect funding entrepreneurship and smes through equity, as postulated by theory is not attractive and feasible without contractual obligation. further research is suggested into this observation. environments of information opaqueness support the use of debt capital. governments in emerging economies, supported by the players in the financial system, should have the capacity to develop the bond market for growth. the stock exchange should be proactive in developing the bond market as a securitized financial asset to be traded and facilitate the liquidation of such instrument to attract investors’ confidence. corporate firms and their agents should ensure good corporate governance to motivate potential investors. managers’ rewards and allowances outside their salaries should be appropriation of surplus and not a charge in the performance statement to encourage management to efficiently use debt capital. there should be 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(2000), capital structure decisions in small and large firms: a life cycle theory of financing. new york: new york university publishers. 5 bridging intention-action gap for healthcare measures during the covid-19 lockdown maria-magdalena roșu bucharest university of economic studies, romania răzvan-mihai băcanu university of bucharest, romania received: may 15, 2021 accepted: september 12, 2021 online published: october 29, 2021 abstract the covid-19 pandemic has proven to be a challenge that forced everyone to rapidly adapt to a new way of distanced functioning and to adopt preventive measures. with a significant body of literature dealing with the general inconsistency between intention and action, also known as the intention-action gap, the present paper aimed better grasp the citizens' tendency to engage with general healthcare measures and the commitment to the covid-19 safety measures recommended during the lockdown. participants self-reported their conduct at the beginning of the covid-19 lockdown (early march) and the ending of the covid-19 lockdown (early may). descriptive statistics and non-parametric analyses testing were used. the preventive recommendations during the covid-19 lockdown revealed an increased degree of efficient adoption compared to typical healthcare measures. moreover, results are indicative of an increase in implied impediments between the beginning and the ending of the covid-19 emergency period, without a notable broadening in the corresponding intention-action gap. this result was attributed to the commonalities between the covid-19 emergency period and the established behavioural management strategies to reduce the intention-action gap, namely the intention actualization, “cheap talk” approach, “corrective entreaty” method, as well as “intentions implementation” strategy. keywords: intention-action gap; behavioral engagement; behavioral efficacy; preventive healthcare; covid-19 safety measures; social-psychological behavior; crisis management. 1. introduction failing to act according to one's intentions is a common observation since it is a recurrent barrier to reaching our aims and potential. be it choosing a different career path or deciding on a difficult matter, it puts strains on our internal discipline and our mental resources. however, the aspect of our life that requires the most discipline is probably our health. this can be achieved by adopting a healthy diet, physical exercises, a sufficient amount of sleep, and a suitable worklife balance, which, for many of us, is in itself a challenge. it seems that, despite all the international journal of economic behavior, vol. 11, n. 1, 2021, 5-21 6 knowledge we have on which preventive measures we should adopt and how we should implement them, we are still bound to fail. for instance, a study conducted in the health domain shows that between 26% and 57% of respondents did not carry their intention to use condoms, exercise, or undergo cancer screening (sheeran, 2002). unhealthy eating is another illustration of a weak intention-behavior link (sheeran & conner, 2019), leading to major health consequences such as a high risk for cardiovascular disease, diabetes and obesity (world health organization, 2019). the recent covid-19 virus outbreak rapidly imposed new "keep-healthy" objectives. our present inquiry is to find whether people succeeded at acting as intended more effectively than they would do otherwise. even if a pandemic is a rare and very specific event, the social reaction to it presents general elements that can be assimilated as recommendations for crisis management and the management of collective behavior. to be able to deduce and understand these elements, we chose a delimited social context -the state-declared lockdown between march and may. we will commence by exposing the everyday challenges to act accordingly to stated intentions, with practical recommendations to accomplish health-related goals. then, we will discuss the covid-19 lockdown context as having the potential to drive desired behavior by mimicking the mechanisms of these recommendations. finally, we will investigate the actual efficacy of the covid-19 lockdown by analyzing the surveyed responses about general healthcare measures and the specific situation of the covid-19 virus outbreak. 2. literature review 2.1 challenges and recommendations for general healthcare people often fail to act according to their stated intentions. many studies identified a difference in the way people regard hypothetical situations compared to actual situations (ajzen et al., 2004; list, 2001). the perpetual incongruence between intention and action is sustained with evidence from economic, environmental, and medical studies (ajzen et al., 2004; penn & hu, 2018). early takes on the matter attribute the intention-action incongruence to the different perceptions of symbols and reality (lapiere, 1934; blumer, 1955). lapiere (1934) claims that “there is no necessary correlation between speech and action, between response to words and to the realities they symbolize” (p. 231). in other words, the author proposes that intentions belong to a symbolic world, while actions are responses to reality. in our opinion, lapiere‘s argument still stands, with recent studies arguing that there is a qualitative difference between hypothetical and real context as people construct them differently. firstly, hypothetical situations activate fewer unfavourable considerations as people overlook real barriers. for example, when bidding in a hypothetical auction, people neglect the decisive distress of opportunity cost (the things that cannot be bought anymore after money is spent) experienced in the real situation (list, 2001). secondly, beliefs are variant across context -a theory known as the belief-disparity hypothesis (ajzen et al., 2004). action consistent with intentions is only expected when beliefs are congruent between hypothetical and real contexts. gershman et al. (1999, october) propose an explanation of the incongruence between the digital and physical world through three major discontinuities: physical discontinuities, information discontinuities, and awareness discontinuities. adapting gershman’s model we can identify three types of mental processing barriers that hinder actions to match intentions: temporal barriers, awareness barriers, and information barriers. the current literature on hyperbolic discounting suggests that time is a notable barrier as the passage of time affects perception and changes choices (quaife et al., 2018). ensuring time proximity between intention and action together with intention actualization, and progress monitoring are crucial 7 parts of goal-achieving strategies (sheeran & webb, 2016). studies show that intention actualization can be effectively achieved through low-cost communication strategies such as reminders (hand et al., 2019). the effectiveness of reminders has been shown especially effective in healthcare contexts where phone calls increased medical appointments attendance by 12%-17% (sawyer et al., 2002; lee et al., 2003, roberts et al., 2007). besides its direct implications, time also fosters the development of another potential barrier habits. bad habits (e.g. wasteful energy consumption) often contribute to the inefficiency to act on good intentions (lee et al., 2020). by addressing awareness barriers, some strategies are shown effective in reducing the intention-action gap: “cheap talk” approach, “corrective entreaty” method, and “implementation intentions” strategy. all these methods employ awareness by highlighting the barriers experienced during an actual situation. the “cheap talk” approach comprises a script presented just before expressing an intention (list, 2001). the script describes the drawbacks experienced in an actual situation. similarly, before intention formation, the “corrective entreaty” method exposes the conceptual problem of a disparity between a fictional and a real scenario (i.e. intention-action gap, hypothetical bias, or belief-disparity; ajzen et al., 2004). finally, the “implementation intentions” strategy that emphasizes an intention already expressed and provides in detail the when, where, and how of future action (kersten et al., 2015; saddawi-konefka et al., 2016). it may also create an action framework where individuals trying to achieve a desirable outcome are forced to take into consideration potential adversities. while the first two approaches consist of brief exposure to the practical and conceptual impediments of real contexts, the latter represents a more in-depth and systemic understanding of barriers, limitations, and ways to overcome them. these methods boost the affective “cold” persona to appreciate how actual “hot” situations are experienced by considering those barriers that are easily overlooked from a distance -usually an emotional distance between the current self and future self (loewenstein, 2005; kang & camerer, 2013; dillard et al., 2020). for more cognitively complex barriers concerning information and context understanding, studies appeal to knowledge. hidalgo-baz et al. (2017) suggest that knowledge helps transmit attitudes to behaviours by overcoming the lack of confidence or the misinterpretation of actual contexts. some authors promote knowledge as a means to understand an actual situation’s consequentiality that accounts for people’s understanding that their reported attitudes and actions affect policy and the common good. adequate risk perception is proven crucial when considering breast self-examination, physical exercise, seat-belt used, or dietary behaviours (schwarzer & luszczynska, 2008). furthermore, optimism bias can have a crucial role in adopting health-conserving strategies. (druica et al, 2020). the authors underline the existence of several distinctions among the conditional particularities of the interviewed, which led to dissimilar healthcare-related approaches under optimism bias. the study also points out several differences in regard to the samples, namely, for the romanian subjects the level of optimism bias decreased as the level of education was higher, in contrast with the existing literature, while the authors mention in the case of italy that lack of clarity from the official bodies led to confusion in terms of assessing the healthcare impact of the pandemic, regardless of their educational level. asides from the general mental processing barriers exposed so far, we must also note the observational commonality through which multiple individual characteristics contribute to the differences in perception and behaviour. the existing literature on the intention-action gap presents it as a rather general tendency, independent of socio-economic factors. the majority of studies show that neither gender nor income broadens the intention-action gap (regan & fazio, 1977; mjelde et al., 2012; penn & hu, 2018). however, some argue that age and education influence the bias ratio (mjelde et al., 2012) and other evidence suggests that even 8 gender affects the magnitude of hypothetical bias (brown & taylor, 2000; mitani & flores, 2014). worth mentioning is also that, despite increased information availability, people’s decision-making capacity is not necessarily keeping up with the expectation of rational decision making and, at the same time, pointing out the increasing importance of social media and online vectors of influence, thus increasing the credibility and authority of certain actions depending on the social network. such upcoming social opportunities may have already had a lasting impact on how we process and handle an increasingly dynamic and interconnected world. (balau, 2018). therefore, further investigation of individual characteristics and the intentionaction family of biases is recommended 2.2 covid-19 lockdown potential to reduce intention action gap we expected the lockdown to underline strong behavioral engagement with intention as the virus outbreak meets multiple conditions outlined in the above-mentioned strategies to reduce the intention-action gap. moreover, we expected to identify the manifestation of individual characteristics -or the lack of manifestation, for that matter -as underlined in previous literature. the social reaction to the covid-19 virus outbreak presents specific features considered effective in diminishing the distance between intention and action. we expected that both selfinterest and common good conservation when facing a collective threat with great consequences play the role of the invariant belief between the hypothetical situation and the actual situation. the solidarization tendency of human societies facing natural disasters such as epidemics is well documented in the social psychology literature (dawson & verweij, 2012; prainsack & buyx, 2012; lee & you, 2020). together with the understanding of actions’ consequentiality and their impact on the common good, we believe that the characteristic of adequate risk perception was fulfilled during the lockdown. time proximity between intention and action, together with intention actualization, was motivated during the emergency period through constant official communication comprising reminders about safety measures and adequate behaviour. informative communication and diverse scenario descriptions (e.g. how to behave in a supermarket or public spaces) provided during this time are very similar to the established methods in addressing awareness, namely the “cheap talk” approach, the “corrective entreaty” method, and the “implementation intentions” strategy. the informative programs released on diverse communication channels (radio, television, or social media) confronted citizens with specific situations and potential adversities. citizens had the means to understand the barriers, limitations, and ways to overcome them. besides the appeal to awareness, complex information concerning the pandemic was highly promoted, all official declarations called upon reliable data and scientific studies. 3. overview of the current study the current study proposes a comparative inquiry of the intention-action gap concerning general healthcare measures (e.g. maintaining good health, having regular health check-ups, seeking out to prevent illness or injuries) and covid-19 safety measures recommended during the state-declared lockdown due to the virus outbreak. to answer this question, we propose a study where people are surveyed about their attitude towards general healthcare measures and towards the specific situation of the covid-19 virus outbreak. in both cases, participants' behavior will also be assessed. we advance the following hypotheses: 9 h1: there is a broader gap between intention and action regarding general healthcare measures than covid-19 safety measures. h2: as implied impediments concerning general healthcare measures increase, the intention to perform a health-beneficial activity decreases. similarly, actual engagement decreases as implied impediments increase. h3: perceived impediments will increase between the beginning and the ending of the covid-19 lockdown, but the engagement with the covid-19 safety measures will not simultaneously decrease. additionally, we will examine the potential impact of socio-economic factors (i.e. gender, income, age, education) on the magnitude of the intention-action gap concerning general healthcare measures. 4. data and methods 4.1 procedure and participants a total of 1244 respondents voluntarily participated in an online survey, consisting of a few questions structured as presented in section 2.2 materials. data was collected via facebook and linkedin using convenience sampling (kitchenham & pfleeger, 2002; heckathorn, 2011). and snowball sampling methods (heckathorn, 2011). even with a non-random initial sample, snowball sampling is shown to approach equilibrium independent of the convenience sample (heckathorn, 2011). the online surveying approach was especially suitable during the covid19 lockdown considering that most activities transferred online (dockery & bawa, 2020). so, we can observe respondents’ intention and action towards preventive behavior concerning the covid-19 lockdown, two different samples of participants completed the survey at the beginning of the covid-19 lockdown (early march) and the ending of the covid-19 lockdown (early may). the first sample of 962 participants consisted of 24.6% were males, aged 16 to 79 years (m= 29, sd = 12.8). in terms of educational attainment, most participants (64.8%) completed secondary education, the rest completed higher education (35.2%). the second sample consisted of 282 participants, of which 21.6% males. participants aged 10 to 79 years (m=20.5, sd = 13.3). out of 282 participants, 98 completed higher education (34.8%), the rest completed secondary education. table 1 summarizes the descriptive statistics. 4.2 materials the online survey began with participants being informed about the confidentiality of the data collected and by expressing their agreement of voluntary participation. subsequent questions concerned individual characteristics, namely age, gender, income, and education. the second set of questions assessed the intention and the action towards general healthcare measures on a 1-7 likert scale. the questions imply different levels of engagement, both for intention and for action. each level of engagement assumes a supplementary amount of effort. all items are presented in table 2. 10 table 1 − demographics and socioeconomic variables variable first sample second sample age min = 16, max = 79, m = 29 (sd = 12.8) min = 10, max = 79, m = 20.5 (sd = 13.3) gender: female 75.4 % 78.4 % male 24.6 % 21.6 % highest level of completed education: secondary education 64.8 % 65.2 % higher education 35.2 % 34.8 % table 2: three levels of engagement intention and action intention action first level of engagement maintaining good health is extremely important to me. i search for new information to improve my health. second level of engagement i want to discover health problems early. i seek out ways to prevent illnesses and/or injuries. third level of engagement i feel it is important to carry out activities which will improve my health. i have regular health check-ups even if i am not sick. two of the questions presented in the second set, one comprising the intention and the other describing the action, refer to the same specific behavior: (1) “i want to discover health problems early.” and (2) “i have regular health check-ups even if i am not sick.” a distance between the responses registered for these questions would determine the intention-action gap regarding general healthcare measures (h1a). the third set of questions measured, on a 1-7 likert scale, the attitude (intention and action) towards safety measures during the covid-19 lockdown. the intention was assessed through the following item: “i am confident i can adopt preventive behaviors against covid-19 correctly.“ the actual engagement with the corresponding behavior was surveyed through the following statement: “i have adopted preventive behavior against covid-19.” as in the case of general healthcare measures, these two questions comprise the intention and the action regarding the same specific behavior. a distance close to zero between the responses would indicate that the intention-action gap was effectively reduced during the covid-19 lockdown (h1b). when assessing intention towards general healthcare (second set of questions), the decreasing agreement between levels of engagement is meant to underline the declining interest (or intention) as implied impediments increase (h2a). similarly, when surveying participation 11 with different actions, a decreasing agreement between levels of engagement indicates that actual engagement with health beneficial actions decreases as implied impediments increase (h2b). perceived impediments during covid-19 lockdown were assessed considering five types of barriers proposed by extant literature: social pressure or stigma (williams, 2002; smith et al., 2000; mcleod, 2008), limited time (sheeran & webb, 2016; quaife et al., 2018), limited resources (moghavvemi et al., 2015), general physical and psychological discomfort (shelus et al., 2020; perna et al., 2020). the items addressing these barriers are the following: “other people will consider me weird, if i adopt preventive behaviors against covid-19” (social pressure), “adopting preventive behavior against covid-19 will take too much time” (limited time), “i don’t have the equipment to adopt preventive behavior against covid-19” (limited resources), “adopting preventive behavior against covid-19 will create physical discomfort” (general physical discomfort), “adopting preventive behavior against covid-19 will hinder me.” (general psychological discomfort). as an indication of the increasing perceived impediments between the beginning and the ending of the covid-19 lockdown, we expected the agreement with each of these statements to increase between the first and the second data collection (h3). 4.3 method given that the distribution of our variables significantly departed from the normal distribution, non-parametric tests were employed to investigate the median differences proposed through the research hypotheses. considering the increasing emphasis on the importance of effect sizes, all results are reported both on means of p-values and effect sizes (sullivan & feinn, 2012; kelley & preacher, 2012). we conducted our data analysis using rstudio software, version 4.0.3. 5. results to test the first set of hypotheses regarding intention, action, and intention-action gap concerning general healthcare measures and covid-19 safety measures, wilcoxon signed rank tests were employed. for the intention-action concerning general healthcare measures difference the results revealed a significantly stronger agreement to intention than to action, both at the beginning of the covid-19 lockdown (w = 236620, p < 2.2e-16, r = 0.65) and at the ending of the covid-19 lockdown (w =16746, p < 2.2e-16, r = 0.65). figure 1 shows the response distributions, both at the beginning and the ending of the covid-19 lockdown. 12 figure 1 − intention-action gap concerning general healthcare measure no intention-action gap was revealed concerning the safety measures during the covid19 lockdown at the beginning of the period (w= 36966, p-value = 0.12, r = 0.06) or at the end of the period (w = 3677, p-value = 0.08, r = 0.1). figure 2 shows the response distributions, both at the beginning and the ending of the covid-19 lockdown. to test the impact of implied impediments on the intention towards general healthcare measures, we compared the responses to three levels of engagement. figure 3 summarizes the responses registered for each level, at the beginning and the ending of the covid-19 lockdown. results revealed a significant decrease of the intention to engage in general healthcare measures from the first to the second level of engagement, both at the beginning (w = 563020, p-value < 2.2e-16, r = 0.45) and the ending of the covid-19 lockdown (w = 47980, p-value = 1.153e06, r = 0.43). another significant decrease of intention to engage in healthcare measures was disclosed at the beginning of the covid-19 lockdown, between the second and the third level of engagement (w = 532930, p-value = 6.182e-10, r = 0.25). the same decrease in intention was not revealed to be significant at the ending of the lockdown ( w = 42142, p-value = 0.1, r= 0.1). still, there is a significant decrease between the first and the second level of engagement, even at the ending of the lockdown (w = 50245, p-value = 1.279e-09, r = 0.61). 13 figure 2 − intention-action gap concerning covid-19 safety measures. figure 3 − intention statements, the three levels of engagement 14 to further test the impact of impediments on the actual engagement with general healthcare measures, we compared the responses to three levels of engagement. wilcoxon signed-rank tests were employed. figure 4 shows the responses registered for each level, at the beginning and the ending of the covid-19 lockdown. results revealed a significant decrease of actual engagement with general healthcare measures from the first to the second level of engagement, both at the beginning (w = 559360, p-value = 3.618e-16, r = 0.41) and the ending of the covid-19 lockdown (w = 50196, p-value = 1.98e-08, r = 0.47). a significant decrease of actual engagement was also exposed at the beginning of the covid-19 lockdown, between the second and the third level of engagement (w = 482610, p-value < 0.05, r = 0.1). the same decrease in actual engagement was not revealed to be significant at the ending of the lockdown (w = 41317, p-value = 0.2, r= 0.07). a significant decrease of actual engagement, between the first and the third level, holds at the ending of the lockdown (w = 51664, p-value = 1.93e-10, r = 0.5). figure 4 − action statements, the three levels of engagement concerning the covid-19 safety measures, dependent 2-group wilcoxon signed rank tests revealed that the five perceived impediments increased from the beginning to the end of the covid-19 lockdown (social pressure: w = 116010, p-value = 4.564e-05, r=0.105; limited time: w = 99408, p-value = 9.052e-15, r = 0.193; limited resources: w = 122410, p-value < 0.01, r= 0.071; general physical discomfort: w = 95802, p-value < 2.2e-16, r= 0.213; general psychological discomfort: w = 106010, p-value = 1.047e-11, r=0.159). to further investigate the impact of the socio-economic factors, namely gender, age, income, and education, on the magnitude of the intention-action gap concerning general healthcare measures, an index of distance was calculated as the difference between the agreement to intention and agreement to action. one index was calculated for the first data collection (the beginning of the covid-19 lockdown) and another for the second data collection (the ending of the covid-19 lockdown). there is no significant difference between the median magnitude of the two indexes (w = 143010, p-value = 0.16, r = 0.04). 15 to investigate the impact of gender on the magnitude of the intention-action gap, 2-group mann-whitney u tests were conducted. no significant difference between genders was revealed at the beginning of the covid-19 lockdown (w = 84550, p-value = 0.7, r = 0.012) or at the ending of the covid-19 lockdown (w = 7517.5, p-value = 0.16, r = 0.084). nor does age have a significant impact on the magnitude of the intention-action gap, with small correlations between age and distance indexes both for the first data collection (r = -0.14) and the second data collection (r = -0.05). kruskal–wallis tests were conducted to examine the impact of income on the magnitude of the intention-action gap. considering the first data collection, the test revealed a significant difference between groups concerning the median intention-action distance (kruskal-wallis xsquared = 14.222, df = 6, p-value < 0.05, eta squared = 0.009). however, with seven groups of comparison (7 levels of income) the chance of observing a rare event increases and, consequently, the likelihood of incorrectly rejecting a null hypothesis (a type i error) increases. the bonferroni correction compensates for that increase. further, dunn’s pairwise tests were carried out for the seven pairs groups using bonferroni correction. no significant difference between groups was revealed. for the second data collection, kruskal–wallis test displayed no between-group difference (kruskal-wallis x-squared = 8.6325, df = 6, p-value = 0.2, eta squared = 0.01). two-group mann-whitney u tests were conducted to examine the impact of education on the magnitude of the intention-action gap. in the first data collection (the beginning of the covid-19 lockdown), a significantly higher difference between intention and action was revealed for the group that completed higher education compared to the group with secondary education (w = 117470, p-value < 0.05, r = 0.09). the difference did not hold significance for the second data collection (the ending of the covid-19 lockdown; w = 8987, p-value > 0.9, r = 0.003). 6. discussion the first hypothesis was confirmed — there is a broader gap between intention and action regarding general healthcare measures than covid-19 safety measures. when examining the attitude regarding general healthcare measures, results show that there is a significant difference between the responses registered for the statement comprising the intention and the one describing the corresponding action. the distance between these indicates an intention-action gap regarding general healthcare measures. this effect is present both at the beginning and the ending of the covid-19 lockdown, meaning that the specific event did not have an impact on the intention-action gap regarding general healthcare measures. when considering the safety measures during the covid-19 lockdown, no significant intention-action gap was revealed even if there was a significant increase of all five perceived impediments, namely social pressure, limited time, limited resources, general physical and psychological discomfort. the lockdown underlines strong behavioral engagement with intention. we argue that the social reaction to the virus outbreak meets multiple conditions specific to endorsed strategies to reduce the intention-action gap. as proposed by the second hypothesis, the intention to engage in general healthcare measures decreases as implied impediments increase. similarly, the actual engagement with health beneficial actions decreases as implied impediments increase. however, the decline is more consistent at the beginning than at the end of the covid-19 lockdown. when dividing the increase of impediment into three levels of implied effort, we observe that at the beginning of the lockdown, both intention and actual engagement with general healthcare measures decrease from the first to the second level and from the second to the third level. at the ending 16 of the lockdown, there is no significant decrease between the last two levels of effort. this result can be explained by higher engagement motivated by the generalization of the interest and involvement during the covid-19 virus outbreak. the engagement with healthcare is most suggestively underlined by the confirmation of the third hypothesis. even though the perceived impediments increase between the beginning and the ending of the covid-19 lockdown, this was not followed by a decrease in the commitment to adhere to covid-19 safety measures. further analysis meant to examine the influence of socio-economic factors on the magnitude of the intention-action gap concerning general healthcare measures shows that gender, age, and income have no significant impact. these results are supported both at the beginning and the ending of the covid-19 lockdown. even if education seems to play a marginal role, with a significantly higher difference between intention and action was revealed, at the beginning of the lockdown, for the group that completed higher education compared to the group with secondary education, the difference holds under effect sizes too small to be considered (r < 0.1). moreover, the difference did not hold significance at the end of the lockdown. 6.1 theoretical implications the results provide insights into the intention-action gap effect and the ways to diminish it. it provides a comparative approach between two different health contexts and underlines the differences. besides underlining the gap between intention and action, it discusses the coexistent gap at the intentional and actional level based on increasing impediments or implied effort. this way, in addition to the confirmation of different findings from extant literature in the context of the covid-19 pandemic, it puts in the same pictures multiple results from the diverse literature on the intention-action gap. the investigation of the influence of socio-economic factors on the magnitude of the intention-action gap shades light on contradicting literature. our results show that gender, age, income, and education have no significant impact on the magnitude of the intention-action gap. 6.2 practical implications revealing efficiency in diminishing the intention-action gap concerning healthcare, the covid-19 lockdown proposes some recommendations for strong behavioral engagement with intention. even if the global virus outbreak represents a rare and specific event, we can identify general constituent elements. moreover, the identified conditions to reduce the intention-action gap are specific to strategies endorsed by extant literature, thus making the generalization valid. in other words, the covid-19 lockdown is a rare event but not a phenomenon isolated from existing knowledge about human behavior and society. this period’s efficiency to avert the three types of mental processing barriers that hinder actions to match intentions (temporal barriers, awareness barriers, and information barriers) can be classified into three major elements: clarity, consistency, and authority. clarity was assured both at the intentional and actional level. both the size of the health risk of the virus outbreak and the consequentiality of nonconforming behavior on the common good were conspicuous. adequate risk perception and consequentiality understanding are proven crucial for behavioral engagement with actions that are frequently overlooked (schwarzer & luszczynska, 2008; hidalgo-baz et al., 2017). citizens were regularly informed through all media communication channels about the existing threat to public health and short programs were describing the adequate behavior -wearing masks, using alcoholic disinfectants, frequent hand washing. moreover, the appropriate behavior was described according to the different social contexts -public spaces, public transportation, parks, 17 supermarkets. besides bringing clarity, these communications acted as reminders and intention actualization, also shown effective in reducing the intention-action gap (sawyer et al., 2002; lee et al., 2003, roberts et al., 2007; hand et al., 2019). creating a code of good practice from the beginning of the pandemic reduced the formation of bad habits and ensured time proximity between intention and action (sheeran & webb, 2016), while prompt governmental response combined with transparent and actionable guidelines help implement early means of pandemic control and diminish the possibility of a widespread healthcare crisis (hou et al., 2020) in addition to the consistency between communications, stability was also ensured by invariant beliefs and purposefulness. communities showed solidarization in the face of the threat, a major factor in overcoming impediments (dawson & verweij, 2012; prainsack & buyx, 2012). being realistic about potential barriers is crucial in fulfilling intention (list, 2001; ajzen et al., 2004; kersten et al., 2015; saddawi-konefka et al., 2016). people were informed about potential impediments. the informative programs confronted citizens with specific situations and potential adversities. citizens had the means to understand the barriers, limitations, and ways to overcome them. this approach resembles established methods in addressing awareness, such as the “cheap talk” approach, the “corrective entreaty” method, and the “implementation intentions” strategy. therefore, the accurate understanding of a situation or the realism of the situation -is a fruitful consequence of clarity and consistency. another central element of this period is authority, ensured both as the formal authority and scientific authority. as the covid-19 period of emergency was a state-declared situation, it held the validity of legal importance. on top of that, complex information concerning the pandemic was highly promoted and called upon reliable data and scientific studies. therefore, based on values such as clarity, consistency, and authority, the strategies employed during the covid-19 lockdown successfully mimicked established strategies to reduce the intention-action gap, among which we mention the “cheap talk” approach, the “corrective entreaty” method, the “implementation intentions” strategy, intention actualization through reminders, scientifically reliable communication, ensuring belief invariance and purposefulness. these values can be assimilated as managerial principles and the strategies proposed as recommendations for crisis management and the management of collective behavior. this way, the particular situation of the pandemic crisis can be illustrative for efficient ways to manage challenging situations from the perspective of the intention-action gap. 7. conclusions a rich body of research literature explored the action failure of individuals following their intentions and an even richer philosophical tradition. we often fail to act according to our intentions, be it for economic, environmental, or medical purposes. the current study confirms the existence of an intention-action gap regarding general healthcare measures. it also underlines the mitigating role of implied impediments on the intention and the actual engagement with healthcare measures, given the context of the covid-19 pandemic. the intention to engage in general healthcare measures decreases as implied impediments increase. similarly, the actual engagement with health beneficial actions decreases as implied impediments increase. nevertheless, a consistent decline is observable during the beginning, rather than the end of the covid-19 lockdown. this result can be explained by the generalization of the interest and involvement with healthcare motivated by the covid-19 virus outbreak. indeed, during this period people succeed to act as intended more effectively than they usually do. our results show that the covid-19 virus outbreak motivated more consistency in behaviour with no significant distance between intention and action. 18 we argue that the covid-19 lockdown presents specific features considered effective in diminishing the distance between intention and action. the clarity, consistency, and authority proved during the lockdown public communication resemble established methods to reduce the intention-action gap, such as the “cheap talk” approach, the “corrective entreaty” method, and the “implementation intentions” strategy. on top of that, intention actualization through reminders, scientifically reliable communication, and inspiring purposefulness contributed to strong behavioral engagement. even if the study discusses a rare and specific event, the social reaction to it presents general elements that can be assimilated as recommendations for crisis management and the management of collective behavior. the applicability of these recommendations is justified all the more as gender, age, and income are revealed to have no significant impact on the magnitude of the intention-action gap concerning general healthcare measures. the present findings may contribute to a larger body of research concerning socialpsychological factors which facilitate acting in desirable manners and foster both desirable societal participation and an efficient organizational climate if we extend it to managerial contexts. furthermore, recent research also showed that subjects are more prone to act in positive behaviors like knowledge sharing inside an organization (bock et al., 2005) when the source of the motivation is intrinsic. a cross-cultural research process would also be indicated to better comprehend the various fallacies which inadvertently may arise when individuals have to decide upon preventive measures. 7.1. limitations framing the crisis between its beginning and ending period would have been more conclusive through a comparative perspective with a post-emergency measurement. with all the other conclusions remaining unchanged, a post-emergency measurement would have contributed to the knowledge of the impact of state authority. future studies could focus on this aspect. an objection may be based on the specificity of the event considered that leads to faulty generalization. as argued before, even if a pandemic is a rare and specific type of crisis, social crises share common traits. therefore, specific crisis analysis can be insightful for the management of other crises. some inconsistencies between the results observed for the beginning and the ending of the covid-19 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(1999), relazioni di canale e strategie di acquisto delle imprese commerciali. potere e stabilità nella grande distribuzione britannica, lint, trieste, isbn: 88-8190-071-8. 4.1 procedure and participants 4.2 materials 4.3 method 5. results 6. discussion 6.1 theoretical implications 6.2 practical implications 7. conclusions 7.1. limitations references 79 the “torre del cerrano” marine protected area and the european charter for sustainable tourism in protected areas as an ecotourism management tool guido capanna piscè carlo bo university of urbino, italy received: december 7, 2021 accepted: december 18, 2021 online published: december 20, 2021 abstract the european charter for sustainable tourism (ecst) in protected areas is a voluntary management tool and certification that enables protected areas to develop sustainable tourism for the benefit of the environment, local populations, businesses, and visitors. the europarc federation, of which federparchi has been the italian section since 2008, issues the internationally recognized charter. the entire process is participative and integrated through a strategic approach that includes defining the strategic objectives to be pursued through an action plan, allocating the necessary resources, and monitoring the results achieved. this contribution aims to propose a critical analysis of the documentation produced by the managers of the torre del cerrano marine protected areas (in italy) following the process implemented during the months when the charter was renewed (between autumn 2018 and spring 2019) and contained in the strategy and action plan document. the author conducted a critical analysis to define the factors characterizing a protected area as the result of the participatory process. keywords: sustainable tourism; sustainable development; ecotourism management, certification, marine protected area, swot analysis. 1. introduction sustainable tourism is defined by the united nations world tourism organization (unwto) as “tourism that takes full account of its current and future economic, social, and environmental impacts, addressing the needs of visitors, the industry, the environment, and host communities” (unwto and unep, 2005, p. 12). within this broad concept, ecotourism is defined as a type of sustainable tourism aimed at improving natural resource conservation and increasing environmental education. international journal of economic behavior, vol. 11 n. 1, 2021, 79-97. https://doi.org/10.14276/2285-0430.3091 80 according to several influential organizations, ecotourism can also provide socioeconomic benefits. according to the united nations (2012), ecotourism has the potential to increase income and job creation while “encouraging local and indigenous communities in host countries and tourists alike to preserve and respect the natural and cultural heritage” (das and chatterjee, 2015. p. 2). to that end, an effective ecotourism strategy necessitates the participation of numerous stakeholders, including resource managers, policymakers, communities, and tourists themselves. protected areas (pas) are recognised as the world's most effective mechanism for nature conservation and represent a key market for nature-seeking tourists (surendran and sekhar. 2011); for these reasons, they provide a suitable context for the development of ecotourism. pas have become the central actors in different contexts within the ecotourism phenomenon and, at the same time, the role of pas can be further strengthened when considering the socioeconomic and welfare effects they can exert on local territories and the communities around them. the stimulus provided by agenda 21 of 1992 (un, 1992) also encouraged some actors to strengthen their commitment to promoting the philosophy and practices of ecotourism. in particular, in 1995, the europarc federation an association that supports the management of european pas established the european charter for sustainable tourism in protected areas1 (hereinafter referred to as ecst or the charter). this initiative would appear to offer an effective management tool to combine competitiveness, well-being, and sustainability through a set of general principles and actions, using a triple bottom line approach (i.e. economic, social, and environmental) (elkington, 1997). to achieve such an ambition, the charter necessitates a strategic as well as a participatory approach within it. the charter plays an important role in the hoped-for development of tourism in the area, which is seen as a type of local economic development that is easier to achieve. nevertheless over time and to an increasing extent, it has highlighted certain limits linked to its negative repercussions on the balance of natural ecosystems, to the extent that a problematic relationship between tourism and the environment must be anticipated. however, in some cases, such as the establishment of protected nature areas, which were established to pursue the objectives of protecting and preserving resources in geographical areas with high naturalistic value and tourist potential, this problem appears to be lacking or at least attenuated, owing to their ability to respond to the need to promote tourist activities in a sustainable manner. the history of protected areas shows how they have been the source of complex choices, arising from the contradictory tensions between the needs of the natural world and those of the human sphere. the fundamental cultural shift to respond to these tensions occurred when parks were conceived as laboratories for a non-homologising economy that was attentive to local peculiarities, instruments for managing the territory, important and indispensable assets, suitable not only for meeting conservation objectives (which remains the main reason for their establishment), but also for experimenting with different development opportunities. the adoption of the european charter for sustainable tourism (ecst) is a significant step in this direction, as it is a methodological and certification tool (bravi, santos, pagano and murmura 2020) (murmura and bravi 2020). for better management of protected areas, ensuring 1 it is a voluntary agreement aimed at recognizing protected areas that positively meet the requirements for membership in the ecst, with the goal of promoting sustainable development and tourism management through the implementation of best practices. the development of the charter's contents and methodology is the result of a collaboration between representatives of protected areas, the tourism industry, and their partners, led by the federation of regional natural parks of france under the aegis of the europarc federation, the pan-european non-governmental organization for the protection of europe's protected areas, which manages the charter with the support of the federation's national sections. 81 that tourism contributes to the balanced economic, social, and environmental development of europe’s protected areas. in fact, the collaboration of all interested parties to develop a common strategy and action plan for tourism development, based on an in-depth analysis of the local territorial situation, is a key component of the charter. the goal is to protect the natural and cultural heritage of the protected area, as well as to continuously improve tourism management in the protected area for the benefit of the environment, the local population, businesses, and visitors. since its inception in 1995, the ecst has been involved in the development of more than 100 ecotourism areas throughout europe. the study sought to answer two key questions within this research framework: 1. are strategic and participatory approaches truly critical to the effectiveness of ecotourism development? 2. how can strategic and participatory approaches to ecotourism development be effective? the paper begins with a discussion of the study’s theoretical foundation. the used methodology is then presented, and the research findings were also illustrated. finally, conclusions, limitations, and future directions are presented. 2. ecotourism definition and dimensions the term “ecotourism” was coined nearly four decades ago, and it has been constantly modified and updated to the present day (wood, 2002; stronza. 2007). today, ecotourism is defined as “environmentally responsible travel and visitation to relatively undisturbed natural areas in order to enjoy and appreciate nature (and any accompanying cultural features both past and present) that promote conservation, has low visitor impact, and provides for beneficially active socioeconomic participation of local populations” (ceballos-lascurain. 1996). it is worth noting how this definition emphasizes the importance of community involvement. the unwto defined ecotourism using the following criteria (unwto, 2002, pp. 4-5): 1. it includes “all nature-based forms of tourism in which the main motivation of the tourist is the observation and appreciation of nature as well as the traditional cultures that prevail in natural areas”; 2. it “includes educational and interpretation features”; 3. it is generally, but not always, organized for small groups by specialized tour operators (pencarelli and dini, 2016), with service provider partners at the destinations being small, locally owned businesses; 4. ecotourism “reduces negative impacts on the natural and socioeconomic environment”; 5. ecotourism “helps to maintain natural areas that are used as ecotourism attractions by: ○ generating economic benefits and wellbeing for host communities, organizations and authorities managing natural areas for conservation purposes; ○ providing alternative employment and income opportunities for local communities; ○ and increasing awareness of the conservation of natural and cultural assets among both locals and tourists.” most of the features already described in ceballos-lascurain's (1996) definition are clearly included in the unwto description of ecotourism's characteristics. it focuses on natural resources and the surrounding environment, emphasizing their role as ecotourism attractions and the importance of their conservation. local communities are fully included in the unwto ecotourism perspective, as they are expected to benefit from the responsible management of the environment around them. the emphasis on educational features distinguishes this definition from previous definitions. according to the unwto definition, ecotourism must foster 82 environmental awareness, consciousness, and culture in local communities and “ecotourists2 to fully promote environmental and socioeconomic benefits. more recently, the international ecotourism society defined ecotourism as “responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education.” education is intended to include both staff and guests (ties, 2015). it could be argued that natural resource conservation has remained at the heart of the definition, but other features have been condensed into a few key words. firstly responsibility and awareness: tourists should travel responsibly to minimize their social, economic, and environmental impact; in other words, they should be aware of and respect the unique characteristics of the territory they are visiting. secondly local people’s well-being: ecotourism must provide objective benefits to local communities in and around natural areas (kouhihabibi, 2021). wellbeing encompasses a broader perspective in which local community development includes socioeconomic, environmental, political, and psychological aspects (das and chatterjee, 2015). third, culture: ecotourism must include interpretation and education to increase visitors and hosts knowledge, awareness, and environmental consciousness. according to this viewpoint, education is meant to be inclusive, underpinning the concept of a necessary overarching process of stakeholder involvement (ceballos-lascurain, 1996). 2.1 cultural and socio-economic dimensions by providing more opportunities for earning a living through ecotourism-related employment, the development of ecotourism can improve both the standard of living and local business development within local communities (ashley, 2002; goodwin, 2002). tourism-related job opportunities can range from tourism services to production systems. the growth of ecotourism has the potential to increase social empowerment. scheyvens (2000, p. 241) defines this as “...a situation in which a community's sense of cohesion and integrity has been confirmed or strengthened by an activity such as ecotourism.” from an individual standpoint, ecotourism provides direct benefits. when such benefits are shared among members of a community, its sense of cohesion and integration can be strengthened. in this view, education, and awareness, both for hosts and tourists, are essential for preserving and respecting the community’s traditions and cultural heritage (unwto, 2013). this process leads individuals and the community to gain a higher esteem and greater respect for their own culture, which in turn makes them more active and capable of becoming part of the decisionmaking process regarding ecotourism sites. 2.2 environmental dimension individuals can be incentivized to protect natural resources as the direct economic benefits spread throughout the local community (stronza, 2007; surendran and sekhar. 2011). ecotourism can 'promote biodiversity conservation by providing economic benefits to communities' in this process (das and chatterjee, 2015, p. 5). the development of ecotourism is based on “applying a green growth strategy in the context of tourism with the goal of sustainable use of finite natural resources” (das and chatterjee, 2015, p. 8). as a result, ecotourism is a viable alternative to the exploitative use of natural resources (wood, 2002; li, 2004: nyuapane and poudel, 2011). in this sense, libosada (2009) describes ecotourism as the tangible aspect of conserva-tion, while holden (2003) underlines its ethical dimension. he claims that ecotourism emphasizes the importance of resource conservation while adopting a conservation-based ethic and considering the economic interests of all stakeholders (holden, 2003). 83 the framework for analysing ecotourism emphasizes “a mutual interdependence between the economic and socio-cultural aspects of ecotourism and natural resource conservation” (das and chatterjee, 2015, p. 14). however, there are examples of ecotourism sites that have failed to meet the goals of economic and social empowerment and environmental conservation due to a lack of proper site management and a lack of environmental consciousness among tourists. in fact, “proper” management of eco-tourism sites is one of the most important factors in their success. the dynamics of the three major stakeholders: resource manager (i); (ii) community; and (iii) tourists are especially important for the success of an ecotourism site; thus, they must be properly managed (das and chatterjee, 2015). policies, management tools, and a strategic approach are required to avoid or manage stakeholder conflicts and to ensure that all stakeholders participate in the development of ecotourism. it could be argued that ecotourism should be founded on a solid strategic approach to consider all of the triple bottom line dimensions systemically and holistically and to harmoniously manage the stakeholders’ diverse needs (musso, 2019). 2.3 ecotourism, protected areas and participation among the factors driving the growth of the ecotourism market is the fact that tourists have become “greener” and demand “environmentally appropriate tourism experiences” (sharpley, 2006, p. 8). obviously, tourists only represent the demand side of the ecotourism market. on the supply side, pas can be regarded as suitable (and in some cases, excellent) locations owing to their institutional mission. indeed, pas are defined globally as “clearly defined geographical spaces recognized, dedicated, and managed, through legal or other effective means, to achieve long-term conservation of nature with associated ecosystem services and cultural values” (day et al., 2012, p. 9). the deep and strong conceptual connection between ecotourism and protected areas is clear from this pa definition. in fact, pas include several of the fundamental characteristics of ecotourism in their mission and function, such as: 1. they must be formally recognized by law and dedicated to specific conservation purposes. 2. to achieve their conservation goals, pas must be properly managed, which means that all activities must aim to influence natural systems and human activities, ranging from careful environmental protection to resource sustainability (dudley and stolton, 2008). pas, like ecotourism sites, are expected to provide multifaceted benefits (morandi et al., 2013; kati et al., 2014; scolozzi et al., 2014). in terms of preserving local biodiversity, preserving cultural and usual traditions, contributing to human well-being and wealth, and improving education, scientific research, recreational, and socioeconomic development activities despite these advantages, “the designation and management of pas is not always without conflict.” the approval and participation of local stakeholders has been identified as critical for the long-term success of protected area management (kati et al., 2014, p. 2). warner (1997) was the first to recognize the importance of combining institutional and citizen participation in the pursuit of “sustainable orientation.” this collaboration is also required to propose a generalized model of participation based on consensus building, as well as to prevent or resolve conflict between stakeholders who may be impacted by sustainabilityoriented decision making. in this regard, tomićević, et al. (2010, p. 1) emphasized the importance of implementing the participatory approach to promote the sustainable use of natural resources. whereas reed (2008) discovered evidence that stakeholder involvement can “improve the quality of environmental decisions.” 84 participation in the management of pas and ecotourism sites is the subject of several significant european case studies. a discriminant analysis survey of regional parks in the slovenian alps found that the more importance given to the factors that influence local populations’ perceptions, the more significant their involvement in the process of creating, planning, and managing the protected area will be (nastran and istenic, 2015). bouamrane et al. (2016) highlighted some cases in france and africa involving biosphere reserves that allow for continuous interaction between society and the environment and necessitate a process of active participation of various stakeholders who interact together to develop a unified proposal or a common purpose (in terms of vision, goals and actions). 3. the european charter for sustainable tourism in protected areas the definition of the ecst certification procedures is mainly based on the recommendations of the study “loving them to death? sustainable tourism in europe's nature and national parks” (europarc, 1993) and the priorities contained in the recommendations of agenda 21 and the sixth community environment action programme entitled environment 2010: our future, our choice. in addition, the iucn parks for life action programme (1994) identifies ecst itself as one of the priorities for european parks. ecst has taken on board the principles of the convention on biological diversity's international sustainable tourism guidelines, providing a practical tool for their implementation in protected areas at a local level (federparchi, 2021).2 the central element of the charter is the collaboration with all stakeholders to develop a common sustainable tourism strategy and an action plan based on a thorough analysis of the local situation. the charter promotes five principles, which define and recognise good practice in the development and management of sustainable tourism in europe’s most precious landscapes. the principles should inspire the promotion and the management of sustainable tourism in protected areas: 1. giving priority to protection. a fundamental priority for the development and the management of sustainable tourism should be to protect the area’s natural and cultural heritage and to enhance awareness, understanding and appreciation of it. 3. contributing to sustainable development. sustainable tourism should follow the principles of sustainable development which means addressing all aspects of its environmental, social, and economic impact in the short and long term. 4. engaging all stakeholders. all those affected by sustainable tourism should be able to participate in decisions about its development and management, and partnership working should be encouraged. 5. planning sustainable tourism effectively. sustainable tourism development and management should be guided by a well-researched plan that sets out agreed objectives and actions. 6. pursing continuous improvement. tourism development and management should deliver ongoing improvement in sustainable environmental impacts, visitor satisfaction, economic performance, local prosperity and quality of life, requiring regular monitoring and reporting of progress and results. 2 protected areas that have received the charter may then choose to implement steps ii and iii (agreements and specific action plans with individual enterprises and tour operators that have actively participated in step i). 85 it seems clear that the choice of these principles was induced by the desire to lead the actors of the protected areas to a correct management of those areas, with the intention of combining the natural values to be preserved and the anthropic actions with those of sustainability, avoiding the so-called and undesirable “museification” of the area subject to environmental protection through the joint and coordinated action of the various actors involved.3 therefore, a collaborative program between ecst, as a mutual commitment between protected area managers and each enterprise, will result in many mutual benefits. in fact, ecst aims at cooperation between all stakeholders involved in the development and management of tourism activities and at avoiding that protected area managers act in isolation. therefore, ecst stakeholders choose to adopt working methods based on collaboration, which will be substantiated at each stage of implementation, encouraging the sharing of responsibilities, and emphasizing the individual and joint commitments of protected area managers and other stakeholders. consequently, a cyclical monitoring of the management results obtained in the area appears necessary to evaluate the contribution of changes to the planned processes that may be necessary to achieve the predefined objectives. the european charter for sustainable tourism in protected areas is a practical management tool (europarc, 2021) that enables protected areas, their communities, and businesses to work together for sustainable tourism development. in this way, sustainability underpins the tourism sector in the area. therefore, the process outlined in the charter has 3 elements to enable companies, local businesses, and tour operators to share a common vision and objectives for the protected area they cover: • part i: sustainable destinations o the first part, the main one, addresses sustainable destinations, with reference to the geographical contexts in which a protected area falls. the charter is assigned to the managing body of the protected area and covers a precise area of application of the charter, which can be wider than the legally defined protected area. • part ii: sustainable partners o the second part is addressed to local companies operating in sustainable tourism activities within the charter area. • part iii: sustainable tour operators o part iii is specific to tour operators and travel agencies that bring visitors to protected areas and wish to contribute to the sustainable development of the charter area. 3.1 ecst in italy in just a few years, ecst has become very important in italy and it is now considered as a very useful tool for the governance of protected areas by parks, regions, and the ministry of the environment. many factors have made this success possible. at the same time, there are some critical elements that will be important to consider for the future. 3 the actors are interested in the effects of proper management, which can have a positive induced effect on the areas in which they operate. “have multiple entities the resident population that, through the creation of a microentrepreneurship in tune with sustainable development policies, can enhance the territorial richness such as crops and typical products; public bodies such as the park authority that, through the park plan, manages the protected area in terms of fishing, hunting, tourism; administrations such as town or city councils that deal with natural resources within their mandate; industries such as tourism operators and water users; non-governmental organizations, research institutes and universities for whom the protected area is at the centre of their professional interests” (quattrone, 2003, p. 95). 86 at the end of the 1990s, the parco regionale delle alpi marittime chose to be one of the seven pilot areas to test the european charter for sustainable tourism promoted by the europarc federation. thus, in 2001 it became the first ecst park in italy and one of the first four in europe. the sibillini national park and the adamello brenta nature park followed shortly afterwards. a few years later, lombardy was the first region to decide to support and finance the candidature of four protected areas in its territory. an important change took place in 2008: federparchi and europarc italia, until then two separate bodies, merged to create a single association, which chose ecst as one of its priorities. thus, thanks to federparchi-europarc italia's relentless promotional and technical support work, a great interest in the tool developed among parks, regions, and the ministry of the environment. since then, the number of parks deciding to apply the charter has been steadily increasing. within a few years, the apulia region and the marche region decided to follow the example of lombardy by promoting ecst among their regional parks. in 2011, the italian ministry of the environment signed the first of a series of agreements with federparchi-europarc italia, including support for the certification of some national parks and seminars and studies on ecst. in 2012, the monte rufeno regional reserve is european ecst area no.100. in 2013, federparchi-europarc italy receives the “special tourism award” from the europarc federation for its “proactive commitment to support italian protected areas in the implementation of ecst”. in 2014, the torre del cerrano marine protected area is the first marine area in europe to receive the charter. in 2015, two parks (the parco naturale adamello brenta and the parco regionale dune costiere) become the first ecst phase ii partners. today the italian network has 36 certified areas and many more are candidates. italian protected areas like the charter because it should be remembered that almost all italian parks are inhabited territories. dialogue, collaboration and the consent of the local communities that live and work in the area is therefore essential. ecst, with its voluntary nature, its defined scope, and its clear objectives, is a very effective support to the instruments of public participation that italian law already provides for. the charter therefore responds to a real need felt by park management bodies. another general aspect: italy is a tourist destination of excellence. the tourism market is very important for the country, but the institutional players involved in the sector are many and often disconnected. for this very reason, it is essential to develop coordination between the policies on the ground, which can foster development without jeopardising “capital” (the cultural and natural heritage). the methodology proposed by ecst may also be an excellent response to this need. the international side of the charter is also a very attractive element for parks, which perceive the appeal and potential of receiving recognition at a european level with ecst. without any doubt, the role played by federparchi-europarc italia in recent years has been decisive for the success of ecst in italy. the federation coordinates and animates the italian network and spreads awareness of ecst, including through political lobbying towards institutions. above all, it offers technical assistance to the protected areas that request it: first of all this technical support takes the form of continuous and high-quality accompaniment of the park up to its candidacy. then, after accreditation, the park receives support for monitoring and continues to benefit from training and refresher courses through technical seminars and exchanges. the commitment of the ministry for the environment and some regions, which have also made financial resources available, has also been decisive in increasing the number of certified parks. as these above mentioned elements show, ecst has been promoted, managed, and perceived as a national network programme, and not just as many individual park routes. 87 another distinguishing point for the italian experience is the dialogue with the private sector, which has been actively involved from the outset, already in ecst phase i. in fact, private operators, in fact, are also invited to start the charter process together with the park and the public authorities, while obviously maintaining different roles and responsibilities. in many cases, they have proved to be a great strength of the italian ecst pathways. 4. the “torre del cerrano” marine protected area the marine protected area “torre del cerrano” was established by ministerial decree on october 21 2009 (euap code 1226, extension: 3,430 hectares, coastline involved: 7,103 metres) and comprises a territory that stretches on the coast of teramo between the two municipalities of pineto and silvi. this area is subdivided into zones subject to different protection regimes, taking into account the environmental characteristics and the socioeconomic situation there. it provides for a restricted zone b (general reserve), a square area of about one km on each side facing torre del cerrano, a zone c (partial reserve) of 14 square km, which covers the entire extension of the sea front up to about 2 km from the coast, and a large trapezoidal zone d (protection) of about 22 square km up to the three-mile limit (fig. 1). figure 1 – “torre del cerrano” pma zones (reference i.i.m. nautical chart no. 43 scale 1:100,000) there are several reasons that led the establishment of this marine protected area. first of all, the coexistence of different habitats in the waters of the “torre del cerrano” marine protected area, which “presents two distinct environmental typologies in close relation to each other: the typical adriatic sandy seabed, which characterizes the largest portion of the area, and 88 some parts of the bottom reefs, both by the semi-submerged rocks of the ancient port of atri and the submerged structures of the provincial marine protection oasis, as well as some outcrops of conglomeratic geological formations.” (ministerial decree of 21 october 2009) the area is home to a good number of marine animal species, both pelagic and benthic, and a small but important contingent of plant species. the “torre del cerrano” mpa was the first marine protected area in europe to obtain, in 2014, the european charter of sustainable tourism. that has allowed it to represent at european level a model of “sustainable” and efficient park that pursues the protection, promotion and enhancement of the territory, through the involvement of all the actors. in 2018 “torre del cerrano” mpa, started the process of renewing the charter. the following information and considerations relate to the data used to reapply for renewal of the charter phase 1. 4.1 the tourism context among the direct anthropogenic impacts, those related to tourism activities are certainly a determining factor in areas, such as that of the mpa “torre del cerrano”, affected by significant summer tourist flows. the coastal strip is an important transition between ecosystems, where we find habitats hosting highly specialised plant and animal species, but also the main tourist attraction of the area. tourism activities attracts thousands of tourists and visitors every year and, if managed in a “sustainable” way, can rapresent a strategic economic sector for the territory. the quality of tourism offer, and the composition of the demand are a direct consequence of all the businesses that directly and indirectly, can offer tourism services, to coordinate and network to their needs and expanding, over time, the users catchment area. the data reported here represent an overview of the tourism sector in the ecst area. the “torre del cerrano” marine protected area lies between the municipalities of silvi and pineto, towns on the adriatic coast whose seaside development originated in the period between the two world wars. the development of “second home” phenomenon has produced, subsequently, different effects and consequences on the socio-economic context of the abruzzo region. the coastal municipalities have benefited to a certain extent, from the expansion of holiday homes by developing the connections and services present on their territory. this led to the creation of collateral economic activities that contributed to the settlement of the population in the coastal towns of teramo province, also leading to a redistribution of the regional population along the coastal areas. in the years that followed, pineto and silvi became the destination for tourists, both italian and foreign, who chose these beaches to spend their holidays for their tranquillity, clean sea and the beautiful pine forest behind the beach, an example of an ideal family holiday. in 2017 (istat data refers to the period in which the charter renewal dossier was presented), with 104.000 arrivals, pineto and silvi attracted around 19% of the tourism of the entire teramo province and have grown by over 27% in the previous fifteen years, although the number of overnight stays has remained constant. pineto recorded 398,000 overnight stays, compared with 270,000 in silvi, and a similar number of arrivals (50,000 in pineto and 54,000 in silvi). foreigners account for 23% of total overnight stays in pineto and 15% in silvi (in the province of teramo they account for 15% of overnight stays in the area). as far as accommodation facilities are concerned, the tourist offer is equal to 9,100 beds, equally distributed between the two municipalities, representing 18% of the accommodation capacity in the province of teramo. the type of accommodation is very different in the two municipalities: in silvi 60% of the beds are in hotels, and only 38% in pineto. 89 the analysis on years 2012-2017, shows how the recovery (after 2009, the year of the l'aquila earthquake) in terms of tourist arrivals derives from a greater attractiveness for national visitors, with the share of italian tourists increasing by about 20% in recent years, while the foreign component remains stable. on the other hand, overnight stays appear to be slightly down, mainly due to the decrease in the number of nights spent in the area by foreign visitors (-10% in the years considered). 4.2 stakeholder the european charter for sustainable tourism involves everyone and it is open to anyone who wants to cooperate constructively with the protected areas institutions and network with other operators. to this end, the stakeholders have been promptly informed of the mpa's decision to renew its membership of ecst, and the schedule of meetings has been communicated well in advance. the stakeholders involved are: local authorities, farmers, restaurateurs, managers/owners of accommodation facilities, local guides, cultural and environmental protection associations, land professionals and local development agencies. the involvement of these actors has been continuous and, direct throughout the process by, sharing the materials of the meetings, collecting their contribution also outside the scheduled times and trying to attract the interest in participation also from subjects who had not joined the initiative during the initial phase. the local stakeholders that took part in the process of renewing the ecst candidacy of the “torre del cerrano” marine protected area are the following: ● 2 protected areas: amp “torre del cerrano”, ris. nat. reg. wwf oasis “calanchi di atri”; ● 3 local public authorities: municipality of pineto, municipality of silvi, province of teramo; ● 4 universities and 1 school institute; ● 26 private tour operators; ● 13 associations. 4.3 the shared strategy for sustainable tourism the methodology for constructing the new ecst strategy for the “torre del cerrano” marine protected area was characterised by an inductive approach. two cycles of meetings on the territory were constructed with the aim of redefining a common strategy for developing more sustainable tourism within the ecst area. therefore, from the initial meetings of the participatory process the four strategic axes (fig.2) emerged through a critical and shared rereading of the 2014-2018 plan of actions and a joint proposal and represent the result of the eight strategic priorities of the authority and the five that emerged from the operators in the area and the representatives of the municipal administrations. each strategic axis is linked to an operational objective that has served to guide and stimulate the development of concrete actions more effectively. 90 figure 2 − the sustainable tourism development strategy 2019-2023 these strategic axes are intended to provide coherence to the actions proposed by the stakeholders involved and to indicate the general priorities of the plan itself. the efforts of each of the “stakeholders” have focused on the put into practice of these axes, through alliances built within the charter forum. crossing the four identified strategic axes with the ecst key issues for sustainable tourism resulted in the strategic matrix of the plan. 4.3 analysis of strengths and weaknesses among the various activities carried out by the thematic tables coordinated by the managing body, the activity that deserves special mention is the one carried out for the definition of a first common vision on the territory’s strengths and weaknesses, opportunities, and threats for the development of sustainable tourism in the marine protected area deserves a special mention. the results of this vision were used to carry out a swot4 analysis, which, as is known, “is one of the most widespread methodologies currently used to analyse complex economic-territorial contexts, since it is a tool that guides the critical analysis of different and complementary information related to a given reference context which allows drawing from such information valuable indications for the definition of appropriate development strategies and/or intervention policies” (scipioni and mazzi, 2011, p. 75). characterizing factors (strengths, weaknesses, opportunities, and threats) are primarily determined in two ways: at the “desk” and through work group (participatory). in the former, it is the researcher who formulates the forecast based on data collected by “expert knowledge” in a neutral and objective manner. however, participatory techniques are used in the latter to identify shared scenarios through joint analysis between experts and stakeholders. (fera, 2008). 4 the acronym famously refers to the aspects that the swot analysis examines: strengths, weaknesses, opportunities, threats. 91 the second is a critical analysis of the results of the swot survey conducted by “torre del cerrano” mpa managers and included in the strategy and action plan document. the above-mentioned critical analysis was carried out by the author to achieve a positive comparison for the identification of the factors characterizing the protected area. the contents of the first survey, known as the participatory survey, are the result of a territorial analysis of the protected area and have been shared and thoroughly studied with all public and private subjects operating in the area, through collective and individual meetings. the distinguishing factors were identified using a “desk” methodology, which entails the researcher’s observations based on contextual data (the prediction of scenarios is based on neutral and objective “expert knowledge”). the issues highlighted concerns about the geographical location, environmental quality, aspects of hotel and non-hotel accommodation, tourist attraction factors, entrepreneurial presence, and territorial competitiveness levels (palmeira, 2017). firstly, among the "strengths" there are: the marine protected area’s favorable location, good infrastructures (particularly highways and railways), close (proximity) of sites of cultural interest; the wine and food tradition; the well-developed coastal accommodation system, centred on the hotel sector, of medium quality and with a good quality/price ratio; and, also a significant emphasis on sustainability. below there are details of the results of the analysis: ● localisation ○ central geographical location; ○ good connections to pescara and ancona airports; ○ proximity to the ports of giulianova, roseto degli abruzzi and pescara ○ good motorway connections (a14, a25); ○ proximity to sites of historical, cultural, traditional, enogastronomic; ○ beautiful landscape in a sustainable and relaxing tourist environment; ○ sense of security, absence of petty crime. ● hospitality ○ well-developed coastal accommodation system of average quality; ○ good diversification of the accommodation offer, particularly for families; ○ sense of hospitality neither mediated nor artificial; ○ good quality/price ratio and prices fairly in line with the average; ○ medium-level event calendar, with some “must-see” events. ● sustainability ○ cycle path: “adriatic green corridor” ○ presence of projects linked to the promotion of sustainability of accommodation structures and tourist services (“friend of the park”); ○ birth of projects linked to electric and sustainable mobility in the territory. among the “weaknesses” there are elements that we could define as “recurring”, i.e. elements that had already emerged from the analysis carried out in the first five years of the charter, such as the low popularity of local attractive factors, the low attitude of operators to mutual collaboration and the issue of seasonality. in the participatory activities and in the analysis “at the desk”, new elements and new needs emerged on the part of the operators involved in the forum, also thanks to the numerous training activities that the mpa implemented, such as, for example, the need for a true integration between “nature and culture” and for a stronger interconnection with atri and with the other nearby protected areas: 92 ● attractive factors ○ some attractions (cultural, religious, food and wine) are only known in within specific niches; ○ lack of integration between natural and cultural attractions for mutual promotion. ● interconnection ○ poor connection between the seaside area and the immediate hinterland and with the other abruzzo protected areas; ○ weak railway accessibility, especially to rome. ● business dynamism ○ still weak associative process among the operators and little attitude to produce “value chains”; ○ high average age of the operators and low generational turnover; ○ guest information system to be improved, developed and coordinated. ● seasonality and competitiveness ○ operations concentrated in the summer period with no extension of the season; ○ low visibility of the territory in terms of promotion and marketing, especially for foreign markets. with reference to the opportunities the evidence mainly concerned those that may arise from the new opportunities to de-seasonalise the tourist offer beyond the summer period deriving in particular from the participation of the mpa in the interreg med destimed project, taking advantage of the possibility to explore the seaside coast, the pine forest, but also the countryside and hill areas by visiting villages, oil mills, places of art: ● innovation in mobility services in the area, with attention also for the disabled, and connections with the hinterland; ● seasonal adjustment of the tourist offer beyond the summer period, taking advantage of the possibility of practising sport and exploring the seaside riviera, the pinewoods, but also the countryside and hillside areas, visiting villages, oil mills, places of art, etc. ● high environmental quality of the accommodation facilities combined with authenticity of the welcome, staff training and well-being in the area; ● innovative and diversified promotion and marketing of the area. referring to and threats the evidence mainly concerned those linked to the cut in funding for tourism, as well as a chronic lack of a real tourism development strategy by the region abruzzo and poor management of tourist services and urban decorum: ● deterioration of the state of the water and increased pollution of the coast and the territory; ● low interest of inhabitants and tour operators in their land in terms of environmental awareness; ● non-competitive individualism of structures; ● loss of traditions and territorial identity; ● cutting of funds for tourism by local politicians and poor management of tourist services and urban decorum. ● erosion phenomena ● overtourism 93 in conclusion, the “desk” analysis confirmed the issues related to the characterizing factors highlighted in the “participatory” analysis, but, with reference to the “strong points”, it further highlighted some others such as the proximity of the port facilities of giulianova and roseto degli abruzzi and ancona airport, in addition to that of pescara; but, above all, it draws attention to the importance of the adriatic cycle route, also known as the 'green adriatic corridor', the track that runs along the adriatic coast. in fact, the abruzzo region has financed the completion of the entire 132 km section of the regional network, valuing the important potential of cycle tourism. it also takes into account other threats such as those that may derive from erosion phenomena (both of the beaches and of the hills behind the coastal stretch), from the pollution levels of the adriatic sea water and from the risks related to the exceeding of the tourist load capacity. 5 concluding discussions and implications the analysis of the work carried out in the “torre del cerrano” mpa produced results on: ● the role of the strategic and participatory approaches for the effectiveness of ecotourism development; ● how these approaches can be effective. the analysis theoretically confirmed (yin, 2013) the central role played by strategic and participatory approaches in enhancing the effectiveness of the ecotourism development process within pas. such approaches are not only important, but pivotal to the effectiveness of the ecotourism development process within pas. the analysis also highlighted those factors that are affected by these approaches (musso, 2019). aside from the economic and social factors, another important factor emerged: the cultural factor. this lends support to the literature’s thesis that ecotourism is characterized by a mutual interdependence among economic and socio-cultural aspects related to natural resource conservation (ceballos-lascurain, 1996; das and chatterjee, 2015). the analysis also identified appropriate good practices that should be implemented for these approaches to be effective in the ecotourism development process, while simultaneously improving the three pillars of sustainable development (ecological, economic, and social). ecotourism can be effective when it is: ● driven by a conservation-oriented authority such as a pa; and ● guided by a participatory strategy such as the one promoted by the ecst. the analysis confirms that ecotourism development can be improved, primarily by adopting a holistic approach (musso, 2019), and provides additional credit to previous streams of literature. this viewpoint is intended to include not only the site-specific social, economic, and environmental dimensions of ecotourism, but also the cultural dimension. considering the latter, the analysis demonstrates the importance of pas in the development of ecotourism. when guided by a collaborative and strategic approach, such as the one required by the ects, a pa can function as a visionary catalyst. through a process of stakeholders’ engagement, such catalytic action can activate a positive and reinforcing loop that can improve local socioeconomic and ecological wellbeing. 5.1 critical issues while there are many positive aspects, there are also some critical points and weaknesses. 94 the first critical aspect is coordination, planning, and the actual possibility of completing the charter’s strategy and action plan in five years. the constant political and strategic changes that characterize the italian situation at the national, regional, and local levels will inevitably have serious consequences for protected areas. it is also frequently difficult to involve public authorities actively and continuously in the forum, despite the fact that they are critical for coordinating policies in the area. the protected areas’ perpetual uncertainty about the public funds avaible to implement what has been planned is also a serious issue. another source of weakness sometimes the very reasons why parks begin the ecst process, pressure coming from the top (ministry or region) or interest in gaining european recognition without fully adhering to the concept and method. similarly, the change of presidents and directors of certified parks is a delicate matter: sometimes, the new management of the protected area does not fully understand or underestimates the importance of the ecst route, which they have not “seen come into being.” in these cases, ecst becomes just one of many projects entrusted to a single responsible official, rather than the park authority's overall working method. when this occurs, ecst may lose its value, and the work done with the territory through the forum may become ineffective. 5.2 looking ahead looking ahead, it appears critical to strengthen and support the tremendous commitment of the many chairmen, directors, and officers who, despite the challenges, are enthusiastically implementing the charter in their respective territories with excellent results. dialogue between the park authority and the private sector will become increasingly important in the future, particularly as phase ii of the ecst is developed. to be successful, however, phase i must be solid, and the park authority as a whole, as well as the public authorities, must always prioritize the charter. only by doing a clear and stable long-term political and strategic framework can be established that private parties can decide to engage. the strength of the italian system is also the national network, powered by federparchieuroparc italia, should be maintained, also through the development of joint projects. at the same time, it is critical to emphasize and improve the european aspect of ecst. this is also the path outlined in the europarc federation 2020 strategy. the federation has already done and can do a lot in terms of european projects, exchanges, technical seminars, events, lobbying european and international institutions, involvement of private ecst partners in the european network, and so on. in this regard, it will be necessary in the future for italian protected areas to strengthen their commitment to the european network in terms of presence, participation, information exchange, and involvement. ecst in italy is an extremely interesting experience that should be preserved, enhanced, and valued at the local, national, and european levels. references 1. ashley, c., & roe, d. 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(2000), economie distrettuali e canali di distribuzione all’estero. varietà di percorsi delle imprese pesaresi del mobile, ins-edit, genova. 98 64. 3. the european charter for sustainable tourism in protected areas 4. the “torre del cerrano” marine protected area 4.1 the tourism context 4.2 stakeholder 4.3 the shared strategy for sustainable tourism 4.3 analysis of strengths and weaknesses 5 concluding discussions and implications 5.1 critical issues 5.2 looking ahead references microsoft word 6 (18-17) gabbianelli conti 81 content marketing tools and metrics in consulting firms: preliminary results linda gabbianelli carlo bo university of urbino, italy emanuela conti carlo bo university of urbino, italy received: july 29, 2018 accepted: november 30, 2018 online published: december 5, 2018 abstract the aim of this work is to identify the goals, tools, strategies, and metrics of content marketing (cm) used by european consulting firms to create value for the customer. the study adopts a quantitative methodology, in particular an online survey. a sample of 55 respondents was analyzed using descriptive statistics. cm is an activity used by 71% of the sample and is considered useful by 85% of respondents. the goals pursued with cm are mainly brand awareness and customer acquisition. the main platforms used for cm are linkedin, facebook, and twitter. the tools most often adopted to achieve cm goals are website articles, social media content, and newsletters. the most used metrics are publishing and sharing. the small sample reduces the possibility to generalize the results. the results give some managerial implications such as: invest more in cm; use cm for maintaining contacts and increasing sales and use platforms like instagram and youtube; cm strategy planning. the study suggests a new cm definition which includes specific targets, the growing importance of digital tools and planned and systemic approach. this work is original as it is the first application of cm to consulting firms and contributes to the definition of cm. keywords: content marketing (cm); value creation; cm instruments; performance measurements; consulting firms. 1. introduction the concept of content marketing (cm) is built around a new approach to marketing communication activities based on the creation of quality content that pursues various goals such as customer engagement and brand awareness. “content” may refer to a wide range of elements such as stories, news, information, product ideas, messages, and videos (handley and chapman, 2010). in recent years, cm has become very popular, especially in the business community, while in the academic sphere it has so far received little attention on the conceptual and empirical level. practitioners’ interest in this concept is evidenced by the international journal of economic behavior, vol. 8, n. 1, 2018, 81-99 82 diffusion within companies of a specialized professional figure (e.g. chief content officer) that deals with the creation and management of business content (text, video, audio, animation) sent via different channels (vollero, palace, 2015). this paper examines the cm concept, seeks to identify goals, tools, and metrics to measure its impact on the performance of consulting firms. in particular, this work provides a twofold contribution: 1) it analyzes the literature on the concept of cm and the main metrics used to measure it; 2) it examines the degree to which cm strategies and metrics are used by consulting firms. the study is structured as follows: the first section presents a literature review of the main contributions to cm and the main metrics used for its measurement; section 2 illustrates the methodology adopted for the empirical survey; section 3 illustrates the preliminary results of the study on the use of cm and on the measurement, metrics used by european consulting firms. section 4 discusses the results of the research. the last section contains the main results, the theoretical and managerial implications, the limitations of the research, and suggestions for future studies. 2. theoretical background the fact that there is a scarcity of literature on "content marketing" is due to the fact that "content" has rarely been the first object of marketing studies, especially in digital contexts (koiso-kanttila, 2004, chen and xie, 2008 rowley, 2008). in general, the concept of cm overlaps with concepts such as social media marketing, brand journalism, custom publishing, storytelling, and online content business models (feng, ots, 2015). in addition, content marketing is a mix of communication, marketing, journalism, and consumer behavior; therefore, it is a multidisciplinary concept and one that is difficult to integrate in the current academic community. the main cm definitions provided in the literature are reported in table 1. rancati and gordini (2015) highlighted three key elements of cm: content, customer engagement, and goals to achieve. the coexistence of these elements indicates the importance of cm as a source of competitive advantage. in particular, the authors explain that content can be short or long, but it should be interesting, proactive, and should express the company's values; content may be made known online, in print, or by voice. the second element indicates that content must be tailored to the customers to attract and engage them (engagement), as they are the ultimate cocreators of value. the adequacy of communication codes with respect to customers enables them not only to develop new content, but also to diffuse it, and therefore a suitable content is used to transfer power to the customer (empowerment). the third element, the objectives to pursue, suggests that the goal of cm is not only to sell, but to achieve a variety of goals such as growth of contacts (lead generation), loyalty, brand awareness. "content marketing has no immediate selling purposes among its objective: before selling it is important to inform, educate and entertain, without even mentioning the product" (gordini, alberts, 2014, p.21). therefore, cm is a complex tool aimed at creating value through quality content, distinguishing itself from social media. the latter is often, in practice, mistakenly considered synonymous, but in reality, it represents more a means of spreading and optimizing content on different web platforms. 83 table 1 – the main definitions of cm (in chronological order) author book/ journal definition chaffey, mayer, johnston, ellis chadwick (2000) internet marketing, pearson education, edinburgh. content is the design, text and graphical information that forms a web page. good content is the key to attracting customers to a web site and retaining their interest or achieving repeat visits. keyes (2006) knowledge management, business intelligence and content management, auerbach publications, broken south parken. cm is usually focused on intranet-based or internet-based corporate content, including data and knowledge bases. pulizzi, barret (2009) get content. get customers, mcgraw hill, new york. cm is a marketing technique of creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience – with the objective of driving profitable customer action. cm is owning, as opposed to renting media. it’s marketing process is to attract and retain customers by consistently creating and curating content in order to change or enhance a consumer behavior. halvorson (2010) content strategy for the web, new riders, berkeley. content strategy is the practice of planning for the creation, delivery, and governance of useful, usable content. handley, chapman (2010) content rules, john wiley & sons, new york. cm is anything an individual or an organization creates and/or shares to tell their story. what it isn’t: a warmed-over press release served as a blog post. it is conversational, human and doesn’t try to constantly sell to you. it also isn’t a tactic that you can just turn on and off and hope that will be successful. it has to be a mindset that is embraced and encouraged. you’ve got to start thinking like a publisher and use that to plan and execute your entire marketing plan which content of any variety should be a part. gunelius (2011) content marketing for dummiers,wiley, new york cm is the process of indirectly and directly promoting a business or brand through value-added text, video, or audio content both online and offline. it can come in long-form (such as blogs, articles, e-books, and so on), short-form (such as twitter updates, facebook updates, images, and so on), or conversational-form (for example, sharing great content via twitter or participating in an active discussion via blog comments or through an online forum). lieb (2011) content marketing: think like a publisher. how to use content to market online and in social media, que publishing, indianapolis cm, in other words, is nothing new. companies having been creating and distributing content for many years, both to attract new business and to retain existing customers. however, here’s the point of differentiation from more traditional forms of marketing and advertising: using content to sell isn’t selling. it isn’t advertising. it isn’t push marketing, in which messages are sprayed out at groups of consumers. rather, it’s a pull strategy—it’s the marketing of attraction. it’s being there when consumers need you and seek you out with relevant, educational, helpful, compelling, engaging, and sometimes entertaining information. nelli (2012) branded content marketing: a new approach to value creation. vita e pensiero. the concept of branded content marketing expresses the operational translation of a new value-creating approach to marketing strategy based on the creation and multichannel distribution of content relevant to specific 'target audience' segments in order to attract attention, stimulate interest, develop long lasting relationships, and stimulate actions consistent with the company's business goals. 84 slater (2014) content marketing: recycling and reuse. how your best online content can engage and attract new customers, i30 media corporation, new york cm is a dynamic way to get customers. it is the process of sharing expertise and knowledge online to attract potential customers and establish a relationship them. content marketers have to be focused on creating, publishing, and sharing suitable content. however, many content marketers often overlook a readily available source of content – articles, case studies, blog posts, videos, images, and other assets that were created years before yet still have the potential to draw new customers. ramos (2014) content marketing: insider’s secret to online sales and lead generation. one night expert publishing, new york cm is a marketing technique that uses high-quality, relevant content to educate, engage, and acquire your target customer. cm is not just creating content for the sake of producing content; your objective is always sales. the true potential of content marketing lies in its ability to provide a conversion path for your leads to follow on their own schedule and at their convenience. holliman, rowley (2014) btob digital content marketing: marketing perception of best practice. journal of research in interactive marketing 8(4). digital cm is the activity associated with creating, communicating, distributing, and exchanging digital content that has value for customers, clients, partners, and the firm and its brands. van lieshout (2014) content marketing for professionals. create space independent publishing platform, london. cm is any marketing that involves the creation and sharing of media and publishing content in order to acquire and retain customers. this information can be presented in a variety of formats including news, video, white-papers, e-books, infographics, case studies, how-to guides, question and answer articles, photos, etc. cm has been defined in multiple ways. the meaning of the term depends a lot on the purpose and context. one of the most used definition states that cm is the technique of creating and distributing relevant and valuable content to attract, acquire and engage a clearly defined target audience in order to drive profitable customer action. cm creates interest in a product through educational, entertaining or informative material. successful cm relies on providing “consistent, high-quality content that solves people’s problems”. vollero, palazzo (2015) conceptualizing content marketing: a delphi approach. mercati e competititivtà, 1. cm is the ability of organization to become “influent”, to develop engagement and trusted relationships with customers and to integrate different efforts in creation and distribution of content in marketing communications in one comprehensive approach. jarvinen, taiminen (2016) harnessing marketing automation for b2b content marketing. industrial marketing management. cm is a new paradigm that leads potential buyer to interact with their company. source: our extrapolation from rancati, gordini, 2015 the last three cm definitions in table 1 clarify other aspects of cm. first, content is addressed to specific "target partners" (nelli, 2012), and content should be designed digitally (holliman, rowley, 2014) so that it can be distributed and used through all of the existing channels and devices to foster a constant flow of conversations between the enterprise and its stakeholders (nelli, 2012). one needs to become "influent" (vollero, palace, 2015) especially on the internet where there is an overabundance of information. developing long lasting relationships with customers is a significant step, as cm communication needs to be permanent, systematic, wellplanned, and should adopt a sort of "editorial line" in the production of content. moreover, as regards the approach to be adopted in cm, vollero and palazzo (2015) believe it is important that all cm actions be part of a “comprehensive approach” that is planned and systematic, and not made up of sporadic actions. with 85 reference to the impact on business performance, it is implicit in the purpose of creating trust, and therefore stable relationships, that one ensures a stable revenue share (vollero and palazzo, 2015). the above-mentioned elements reinforce what has emerged in the literature, that value creation for stakeholders requires effective metrics for measuring it. in summary, the elements that characterize cm are: content, customer engagement, the objectives, the target to which communication is directed, the growing importance of digital communication, a planned and systematic approach the impact on performance is, however, an element that is more explicitly and frequently expressed in the cm definitions provided by practitioners and the business community. in fact, as outlined by the business community's definitions or consultants and experts (table 2), content marketing compared to other forms of online communication has two purposes: 1) to give customers what they are looking for, promoting the interactions which help to become customers, and 2) to gain profits from such relationships. starting from the assumption that cm is a value-creating activity, this has an impact on company performance by requiring the development and adoption of suitable measurement systems (giacchetti, 2013). table 2 – the definitions of content marketing by the business community source definition of cm content marketing institute http://contentmarketinginstitute.com/ what-is-content-marketing/ content marketing is a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to attract and retain a clearly-defined audience — and, ultimately, to drive profitable customer action. inbound.org http://inboung.org content marketing’s purpose is to attract and retain customers by consistently creating and curating relevant and valuable content with the intention of changing or enhancing consumer behavior. it is an ongoing process that is best integrated into your overall marketing strategy, and it focuses on owning media, not renting it. copyblogger.com http://www.copyblogger.com/conten t-marketing/ content marketing means creating and sharing valuable free content to attract and convert prospects into customers, and customers into repeat buyers. the type of content you share is closely related to what you sell; in other words, you’re educating people so that they know, like, and trust you enough to do business with you. source: our extrapolation however, metric literature has often been criticized for its limited diagnostic capacity, due to its short-term focus, the excessive number of different and incompatible measures, and the lack of attention to value creation for shareholders (doyle, 2000, bonoma and clark, 1988). the metrics used to measure cm in marketing literature are summarized in table 3. 86 table 3 – the metrics for measuring the performance of content marketing types of metrics examples of metrics consumption metrics page views, video views, document views, downloads, visitors, visitors returns, time on page, page views/visitors sharing metrics likes, shares, tweets, +1, retweets, and pins, mail forwards, inbound links lead generation metrics form completions, email subscriptions, newsletter subscriptions, blog subscriptions, blog comments and social, cookies, rss feed, conversion rate sales metrics online sales, offline sales, customer retention, cost saving, content marketing roi source: our extrapolation from gordini, rancati (2015, p. 8-10) gordini and rancati (2015) have identified four types of metrics that measure different performance and are aimed at quantifying cm's contribution to value generation: 1) the consumption metrics measure web-generated traffic; 2) the sharing metrics measure consumer content sharing and hence their level of engagement; 3) the lead generation metrics collect a list of potential customers and related data to create useful databases to transform prospects into actual customers and 4) the sales metrics quantify the impact of investment in content on enterprise performance. when linked together (linn, 2012), these metrics not only measure cm's contribution to value creation, but also identify key valuecreating activities and any deviations from what is planned and take precautionary action to achieve goals. in order to present a systematic literature review of empirical studies on cm, the peerreviewed journals on academic databases such as scopus and ebsco were analyzed, regardless of their impact factor. in particular, papers that contained the keyword ‘content marketing’ in the abstract were analyzed. subsequently, those that contained the keyword ‘consulting’ * were selected. a total of three papers, one from the ebsco database and two from scopus, were reviewed. however, none of the three articles contains objectives that are pertinent to this study. there is, therefore, a research gap for the services and the b to b sectors, although small contributions have been identified; these focus mainly on manufacturing companies and on b to c companies (gordini, rancati, 2015; rancati, gordini, capatina, 2016). in the field of service companies, there have never been any studies conducted on consultancy companies, i.e., companies that provide services to clients in various areas of consultancy (economic, financial, legal, computer, medical, marketing and communication ...) using the know-how or the problem-solving skills of their own consultants (newton, 2012; kurb, 2003; head, 2006; van den bosch, 2005). these service companies are particularly interesting to study because they have to sell an intangible and high intensity knowledge "product" with respect to other service companies (alvesson, 2008) to their customers requiring expertise in the cm. some of them are specialized in providing communication and marketing services and therefore cm becomes strategic to create value for customers. with the advent of the new economy and the spread of the internet and it, as well as digital communication in general, consultancy companies are called upon to use cm in order to get consumers’ attention and gain their loyalty, providing them with useful content value and influencing their buying choices. it is interesting, therefore, to understand how this type of enterprise uses cm, which tools it uses, and how it measures results. 87 another gap identified in the empirical literature concerns the qualitative study of cm. in this regard, peter et al. (2017) point to the example of dedagroup, one of the largest information technology companies with more than 3,000 customers and 1,600 employees. in order to pursue the goals of improving its reputation and image (focusing on ‘italian-ness’, competence, concreteness, innovation) the company has abandoned "the tone of the selfreferential tale of the b to b market ("leading company in the national scenario ...") to adopt closer and friendlier tones typical of the b to c market ("dedagroup at work", "the cloud with its feet on the ground", "simple, deda" (peter, et al., 2017, p. 205). this style of communication underpins a fundamentally cultural approach that is based, rather than on "what we sell to anyone", on the analysis and the identification of buyers, instead, to redesign the offer portfolio in terms of needs / solutions. 3. objectives and methodology this work aims to identify the goals european consulting firms pursue with cm and the cm tools, strategies, and metrics they use to create value for the customer. to this end, a questionnaire was sent online to the marketing managers of 1,036 micro, small, medium, and large size consultancies selected from the feaco (european federation of management consultancies associations) website. the on-line survey (google module links) allows consulting companies to respond anonymously, in a user-friendly environment which, without requiring excessive amounts of time, allows more respondents to answer compared to other traditional channels such as telephone calls or mailings (molteni, troilo, 2007). the consulting companies responded to the questionnaire during the period from december 2016 to january 2017. the survey consisted of eighteen multiple-choice questions divided into two sections: the first consisting of five questions classifying consulting companies by nationality, size (number of employees), turnover, and the respondent's role. the second section, consisting of thirteen questions, addressed the following points: the use of cm and an evaluation of its real utility; the goals that drive consulting companies to use cm; the way in which these goals are met and the tools used to reach them; investments made in cm; using metrics for performance measurement. in order to increase the number of respondents, a follow-up activity was implemented. the final response rate was 5.04%, or 55 consultancy firms. 4. findings the findings were analyzed firstly at the aggregate level, and secondly by dimensional class and geographical area. table 4 shows the composition of the consulting companies in the sample: the largest proportions are german (24%), followed by finnish and greek (both 15%) and italian (13%). these are micro (60%) and small (31%) consulting firms with a turnover of less than 10 million euros (91%). table 5 shows the level of use and the degree of effectiveness attributed to content marketing by the sample companies. at the aggregate level, businesses demonstrate discrete use (71%) of content marketing. the companies that use it most are micro (51%) and small (36%) ones. these companies find cm useful to achieve their goals and create value in 47% and 37% respectively, whereas cm is found to be quite useful in 92% of micro and small consulting firms. it should be noted that small businesses have only expressed positive 88 comments about the effectiveness of content marketing. however, medium and large service companies have shown a greater mistrust in the utility of cm tools (5% and 11%). table 4 – sample characteristics by nationality (%) f in la nd f ra n ce g er m an y g re ec e ir el an d it al y p o rt u g al u n it ed k in g do m r o m an ia s w it ze rl an d t o ta l aggregate level 15% 6% 24% 15% 7% 13% 2% 2% 9% 9% 100% size micro 75% 62% 63% 75% 71% 60% 60% 60% small 13% 67% 31% 13% 25% 29% 100% 100% 40% 40% 31% medium 13% 8% 13% 5% large 33% 13% 4% turnover 2015 less than 10 million € 88% 67% 100% 75% 100% 100% 100% 100% 100% 91% 11-50 million € 13% 13% 4% more than 200 million € 33% 13% 100% 5% with regard to nationality, german (21%) and greek (18%) service firms are the ones who use it most. as for italian companies, although little used (8%), cm is considered a useful tool. more distrust was expressed by french, portuguese, and swiss companies (5%). the unit is measured by asking respondents if they consider cm tools effective for achieving business goals and increasing performance. table 5 – level of use and rate of the perceived utility of content marketing, by size and geographic area. size usage useless scarce utility useful quite useful very useful aggregate level 71% 5% 10% 49% 31% 5% size micro 51% 50% 100% 47% 42% 50% small 36% 37% 50% 50% medium 8% 50% 5% 8% large 5% 11% geographic area finland 13% 11% 25% france 5% 5% 8% germany 21% 50% 26% 8% 50% greece 18% 25% 11% 33% ireland 10% 50% 25% 11% italy 8% 16% portugal 3% 5% united kingdom 3% 8% romania 10% 25% 11% 8% switzerland 10% 25% 5% 8% 50% 89 graph 1 shows the main objectives pursued by consulting firms that use cm. at the aggregate level, the main goals content marketers identified are brand awareness (85%), customer acquisition (51%), and customer retention (46%). additional goals are website traffic (41%), contact generation (39%), acquisition of a thinking leader position (31%), sales (23%), and maintaining contacts (21%). as shown in table 6, sales are a priority for micro (56%) and for small and large (22%) firms. instead, medium-sized service companies focus on maintaining contacts (13%) while small (50%) pursue also the generation of website traffic (50%). at the national level, firms that pursue brand awareness are mainly german and greek (18%), followed by finnish, swiss, and irish (12%). acquisition and retention of customers is mainly pursued by german firms (25% and 33% respectively). among the goals that are not pursued through cm, we point out the following: sales growth by finnish, german, portuguese and swiss companies; retention of customers by italian and portuguese firms; the generation of contacts from greek, portuguese, and swiss companies; maintaining contacts by finnish, greek, irish, and portuguese companies; and finally, monitoring web traffic by finnish, greek, and portuguese firms. it is interesting to note that portuguese consulting firms only use cm to increase brand awareness (3%) and maintain contacts (5%). graph 1 content marketing goals table 6 – content marketing goals divided by size and geographical area brand awareness customer acquisition sales customer retention/ loyalty lead generation lead management website traffic thought leader size micro 42% 40% 56% 39% 40% 25% 38% 33% small 42% 45% 22% 44% 47% 50% 50% 42% medium 9% 10% 6% 7% 13% 6% 8% large 6% 5% 22% 11% 7% 13% 6% 17% geographic area finland 12% 10% 6% 27% 17% france 6% 10% 22% 6% 13% 13% 6% 8% germany 18% 25% 33% 20% 38% 31% 33% greece 18% 10% 33% 17% 8% 85%51% 23% 46% 39%21% 41%31% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%brand awareness customer acquisitionsales customer retention/loyaltylead generation lead managementwebsite traffic thought leader 90 ireland 12% 10% 11% 17% 7% 25% 17% italy 9% 10% 11% 13% 13% 6% portugal 3% 5% uk 3% 5% 11% 6% 7% 13% 6% 8% romania 6% 5% 11% 11% 13% 13% 6% switzerland 12% 10% 6% 13% 19% 8% although 71% of consulting firms use cm tools, 13% implement it without any ex ante strategic planning (graph 2). graph 2 criteria for defining content marketing strategy in particular, 60% of micro and 40% of small consulting firms do not plan their cm strategy (table 7). the remaining 87% carry out a detailed planning of cm strategies based on the company characteristics (41%), business sector trends (39%), service life cycle (36%) and finally, on the analysis of cm strategies adopted by competitors (31%). the large consulting firm bases its cm strategy mainly on the business sector trends (13%), while the medium-sized one looks at the company's characteristics (13%). the small consulting firm bases its content marketing strategy on the service life cycle stage (36%) while the micro ones consider a combination of the company's features, service life cycle stages, and analysis of competitors’ content strategy (50%). looking at the results by geographic distribution, we found that the companies that rely on the business sector trends are german (33%) and irish (20%), while the company characteristics are the focus of the greek ones (25%). german companies are also the ones that most plan cm strategies based on their competitors’ content strategies (25%) and on the life cycle of the service, as do swiss firms (21%, for both). portuguese companies only adopt the business sector trend criterion (7%), while this is not taken into account by either romanian or swiss consulting firms. table 7 – criteria for defining content marketing strategy divided by size and geographic area business sector trends company characteristics stage in the service life cycle analysis of competitors’ content strategy none aggregate level 39% 41% 36% 31% 13% size micro 47% 50% 50% 50% 60% small 33% 31% 36% 33% 40% medium 7% 13% 7% 8% large 13% 6% 7% 8% geographic area finland 7% 13% 14% france 13% 6% 17% germany 33% 6% 21% 25% 40% greece 7% 25% 14% 17% 20% 41% 36% 31% 13% 0% 20% 40% 60%company characteristics stage in the service life cycle analysis of competitors content strategy none 91 ireland 20% 6% 8% 20% italy 7% 13% 7% 8% 20% portugal 7% united kingdom 7% 6% 7% 8% romania 13% 14% 8% switzerland 13% 21% 8% the content marketing tactics most used by consulting firms (graph 3) to achieve their goals are articles on their website (77%) followed by social media content (69%) and enewsletters (62 %). the least used tactics are infographics (13%), mobile content (8%) and e-books and mobile apps (5%). podcasts are not used by any of the responding consulting companies. the greater use of such content tactics is confirmed by micro and small consulting firms (table 8). graph 3 – content marketing tactics table 8 shows that even when classified by geographic area, the most used cm tools are articles on their website, social media content, e-newsletters and blogs, especially for german, finnish, greek, and irish service firms. table 8 – cm tactics divided by size and geographic area s o ci al m ed ia b lo g s e n ew sl et te r a rt ic le s o n th ei r v id eo s in fo gr ap h i cs o n l in e p re se n ta ti e bo ok s m ob il e co n te n t r es ea rc h re po rt s w eb in ar s a rt ic le s o n o th er m ob il e ap p s size micro 48% 36% 33% 47% 25% 40% 38% 100% 33% 30% 25% 33% 50% small 41% 45% 54% 37% 50% 20% 38% 33% 40% 63% 50% medium 4% 9% 8% 10% 13% 20% 13% 10% 13% large 7% 9% 4% 7% 13% 20% 13% 33% 20% 17% 50% geographic area finland 15% 27% 13% 13% 25% 50% 25% france 7% 9% 8% 7% 25% 20% 13% 33% 20% 13% 17% germany 15% 18% 25% 23% 25% 60% 38% 33% 30% 38% 50% greece 15% 9% 13% 17% 13% 10% 17% 50% ireland 11% 18% 4% 13% 13% 20% 13% 33% 10% 50% 69% 28% 62% 77% 21% 13% 21% 5% 8% 26% 21% 0% 15% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 92 italy 11% 9% 8% 3% 50% 10% 13% portugal 4% 3% 13% united kingdom 4% 9% 4% 3% 13% 10% romania 7% 13% 7% 13% 10% switzerlan d 11% 13% 10% 13% 17% upon analyzing the degree to which consulting firms use platforms (graph 4) that constitute social media content (the second-most used tool after articles on the website), the findings were that most consultancies make wide use of linkedin (87%), facebook (59%), twitter (36%) and youtube (18%). these are the most well-known and easy-to-use platforms as they require neither large investments nor high skills and competencies to be sought through the creation of a dedicated resource. graph 4 platforms used for content marketing the aggregated results are confirmed also in terms of size and geographic area (table 9), as the cm is, for smaller firms, a mere communication tool that does not require careful strategic planning or a substantial investment in technology, skills and competences. in fact, more than half of the micro-consultancy firms use such platforms. interestingly, 15% of consulting companies use xing, a business social network, or a platform dedicated to professional relationships. flickr and pinterest are not used at all by consulting companies for content marketing. geographically, the most popular social consulting firms are german, finnish, greek, and irish. table 10 shows the investment in cm activities compared to the total communication cost. at the aggregate level, 5% of consulting firms do not allocate any resources to content marketing activities; for 80% of respondents the share allocated to this activity is between 1% and 20% of the budget; 13% allocate between 20% and 40% of the budget and only 3% earmark more than half the budget for this purpose. table 10 shows a greater willingness to invest in cm by micro and small consulting firms (52% and 35% respectively), compared to larger ones. these are mainly german (23%), finnish (16%) and greek (13%) companies. 36% 59% 87% 13% 13% 18% 10% 0% 5% 0% 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% twitter facebook linked in slideshare google + youtube vimeo flickr instagram pinterest other (xing) 93 table 9 – platforms used for cm divided by aggregate level, size and geographic area t w it te r f ac eb o o k l in k ed i n s li d es h ar e g oo g le + y ou t ub e v im eo f li ck r in st ag ra m p in te re st o th er (x in g ) aggregate level 36% 59% 87% 13% 13% 18% 10% 5% 15% size micro 50% 52% 47% 80% 40% 29% 25% 50% 17% small 29% 35% 38% 60% 29% 25% 67% medium 7% 9% 9% 14% 50% 50% 17% large 14% 4% 6% 20% 29% geographic area finland 29% 17% 12% 20% 14% 25% 50% france 14% 4% 6% 20% 14% germany 14% 13% 24% 20% 60% 29% 25% 50% greece 7% 26% 12% 14% 25% 50% ireland 21% 13% 12% 25% italy 7% 4% 9% 40% 20% 14% portugal 4% 3% united kingdom 7% 3% 20% romania 9% 9% 14% switzerland 9% 12% 50% table 10 – percent of budget spent on content marketing activities 0 1-20% 21%-40% 41%-60% 61%-80% 81%-100% aggregate level 5% 80% 13% 3% size micro 100% 52% 40% small 35% 60% medium 10% large 3% 100% geographic area finland 16% france 6% germany 23% 20% greece 50% 13% 20% 100% ireland 6% 40% italy 6% 20% portugal 3% united kingdom 3% romania 50% 10% switzerland 13% finally, the use of content marketing metrics by consulting firms was analyzed both at the aggregate level and by size and geographical area (table 11 and table 12). findings show a broad use of sharing (37%) and consumption metrics (35%), or measurement of phishing activities that enhance the interactive and multimedia aspects of cm, easily calculated in terms of time and cost. a slightly lower or average use was evident for sales metrics (30%), i.e., metrics that give a clear economic quantification of cm strategies for value creation, whereas the use of lead generation metrics was found to be quite low (25%). the most used consumption metrics are: page views (69%), visitors (54%) and 94 page views / visitors (46%). likes, shares, and tweets are the most used type of sharing (64%) metrics. e-mail subscriptions and consumer feedback are the predominant lead generation metrics (64% and 44% respectively) while the primary sales metrics are off-line (56%) and customer retention (49%). the size and geographic-level analysis confirms this data: sharing and consumption metrics are mainly used by micro and small consulting firms. as the size of the consultancy increases, the "reasoned and selective" use of lead generation and sales metrics is the norm, rather than a general use of all possible metrics (table 12). these findings demonstrate a widespread use of consumption and sharing metrics rather than lead generation or sales ones, resulting in some considerations that could lead consultants to rethink the role of cm. the different uses of metrics demonstrate cm's vision: the great importance assigned to consumption and sharing metrics highlights the fact that, within consulting firmsespecially micro and small one cm is still considered a communication activity for the "publishing and sharing of interactive and multimedia content" without recognizing the prominent role that cm plays in creating value. the greater use of consumption and sharing metrics may be due to the greater ease and costeffectiveness of implementing those indicators that do not require distinctive capabilities and competences as well as to the composition of the sample, 85% of which is formed by smes or firms that, in general, do not have the necessary resources to adopt sophisticated measurement tools. however, in increasingly dynamic markets with no space-time constraints, cm strategies are key elements in value creation. nevertheless, the geographic analysis shows a greater use of leadgeneration and sales metrics regardless of size. table 11 cm metrics by size aggregate level micro small medium large consumption metrics 35% page views 69% 37% 44% 11% 7% visitors 54% 43% 43% 10% 5% video views 8% 33% 33% 33% time on page 26% 30% 40% 20% 10% document views 26% 20% 40% 30% 10% downloads 33% 38% 38% 8% 15% page views/visitors 46% 67% 22% 6% 6% visitors returns 26% 40% 50% 10% time on page/visitors 28% 36% 46% 18% sharing metrics 37% likes, shares, tweets, +1, retweets, pins 64% 56% 28% 8% 8% mail forward 41% 38% 50% 6% 6% inbound links 5% 100% lead generation metrics 25% form completions 21% 38% 63% rss feeds 8% 67% 33% blog comments 18% 57% 29% 14% email subscription 64% 48% 44% 8% qualitative feedback from customers 44% 53% 35% 6% 6% blog subscription 8% 67% 33% conversion rate 15% 33% 67% sales metrics 30% offline sales 56% 36% 59% 5% online sales 21% 50% 25% 25% customer retention 49% 47% 42% 11% 95 cost savings 13% 80% 20% content marketing roi 13% 60% 40% table 12 cm metrics by geographic area a g g re g at e le v el f in la nd f ra n ce g er m an y g re ec e ir el an d it al y p o rt u g al u n it ed k in g do m r o m an ia s w it ze rl an d consumption metrics 35% page views 69% 15% 7% 19% 15% 7% 11% 4% 4% 7% 11% visitors 54% 14% 10% 14% 19% 10% 10% 5% 5% 10% 5% video views 8% 67% 33% time on page 26% 30% 10% 20% 20% 10% 10% document views 26% 20% 20% 20% 10% 10% 10% 10% downloads 33% 23% 15% 8% 8% 8% 23% 8% 8% page views/visitors 46% 17% 6% 17% 11% 17% 6% 6% 17% 6% visitors returns 26% 10% 10% 30% 10% 10% 10% 10% 10% time on page/visitors 28% 9 9 46 9 9 9 9 sharing metrics 37% likes, shares, tweets, +1, retweets, pins 64% 16% 4% 20% 12% 16% 12% 4% 8% 8% mail forward 41% 6% 6% 25% 31% 6% 6% 13% 6% inbound links 5% 50% 50% lead generation metrics 25% form completions 21% 13% 25% 13% 13% 13% 13% 13% rss feeds 8% 67% 33% blog comments 18% 14% 29% 14% 29% 14% email subscription 64% 16% 4% 24% 24% 8% 8% 4% 8% 4% qualitative feedback from customers 44% 12% 6% 29% 6% 6% 12% 6% 12% 12% blog subscription 8% 33% 33% 33% conversion rate 15% 33% 33% 17% 17% sales metrics 30% offline sales 56% 9% 5% 18% 14% 14% 14% 5% 5% 9% 9% online sales 21% 13% 13% 13% 25% 25% 13% customer retention 49% 5% 5% 32% 32% 5% 5% 5% 5% 5% cost savings 13% 20% 20% 60% content marketing roi 13% 20% 60% 20% 5. discussion of findings the study shows that the sample of the responding companies highly use the cm and the related strategies and metrics, providing useful answers to the research question. first of all, the prevalence of responding consultancies uses cm (71%). this result is in line with what emerged in previous researches carried out on manufacturing and service companies (rancati, gordini, 2015; rancati, gordini, capatina, 2016), although the latter recur to them slightly more (78% and 88%). however, we believe that this result is positive, especially because the 60% of the companies in the sample have less than 10 employees and 31% less than 50; or almost all of the sample is made up of smes (with a physiological endowment of resources limited), and that 91% of respondents have a turnover of less than 10 million euros per year. 96 the literature highlights that firms can pursue many goals with the cm: brand awareness, customer acquisition, and increased sales (table 1). however, the companies examined privilege brand awareness and objectives related to the customer management (respectively acquire and retain customers), registering a slight difference compared to previous studies (rancati, gordini, 2015) which in third place put the increase of sales. in our sample, big consulting firms mainly pursue goals linked to sales (22%) and to opinion leaders (17%). examining the approach used to define the cm strategy, the study highlighted that 87% of firms adopt a strategic planning of the cm based on the characteristics of the company, the product/service life cycle and the competitor’s strategy. this result is even more positive than in previous studies (61%) (rancati, gordini, 2015). in addition, the survey confirms the growing importance of the digital as highlighted in the literature (keys, 2006; gunelius, 2011; slater, 2014; among others), as the most used tools to achieve the firm objectives are articles on their web site (77%) followed by social media content tools (69%) and e-newsletters (62%). with regard to customer engagement, it can be said that consulting companies involve their customers as the most used metrics are sharing metrics such as likes, shares and tweets (64%) and high values are recorded for e-mail subscriptions (64%) and feedback from consumers (44%). regarding content, since the most used platforms are linkedin, facebook and twitter, it is clear that consultancy companies give importance to quality content, and to professional contents above all (linkedin) that are also conveyed on the facebook page. they are social that require engagement and an active participation of the targets, called to respond. the messages are also rich because on all three platforms it is assumed that in addition to written phrases there are images, small speeches. it is therefore assumed that companies use both short text (especially for twitter) but also medium length text. furthermore, the contents are disseminated, shared by the targets. this result confirms the importance of consistent, high quality content to educate, engage and acquire new clients, as underlined in the literature (pulizzi, barret, 2009; ramos, 2014, liebhout, 2014). furthermore, the result confirms that cm is a pull strategy, it’s the marketing of attraction as consumer needs to look for compelling, helpful and engaging information (lieb, 2011). with regard to the targets, it is inferred that consultancies are aimed at both potential and actual customers and at potential collaborators. in fact, on linkedin, the company can address to potential or actual customers but also to potential collaborators to engage with. this result confirms that cm may be addressed both clients and partners (slater, 2014; hollyman, rowley, 2014). 6. conclusions the study conducted is original as it provides an empirical contribution and a conceptual advancement on the subject of content marketing. unlike previous empirical studies on the subject, this work is a novelty as: the cm theme has never been applied to consulting firms; it makes use of cross-country comparative analysis at the european level of consulting firms involving more countries than previous studies (rancati, gordini, 2015). the results of the research conducted on european consulting firms (nearly all micro and small businesses) allow to provide useful answers to the research question: to identify the goals pursued through cm, cm tools, strategies, and metrics used to create value for the customer. in particular, the main results are the following: 97 cm is an activity used by 71% of the sample, which is considered useful by 85% of consulting firms, especially german, finnish, and greek ones, and annual investments amount to 20% of the budget; the main goals pursued are brand awareness and customer acquisition; the most used platforms are linkedin, facebook and twitter, and the most used tools are articles on the website and social media and newsletters; micro and small consulting firms do not plan on cm strategy, and companies generally use metrics to measure aspects of content publishing and sharing, rather than measuring the economic impact of cm. the study highlights theoretical and managerial implications. regarding the theoretical implications, the work suggests an advancement of the concept of cm. in particular, new elements have been identified to be integrated into the definition of cm such as: 1) specific targets to address communication; 2) the growing importance of digital communication; 3) the approach to planned and systemic cm. based on these additional elements, we propose a more complete definition of content marketing: cm is a planned approach and with a clear editorial line aimed at the creation, dissemination, sharing, and measurement of quality content to be addressed to specific targets, involving them actively in the co-creation and dissemination of content, especially online. cm's goal is value creation for customers and business: for customers it means helping to inform, orient their preferences, attract, satisfy, and gain loyalty, whereas for businesses it means building relationships and trust as well as increasing economic-financial returns. the managerial implications deductible from the study make it possible to identify the main difficulties encountered by companies in implementing cm activities, outlining possible development strategies and contributing to the debate on the need for a global approach to cm understood as a strategy to increase performance and to create value. in particular, we can draw some managerial implications for consulting firms: considering the strategic importance of cm to create value for customers and the results of the study, the consulting firms could invest more economic resources on cm, although most of the sample consists of predominantly small and micro enterprises that generally have limited financial resources and marketing skills; consulting firms could use the cm for broader goals such as maintaining contacts and increasing sales and a larger number of platforms like instagram and youtube that are useful to distribute high quality content and to interact with customers; as cm is a pull strategy, consulting firms need to create continuously high-quality and attractive content in order to engage and even entertain customers who need to look for such content; a careful planning of cm strategy, especially by small and micro-businesses, and a vision that goes beyond simple content publishing and sharing strategies are needed; it is important to distinguish the kinds of target to address cm, for example customers and partners, and to approach them with proper information, strategies, tools and metrics of cm; it is suggested that these types of consultancies increase the use of lead generation and sales metrics in order to properly assess the impact of cm on value creation. 98 the main limitation of the study is the statistical non-representativeness of the sample used, which prevents the generalization of the results. however, the results of the study provide useful information to answer the research questions. future research could therefore consider samples that include consulting firms of other nationalities and continents. an extended sample could allow to generalize the results from a statistical point of view. also, it would be interesting to focus on those cm elements that have been integrated into the proposed definition. it would also be necessary to deepen empirical research through qualitative studies conducted through in-depth interviews and case studies in order to better understand the evolution of the content marketing. in particular, some research questions for future research may be the following: what kind of content is delivered by b to b 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(2015). conceptualizing content marketing: a delphi approach, mercati e competitività, 1: 25-44. sitography http://www.contentmarketinginstitute.com/what-is-content-marketing/ http://www.copyblogger.com/content-marketing/ http://www.feaco.org http://www.inboung.org microsoft word 5 (18-16) masili curina 61 global start-ups and born global spin-offs: a multiple case study giorgia masili carlo bo university of urbino (italy) ilaria curina carlo bo university of urbino (italy) received: august 7, 2018 accepted: november 20, 2018 online published: november 30, 2018 abstract the paper aims to identify and analyze the major critical success factors at the base of the rapid internationalization of three different types of born global (bg) firms, namely start-up, academic spin-off and company spin-off. based on a case study analysis, the findings show that the entrepreneurs’ dynamic capabilities, their passion and propensity to take risks, previous international experiences, language skills, the presence of an experienced staff, the ability to nurture relationships and networks based on mutual trust and on the transfer of know-how represent the major key factors for internationalization. this study intends to strengthen the literature focused on the bg phenomenon. however, the empirical analysis was conducted on an exiguous number of enterprises, operating in the high-tech sectors and founded few years ago. in order to obtain more generalizable results, future research should also focus on companies active in the low-tech sectors and founded in less recent years. keywords: born global; global start-up; born global academic spin-off; born global entrepreneurial spin-off; non-linear internationalization process; multiple case study. 1. introduction literature defines “internationalization” as a long and incremental process, through which enterprises gradually increase their involvement in the international markets (johanson and vahlne, 1977). however, this definition refers to the path followed by large companies and multinationals (karra et al., 2008), on which scholars have mainly focused in the past their attention, by neglecting, in this way, the behaviors adopted by small and medium-size enterprises (smes). for this reason, in the last years, several researchers (chen et al., 2009; crick, 2009; nordman, 2009) tried to fill this gap by analyzing new approaches, that smes can specifically adopt, in order to enter foreign markets (cavusgil, 1994). one of these approaches concerns the born global (bg) phenomenon, which describes the early internationalization of those companies starting their expansion within few years from their inception (rennie, 1993). according to this approach, these firms follow a different process with respect to the traditional international journal of economic behavior, vol. 8, n. 1, 2018, 61-80 62 ones (crick, 2009; knight, 2015) and they are usually characterized by a low number of employees and limited resources, especially on the economic side. furthermore, an emerging topic in the bg literature is currently focused on born global spin-offs and global start-ups, which are defined as smes “which choose to be extensively present in international markets right from –or very soon after– their birth” (rialp et al., 2005, p. 135). for different authors (rialp et al., 2005; knight, 2015; cavusgil and knight, 2015; knight and liesch, 2016; mccormick and somaya, 2017; moen and rialp-criado, 2018), these firms are becoming ever more widespread and their growing relevance is “critically challenging traditional internationalization theory” (rialp et al., 2005, p. 134). moreover, their increasing significance, as a leading research topic, is confirmed by the inclusion of the bgs in some of the most comprehensive reviews focused on the smes internationalization literature (zou and stan, 1998; coviello and mcauley, 1999; fillis, 2001; rialp et al., 2005). however currently, comprehensive explanations of this phenomenon are still required (knight and liesch, 2016). this means that both further theoretical efforts and new empirical analysis, concerning this phenomenon, have to be provided. starting from these assumptions, the objective of the paper is two-fold: [1] to strengthen the contributions focused on the bg phenomenon, by providing in this way a response to the call for more research into this topic; [2] to identify and analyze the main critical success factors explaining the rapid internationalization of this type of firms. in order to reach these objectives, a qualitative methodology has been adopted, based on the case-study analysis of three italian companies (a start-up, an academic spin-off and a company spin-off), which have experienced a rapid process of internationalization. structurally, the paper is organized into the following sections: (ii) a literature review mainly focused on start-ups, spin-offs and the bg phenomenon; (iii) methodology; (iv) case studies’ description; (v) discussion of the results; (vi) conclusions. 2. literature review 2.1. start-ups usually, the term “start-up” is adopted to define any typologies of new and young enterprise or to identify a project with different evolutionary phases, born spontaneously in the high technology sector. furthermore, it identifies companies born with the intent to develop products and create demand in new markets, through the organization of online activities and the adoption of online digital channels (makowiec, 2016). generally, most of these companies are small and suffer for the lack of resources and procedures, the dynamism of markets and technologies, and for the presence of different factors that can influence their development (sutton, 2000). moreover, they are also defined in terms of innovation, speed of growth, flexibility of the organizational structure, speed in the decision-making process and focus on the development of a single product (paternoster et al., 2014). especially in terms of innovation, several studies (ganitsky, 1989; jolly et al., 1992; rasmussen and madsen, 2002; ries, 2011; taji and tsuyuki, 2012; paternoster et al., 2014; makowiec, 2016; melegati et al., 2016) identify different categories of innovation start-ups. a first typology is represented by the ‘high-tech startups’ (taji and tsuyuki, 2012). these companies are defined as enterprises with a global vision and orientation, for which the global market represents the place where create innovation in order to achieve competitive advantages. they are also called ‘innate exporters’ (ganitsky, 1989), since the highly technological character of their products encourages them to develop the internationalization process from their inception (rasmussen and madsen, 2002), through the creation of networks with specialized partners (jolly et al., 1992). 63 other studies (paternoster et al., 2014; melegati et al., 2016) focus their attention on the ‘software startups’, defined as "newly created companies with no operating history and fast in producing cutting-edge technologies” (paternoster et al., 2014, p. 1200). overall, the creativity, the flexibility, the reactivity to the external context, the product orientation, the reduced timeto market, the tendency to set short-and-medium terms goals, the absence of methodology and bureaucracy, the focus toward innovative segments of market, with a quick growth, and the scarcity of physical and economic resources represent the main features characterizing this type of firms (paternoster et al., 2014). finally, ries (2011) analyzes in his contribution the “lean startups”, defined as firms that follow “a hypothesis-driven approach to the evaluation of an entrepreneurial opportunity and the development of a new product for a specific market niche” (2011, p. 5). these enterprises try to speed up the cycle of their production and improve the quality of their products through innovations, the elimination of the wastefulness, experimentations, and customer’s product development (ries, 2011). these peculiarities were also adopted in the analysis of other types of start-ups, specifically in the case of bg companies. 2.2. spin-offs the literature, focused on the spin-off topic, turns out to be very heterogeneous, since this particular type of business presents different models of creation, as well as, multiple degrees of independence, support of the head organization and technology transfer. researches, conducted on spin-off companies, are usually based on case studies mainly developed in the united states (tübke, 2004), with very few of them focusing on the european context. from a conceptual perspective, spin-offs were defined as new businesses created by one or more individuals through the exploitation of the knowledge and experiences acquired during their previous occupation (cooper, 1985). moreover, ahlström söderling (1999) underlines how these individuals decide to leave their previous job with the intent to start a new business, in which the previous organization doesn’t have a dominant influence. overall, in order to create a spin-off, three conditions become essential: [1] an organization from which to separate; [2] an entrepreneurial impulse from one or more people, who have easy access to methods, knowledge and relationships; [3] the presence of one or more customers who express the need to benefit from the products and/or services offered by the spin-off (ahlström söderling, 1999). additionally, a spin-off can originate as much from another company as from a public or private institution (ahlström söderling, 1999). in particular, tübke (2004) distinguishes between corporate spin-offs and institutional spin-offs. the former is defined as “the division of an existing company into one parent company and one or more independent spin-off(s), which implies that the new product is in some way separated from the parent organization and a new economic activity is created around it” (tübke, 2004, p. 3). these companies are extremely innovative, since they combine existing technologies and processes with a lean organization favoring the development of more innovative and customized products, at lower costs than their competitors (tübke, 2004). for what concerns the institutional spin-offs, research mainly focuses its attention on three specific categories: [1] university spin-offs; [2] research-based spin-offs; [3] technologybased start-ups (tübke, 2004; mustar et al., 2006). primarily, the term “university spin-off” identifies high-technology start-ups, created by university graduates or staff members, who bring university knowledge to market (pirnay and surlemont, 2003). in particular, the main characteristics of these companies are: relative lack of resources and experiences in fields other than the one of origin, such as management and marketing; fundamental importance of entrepreneurial skills and the ability to create 64 international network and a rapid process of internationalization, necessary to avoid the obsolescence of their high-tech products (pirnay and surlemont, 2003). a similar definition is also adopted for the research-based spin-offs (rbso), which can be conceptualized as new companies created through the transfer of technologies and knowledge of public research institutions (smilor, 1990). finally, the technology-based start-ups are defined as a category of spin-off firms characterized by a direct ongoing intellectual property link with the parent university or other research agencies (hanich, 2004). in particular, a significant share of capital on behalf of the main institution, the previous experiences of the entrepreneur, his ability to find the necessary resources and to create synergy and credibility through networks and strategic alliances represent the key prerequisites necessary for their development (hanich, 2004). 2.3. linear and non-linear internationalization processes several studies, in the field of international business (ib), start from the assumption that the firms’ internationalization process follows an incremental and linear trend (andersen, 1993). in particular, the main models, based on this presupposition, are the uppsala (johanson and vahlne, 1977) and the innovation-related models (bilkey and tesar, 1977) – also known as stage models (uner et al., 2013). the former describes a dynamic model which identifies four different sequences of incremental decisions, through which developing a gradual internationalization irregular exportation, exportation via independent representatives, establishment of an overseas sales subsidiary, overseas production (johanson and wiedersheim-paul, 1975), while the latter considers the internationalization as an innovative process, which is developed through learning sequences (andersen, 1993). even if both models analyze the exportation as the main entry mode in the international markets, they enumerate and describe the constituent stages differently. however, in recent years, a new line of research, contracting these theories, has spread. in particular, by focusing on the smes literature, scholars identify new approaches that firms can adopt in order to enter foreign markets (cavusgil, 1994). these approaches follow a non-linear internationalization process, which can be developed in three different ways: the “deinternationalization”, the “re-internationalization” and the “born-again global internationalization”. overall, the non-linear internationalization process which represents “a process characterized by substantial increases and decreases in internationalization activity” (vissak, 2010, p. 560) – can manifest in different times and markets and it can be induced by external or internal factors and subjects. according to vissak (2010), the bg approach can be considered as a non-linear internationalization process, describing the path of those companies that internationalize their activities from their inception or in the first few years of their life. 2.4. born global phenomenon the bg firms were described for the first time by rennie (1993) as companies developing an early expansion in international markets within two years from their inception, by reaching the 75% of total sales with export. later, knight and cavusgil (1996, p. 1) define bgs as “small, technology-oriented companies that operate in international markets from the earliest days of their establishment”. in addition, other scholars define bg internationalization as a process developed between two or eight years from the firm’s inception (chetty and campbell-hunt, 2004), which allows reaching a percentage of export equal to the 50% of the total sales (gabrielsson and gabrielsson, 2003). overall, from the literature emerges how a unique and unanimously shared definition of the bg phenomenon, does not still exist. 65 on the empirical side, several studies identified the key elements characterizing the bg companies, such as their global vision (oviatt and mcdougall, 1995), the proactive behavior in the research of new markets and the ability to develop dynamic networks and capabilities (weerawardena et al., 2007) in order to achieve a competitive international advantage (coviello, 2006). in addition to these elements, efrat, shoham (2012) and wictor (2006) underline, in their works, how the bg products are addressed to markets’ niches and they are the result of dynamic capabilities and highly innovative competences in research and development (r&d), as well as in technology. furthermore, several scholars (oviatt and mcdougall, 1994; rasmussen and madsen, 2002; gleason et al., 2006; nordman and melen, 2008: nordman, 2009) identify specific categories of firms which engage in rapid internationalization processes, by addressing their products to global markets since their establishment. these categories (start-ups, academician and entrepreneurial spin-offs) present some common characteristics with bg companies, as well as relevant differences. the first typology concerns the global start-ups which represent a radical manifestation of bg companies (gleason et al., 2006). indeed, they are firms whose competitive advantages derive from their ability to coordinate several organizational activities, in multiple countries, since their establishment (oviatt and mcdougall, 1994). as well as the traditional bgs, they adopt a proactive behavior in the research of resources and markets at a global level, also exploiting international networks (rasmussen and madsen, 2002). conversely, the coordination of different activities such as r&d, import, subsidiaries etc., represents the main difference they have with respect to bgs. instead, the born global entrepreneurial spin-offs are firms established by businessmen, who leave their previous work with the aim of creating a new business, based on innovative products realized through the exploitation of specialized knowledge acquired at the international and technological field (nordman, 2009). finally, the born global academician spin-offs are companies founded by scholars, who decide to commercialize the products developed during their researches, by adopting the available technological resources (nordman, 2009). in particular, these firms are characterized by reactive behaviours, the lack of international knowledge, the absence of specific strategies (objectives and target markets) and a decelerated internationalization process (nordman and melen, 2008). 3. methodology to develop our analysis, a multiple case study (yin, 2009) has been adopted, since it allows investigating a phenomenon inside its natural environment, as well as its evolution over time. in particular, the choice of this method is related to the opportunity to identify similarities and differences between cases, by obtaining reliable demonstrations (baxter and jack, 2008; lewis, 2015). the sample is composed by three companies located in different provinces of the abruzzo region in italy (chieti, pescara and teramo). a unique region has been selected in order to avoid the influence of territorial factors, related to different levels of development, and in order to identify potential facilitators characterizing the investigated area. however, even if the sample is not sufficient to realize statistic generalizations, it allows developing theoretical ones for similar case studies. for what concerns the firms’ selection, the archive of the chamber of commerce of the abruzzo region has been adopted. in particular, the study involves small independent firms 66 founded less than 20 years ago and operating in the high-tech or medium-high-tech sectors. starting from a sample of fifty companies, three final firms have been selected on the basis of different parameters, such as the date of foundation, the size, the sector of origin, the condition of independence, the condition of start-up, entrepreneurial or academic spin-off, the speed of the internationalization process 3 years from their inception, with an amount of sales equal at least at the 25% of the total turnover (knight and cavusgil, 1996) and/or the coordination of multiple activities in different countries (oviatt and mcdougall,1995). in a second phase, semi-structure interviews have been addressed to the entrepreneurs or to the figures dealing with the international activities. the interview includes the request for information concerning the story and the structure of the company, the characteristics of the entrepreneurs, their backgrounds and their ability to create network and alliances, the production activity, the internationalization process (with specific reference to markets), the mode of entry and the year of reference. every interview has been recorded and transcribed. finally, in order to respect the triangulation principle, further data were collected by analyzing the website of these enterprises, as well as the reports provided by them. 4. case studies in this section the case studies will be presented. table 1 resumes the main characteristics of the three investigated companies. table 1 companies’ general characteristics firm a firm b firm c typology innovative start-up academician spin-off entrepreneurial spin-off year of establishment 2014 2014 2015 number of employees 8 4 6 turnover 2016 550.000 € 530.000 € 160.000 € products and services software and methodologies software, hardware and r&d solutions components of advanced material sector it (high-tech) biomedical (high-tech) metal-mechanic (medium-high-tech) company's headquarters vasto (ch) pescara (pe) mosciano s.angelo (te) other offices turin (it) sao paulo (br) nis (srb) level of technology and r&d high high medium-high organizational structure flat and flexible flat and flexible flat and flexible decision-making process (speed) fast fast fast 67 4.1. firm a firm a is born in 2014, as a result of the experiences collected, in the previous twenty years, by two of the four founders. the company is situated in vasto, in the chieti’s province of the abruzzo region and it is classified as innovative start-up in the it sector. it develops and commercializes software supporting the management of people and processes. the headquarter of the company is in vasto, while the commercial office is in turin in the piemonte region, italy. it also owns two subsidiaries, one in brazil at sao paulo and the other one in serbia at nis. born as a project, initially intended for an important italian multinational active in the automotive sector, it soon expanded its customer portfolio by installing its software in the major venues of the bigger multinationals all over the world. at the time of the interview, the company realizes seven products, in the form of modules addressed to big enterprises, as well as to single users. for what concerns the internationalization process, it was started since the firm’s establishment in 2014, when the founders decided to export the software in serbia. furthermore, it was motivated by the ambitious character of their founders, who wanted to acquire new market shares and reduce the risk associated with operating in a single market. in 2015, the firm started its business in the brazilian market and simultaneously in poland, reaching a percentage of foreign sales equal to the 25% of the total turnover, already from the first year. in particular, in brazil through a partnership stipulated with an italian multinational located in this market, the company started to develop the 50% of its activities. in 2016, the firm started a “partnership program” to enable qualified organizations to sell its services to other companies in an exclusive way. finally, it also developed a collaboration with the university of serbia in order to identify qualified professional employees to be inserted in the serbian subsidiary. overall, the main foreign markets, served by the company, are serbia, poland, brazil, france, india and china (from september 2017). these markets are constantly monitored with reference to political and legal barriers and the country-risk. these monitoring activities are important especially for markets as serbia and brazil, where the firm owns its subsidiaries. in particular, they are adopted in serbia for the product development, while in brazil especially for the commercial activities. in both cases they are managed by two local directing managers. moreover, the company addresses its products to market niches and it resorts to italian representatives, through whom it develops contacts with foreign clients, especially multinationals. at the time when a collaboration with a partner starts, an employee is sent to the headquarters of the foreign company with the aim of installing the software. in addition, the firm’s flat organization generates a strong cohesion, by favoring the share of goals and values between shareholders, simplifying and speeding up the decision-making process, which is usually guided by the founders. overall, the internationalization process of this firm can be considered linear, since it has a stable position in every markets. additionally, the fear to enter in foreign markets and the psychic distance do not obstacle the development of the internationalization process, thanks to the language and intercultural skills and knowledge owned by the internal staff. 68 table 2 firm a: internationalization characteristics typology of firm according to bg theory global start-up first year of internationalization 2014 first market serbia markets serbia, poland, brazil, france, india, china linear internationalization yes % of sales in the first 3 years from inception 25% strategy niche strategy mode of entry direct exportation, organizational unites abroad main global channels for the expansion multinationals 4.2. firm b the second company was founded in 2014 by a professor of the university of neuroscience of chieti-pescara, with 15 years of experience in the infrared technology research. he is the chairman of the board of directors and he founded the company after obtaining a degree in physics and a phd in biomedical technologies. he also worked as researcher in the united states of america for 5 years, but he did not develop other entrepreneurial experiences. the firm is located in pescara and it is active in the biomedical sector. the founder of the firm is also supported by two partners: an ex-accountant and an italian holding sub-entered in april 2017. born as a university spin-off, today it has become an academic spin-off. in particular, by following the will of its founder to commercialize a finished product and to ensure a concrete transfer of know-how, as well as better future prospects for his employees, the company is addressed to both the domestic and the global market. furthermore, it aims to offer unique innovations in the infrared technology sector, by proposing software, hardware and other complete solutions, along with support and training services. from the international perspective, the internationalization process of company b started in january 2015, when the firm stipulated its first contract with a client in the united states of america (usa). after this stipulation, in april of the same year, one of its employees settled permanently in usa in order to take care of the firm’s research laboratory. through a partnership with an important american multinational, the firm’s r&d activities were particularly developed. the company has also established, during the years, different collaborations with universities, national and international research institutions, consortia and american suppliers. finally, the university of pescara which was one of the previous owners of the company still holds the rights related to a patent and a software that has licensed to the company for commercial exploitation. in particular, the internationalization process of firm b started as a consequence of the immaturity of the domestic market in relation to the firm’s innovative products. moreover, the company aimed to transfer know-how and knowledge in international markets. through this international expansion, the firm was able to reach an amount of foreign sales equal to the 55% of the total turnover. the most important market is the north america, even if during the years the firm also entered in other ones such as france, australia, germany and recently hong kong. overall, the internationalization process can be considered as non-linear because the firm has a stable position only in the usa, even if the psychic distance is not perceived as an obstacle. all the other markets are not systematically monitored, due to the lack of human resources to devote. furthermore, the company prefers to invest in r&d rather than in marketing activities. nevertheless, the abroad visibility of the firm is high. similarly to company a, also in company 69 b the flat organization facilitates the speed of the decision-making process, which is guided by the founder. table 3 firm b: internationalization characteristics typology of firm according to bg theory born global academician spin-off first year of internationalization 2015 linear internationalization no first market usa markets usa, france, germany, australia, hong kong % of sales in the first 3 years from inception 55% strategy niche strategy mode of entry direct and indirect exportation (consortia); partnership with an american multinational main global channels for the expansion big companies 4.3. firm c the third company is represented by an entrepreneurial spin-off born in 2015 in mosciano s. angelo, in the teramo province. the firm’s property is divided between the main founder – with ten-year experience in the field of classical composites and in the design of mechanical components and the abruzzo region. the founder is also the general director. after obtaining the diploma as accountant, he followed some marketing courses and collected several experiences before the establishment of his own company. in particular, from 1997 to 2003, he worked as export manager for a company active in the food industry. later, from 2003 he was hired as commercial director in a company specialized in the production of components for the chemical-mechanical sector, which sold its products in the european market. he decided to leave this last job in 2015, with the aim of founding his spin-off for the production of advanced components. however, he collected also several work experiences in different countries such as canada, tunisia and north america. the firm operates in the mechanical sector, and it is part of an incubator of companies settled in the abruzzo region and supported by a society specialized in the creation of new enterprises. the main objective, which has led to the firm’ establishment, is to answer to specific needs expressed by the customers of the previous company, in which the founder worked in the past. at the beginning, the company operated as a supplier of multinationals, dealing with the movements of fluids. then, it has expanded its services portfolio by entering in other sectors, such as the molding of standard and non-standard plastics and the food industry. currently, it provides services in two different sectors: fluid handling and public transport (creation of advanced components and the offer of consultancy and designing services). from the international point of view, in 2015 the company started to be a supplier of a danish multinational, specialized in the production and commercialization of pumps, with which the firm has stipulated a partnership aimed at developing marketing activities for a certain period. this relationship turns out to be still strong and essential for the firm’s growth. in 2017, instead, the firm developed a direct contact with some clients of austria, switzerland, spain, germany and netherlands, by employing its own managerial team. the served foreign markets are thus the same in which the danish multinational company offers its products. by serving these markets, the company reaches a percentage of sales equal to 45% of 70 its total turnover. currently the company is able to systematically monitor only the italian market, although it is developing an effective strategy to directly enter into foreign markets. the choice of direct exportations, mainly focused on market niches, mostly arises from the desire to gain greater experience and market share and from the excessive saturation felt in the domestic market. overall, the flat organizational structure of the firm makes decision making fast enough, and usually decisions are made by the entrepreneur. finally, although the process of internationalization is still under development, as this is only the second financial year for the company, it turns out to be linear and the cultural distance does not represent an obstacle for the firm’s growth. table 4 firm c: internationalization characteristics typology of firm according to bg theory born global entrepreneurial spin-off first year of internationalization 2015 first markets austria, germany, switzerland, spain, the netherlands, england markets emea, north america, asia (markets served by the multinational companies) linear internationalization yes % of sales in the first 3 years from inception 45% strategy niche strategy mode of entry indirect exportation (trading company) main global channels for the expansion multinationals 5. results and discussion according to the previous considerations and results, it is possible to assume that the three analyzed firms are respectively a global start-up, a born global academic spin-off and a born global entrepreneurial spin-off. in particular, firm a presents specific traits owned by different typologies of innovative start-ups: of the high-tech start-ups, it takes the global market perspective and the highly innovative character of the proposed solutions (taji and tsuyuki, 2012); with the software start-ups, it shares the development of cutting-edge technologies, the flexibility and a specialized team, while at the same time it stands out for its proactive attitude and for the pursuit of a long-term oriented strategy directed to rapidly growing market segments (paternoster et al., 2014). moreover, the firm operates by following the lean approach (ries, 2011), aimed at eliminating waste and losses through continuous innovation and measurement. according to the definition of pirnay and surlemont (2003), firm b is a university spin-off, since it was founded by a professor and it includes other university staff members. in particular, the dynamic skills of the founder favor the internationalization process, through the sale of high-technology and innovative products in different foreign markets. finally, firm c is an independent entrepreneurial spin-off offering innovative and customer-oriented products. it exploits the advantages related to the flexibility of the lean organization (tübke, 2004), by addressing its offers to several market segments, different from those served by the parent company. 5.1. the process of internationalization and the pursued strategies all the investigated companies are young and internationalized within the first year of their activity. they offer their products in the global market and, for this reason, they cannot be 71 considered born international, meaning companies that develop a quick internationalization inside their own continent (sharma and majkgård, 1999). moreover, in the case of firm b and c, it is more correct to talk about “born global” phenomenon. indeed, bg companies are identified as small technology-oriented enterprises (knight and cavusgil, 1996), that develop their international process within three years from their inception, by reaching a percentage of foreign sales equal to the 25% (at least) of their total turnover. they are also recognized as companies developing a competitive advantage through the sale of their outputs in the foreign markets (andersson and wictor, 2003). instead, firm a can be considered as an international new venture (inv), since it develops its competitive advantage by adopting several resources, identified in the foreign countries, and by selling its products in different markets (oviatt and mcdougall, 1994). however, within three years – two for the firm c – these companies achieved different percentages of foreign sales: 25% for firm a, 55% for firm b and 45% for firm c. furthermore, their internationalization processes are based on different reasons: firm a and c decided to internationalize their activities in order to acquire new market shares and to find new opportunities. on the contrary, firm b decided to start its internationalization process after external solicitations and in order to transfer know-how and skills. in addition, at the beginning of their internationalization process, firm a and b entered in only one market, that are serbia and usa. later, firm b started selling their products also in additional markets, by sending its employees on-site. instead, firm a first entered in serbia and then in brazil through the establishment of two subsidiaries. in these two countries the company coordinates the development of its products and the commercial activities through the adoption of two local directing manager. this is the reason why the firm can be considered a global start-up (oviatt and mcdougall, 1994). on the other side, firm c started its internationalization process by collaborating with a danish multinational and by selling its products in the main foreign markets of this company. in 2017, through the support of internal managers, the firm started to develop direct contacts with potential foreign customers. overall, although they differ for their importance, the foreign markets, served by these companies, are: europe, east and south asia, north and south america. for what concerns the pursued strategies, some differences are visible: despite the enterprises turn to global niches, as wictor (2006) theorized, firm a and c adopt a proactive behavior (chen et al., 2009), by developing a systematic monitoring strategy in their markets. on the contrary, firm b mainly acts by responding to external solicitations, thus demonstrating a more reactive attitude, characterized by the absence of any strategy or regular monitoring activity in the served markets. finally, while firm a and c are permanently present in the countries in which they entered, company b seems to suffer from the processes of deinternationalization, since it claims to be permanently present only in the north american market. 5.2. influencing factors of internationalization in the following subparagraphs, all the factors influencing the internationalization processes are summarized. in order to develop possible comparisons, among the three companies, more detailed information is included in table 5, where the importance, expressed by the companies for all the elements considered in the analysis, is also displayed. 72 table 5 success factors influencing the internationalization process variables firm a firm b firm c startup phase postlaunch startup phase postlaunch startup phase postlaunch entrepreneurs/interviewee characteristics ***** ***** **** **** ***** **** entrepreneurs/interviewee capabilities ***** ***** ***** ***** **** ***** proactive behaviour in the research of opportunities in international markets ***** ***** ***** ***** **** ***** global vision ***** ***** ***** ***** **** **** (previous) training and work experiences in international field **** **** ***** ***** ***** **** personal and business networks ***** ***** **** **** **** ***** technical knowledge ***** ***** ***** ***** ***** ***** resources held by the company *** **** **** ***** *** **** products’ quality ** ***** **** **** **** ***** adopted strategy ***** ***** **** **** **** **** domestic market characteristics ***** *** *** *** **** **** target markets characteristics ***** *** *** *** **** **** industry ***** ***** **** **** **** **** new managers ***** *** **** cooperation between entrepreneur and managerial team ***** ***** *** ***** dynamic capabilities ***** ***** **** **** **** **** innovation ***** ***** ***** ***** ***** ***** research & development ***** ***** ***** ***** ***** ***** technology ***** ***** ***** ***** ***** ***** marketing ** ***** ** ** **** **** production ** ***** **** **** **** **** ***** = very influential ** = not very influential **** = quite influential * = not at all influential *** = influential empty cell = not relevant 5.3. entrepreneurs’ characteristics and background from the analysis, emerges how the internationalization processes of the investigated firms are guided by entrepreneurs with quite different professional and training paths, who own, in turn, many common peculiarities, such as perseverance, willingness to run risks and adaptability. other important characteristics, concerning the entrepreneurs’ figures, are represented by the passion for their job, their language skills and their innate global vision, even if for the firm b, this vision turns out to be short-term. furthermore, all the entrepreneurs play a leading role in the process of defining objectives and implementing decisions. 73 with reference to the role played by the previous experiences, while the entrepreneurs of firms a and c possess previous experiences both at a corporate and at an international level, the founder of firm b owns consolidated international experiences, which have facilitated the process of internationalization. overall, the experiences acquired in the international markets and the passion for their jobs, combined with the language skills, allowed these companies to grow rapidly. finally, for what concerns the main critical success factors, the passion for their jobs, the long-term international orientation, the adoption of the learning-by-doing philosophy, the removal of wastefulness and losses through the adoption of innovation, the focus on the quality, the assistance to clients and suppliers, the establishment of relationships, based on reciprocal trust, and the willingness to constantly improve themselves represent the main drivers, considered by the entrepreneurs of firm a and c, as crucial for the development of their companies. a strong international orientation in the short-term, the ethic and social responsibility, combined with the innovation and the continuous research constitute, in turn, the main key factors highlighted by the entrepreneur of firm b. table 6 – founders’ characteristics firm a firm b firm c previous experiences in international markets and in other companies passion, global vision, proactivity, learning-by-doing focus on quality constant research of innovation and relationships; foreign language knowledge previous experiences in international markets and in scientific research passion, global vision, reactivity focus on quality constant improvement in research constant research of innovation and relationships foreign language knowledge. previous experiences in international markets and in other companies passion, global vision, proactivity, perseverance focus on quality, innovation and relationships foreign language knowledge 5.4. human and financial resources the presence of a well-prepared staff, with strong language skills and a high level of specialization, represents one of the most crucial factors facilitating the companies’ international expansion. although andersson and evangelista (2006) suggest the importance to assume employees prepared for the internationalization process, these figures are present only in firm a and c. furthermore, from the analysis emerges a difficulty in finding resources, especially on the human side. in particular, the entrepreneurs of firm b and c underline the complexity to find human resources with specialized knowledge (ex. marketing skills, management abilities). from a financial perspective, the resources seem to be enough to support the international activities and, in all three cases, they are both internal (social capital) and external (especially bank loans) to the company, even if in the case of company c, the finding of external financial resources turns out to be more complex. 74 table 7 human and financial resources’ characteristics firm a firm b firm c human resources expert and ambitious team with knowledge of foreign languages dynamic team with interdisciplinary knowledge and foreign languages expert team with technical knowledge and foreign languages financial resources sufficient; guaranteed by share capital and bank loans. sufficient; guaranteed by share capital and microcredit for enterprises. sufficient; guaranteed by share capital and other founds. 5.5. relation, networks and alliances even if, among the three investigated companies, only firm c is part of an incubator of enterprises, all of them highlight the need to develop long-lasting networks and partnerships, based on mutual trust, in order to have access to resources, skills and opportunities (coviello, 2006). moreover, for the entrepreneurs, the professional relationships, developed during their previous careers, become crucial for the firms’ international growth. in addition to the business relations, the entrepreneur of firm b also underlines the relevance of the inter-personal relations, developed and consolidated during the years, in favoring the customers' loyalty, the transfer of knowledge/know-how and in exploiting the time advantage in terms of technology and innovations. furthermore, all the three companies stipulate collaborations with global customers multinationals in the case of firm a and c, large companies in the case of firm b which allow them to enter the main foreign markets and to obtain further contacts with potential customers. finally, all the companies develop collaborations with italian and foreign universities. overall, all these relations are characterized by [1] closed collaborations aimed at transferring know-how and knowledge; [2] the acquisition of international patents and certifications in order to defend the knowledge resources from competitors; [3] the improvement of the degree of production quality. table 8 relation, networks and alliances’ characteristics firm a firm b firm c solid relationships especially with multinationals; strong importance of previous professional relationships; collaboration with a foreign university. solid relationships both personal and professionals; partnership with an american multination for the activities of r&d and distribution; collaborations with italian and foreigner universities and research institutes; participation in consortia. solid professional relationships; partnership with a danish multinational; collaboration with (domestic) universities. 5.6. characteristics and technological level of production the investigated companies belong to different sectors, all requiring high levels of technological and knowledge resources, which are fundamental in order to favor the expansion in the international markets, facilitate the activities’ management and development and to guarantee more flexible productive processes. the technological and r&d levels are 75 particularly high in firm a and b and less in firm c. furthermore, for all the companies the necessity to develop a constant innovation becomes a key priority. according to rasmussen and madsen’s theory (2002), the products of firm a and firm b appear standardized, while those of firm c combine standardization and adaptation. in particular, for what concerns firm c, the company manages every phase of the entire value chain, by collaborating with its clients and other partners. it is for this reason that the production process, even if supported by the ict adoption, becomes particularly long. in order to develop in the future a more flexible structure, the founder considers [1] the possibility to relocate the production process in outsourcing in india or in the east of europe (with the exception of the management of the most relevant phases, such as consulting, prototype design and distribution); [2] to invest in new machineries and technologies in order to support the entire production process. table 9 characteristics and technological level of production firm a firm b firm c flexible productive process; high level of research and technologic development: technologies as facilitators of [1] the expansion in international markets; [2] the development and management of the different activities. flexible production process; highly technological and innovative solutions; investments in r&d. management of the every phase of the entire value chain; collaboration with the clients and other partners; long production process; relevance of the ict tools in the production process; necessity to invest in new machines and technologies. 5.7. perceived barriers focusing on the analysis of the perceived barriers, the political-legal tariffs, the psychic distance with specific markets and the import duties represent the main constraints, identified by all the investigated firms, when entering in foreign markets. on the contrary, in the domestic market, the non-tariff barriers represent the major obstacles in the firms’ international development. finally, all the companies highlight, in their internationalization process, the excessive bureaucracy and the lack of support provided by national institutions, both at bureaucratic and financial levels. table 10 perceived barriers firm a firm b firm c domestic markets huge bureaucracy; scarce support provided by national institutions. scarce support by national institutions. excessive bureaucracy foreign markets tariff barriers and import duties. tariff barriers and psychic distance perceived in specific countries. tariff barriers 76 6. conclusions the comparative analysis, between the results emerging from the case studies, demonstrates how the three investigated companies present not only similarities, but also some relevant differences in the development of their internationalization processes. firm a, which was identified as a global start-up, sells its products in the foreign markets, where it coordinates different activities such as commercial or product development taking advantages by its skills and resources. instead, firm b is a born global academician spin-off founded in order to commercialize a finished product and the relative know-how at a global level. conversely to the born global academic spin-off theories (nordman and melen, 2008), the company owns a high level of technological and international knowledge, which allows the development of a rapid internationalization process, despite the firm’s reactive behavior and the absence of a specific strategy. thirdly, firm c is a born global entrepreneurial spin-off, developed through the proactive behavior, the high-technology knowledge and the long experience, in the international environment, acquired by the founder. although the literature (rasmussen and madsen, 2002) defines the global start-up as a typology of inv and the born global spin-offs as two sub-typologies of bg firms, the investigated enterprises present several common aspects. for instance, all of them started their international process within three years from their inception, by achieving a percentage of foreign sales, equal or higher than 25% of the total turnover. furthermore, even if different reasons guided their internationalization process, all of them are oriented to global niches, to which they offer standardized products (firm a and b) and sometimes products adapted to the customer needs (firm c). in addition, in all the analyzed cases the ability to start a rapid internationalization was favored by the dynamic capabilities of the entrepreneurs, their passion and propensity to take risks, their previous international experiences and language skills. also the presence of an experienced staff, the ability to nurture relationships, strong collaborations and networks, based on mutual trust and on the transfer of know-how, play an important role in the internationalization process of all the analyzed firms. for this reason, the psychic distance and the perceived barriers have not discouraged and slowed down the firms’ internationalization impulse. overall, the analyzed organizations are small-size enterprises searching for external providers, who can help them in supporting the high costs of investments in innovation, technology and r&d, by compensating at the same time their lack of economic resources. these enterprises did not enter simultaneously in all the served markets and in some cases the internationalization was not a linear process. this confirms vissak’s results (2010), according to which the process of de-internationalization of firms is a path also adopted by bg companies. the results also demonstrate how these companies, during the first years of their internationalization, preferred to combine direct exportations with entry modes requiring less use of resources, and to exploit collaborations with consortiums, multinational firms and other large companies acting as global customers or distributors of their products (gabrielsson et al., 2008). finally, in relation to a possible stimulation function carried out by the specific geographical location of the companies, there do not seem to be any substantial external factors that have speeded up or otherwise facilitated the process of internationalization. this study aims to strengthen the literature focused on start-ups and spin-offs born with a global orientation. however, the empirical analysis was conducted on an exiguous number of enterprises operating in the high-tech and medium-high-tech sectors and founded few years 77 ago. in order to obtain more generalizable results, future research should focus on 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(1998). the determinants of export performance: a review of the empirical literature between 1987 and 1997. international marketing review, 15(5), 333356. microsoft word 9 (20-17) bellagamba.docx 113 born international spin-offs in an italian industrial district: an exploratory study on two range hood producers aldo bellagamba polytechnic university of marche, italy received: july 31, 2020 accepted: november 18, 2020 online published: december 10, 2020 abstract the paper analyzes the peculiarities and the drivers of the accelerated internationalization strategies of two range hood manufacturers, born as spin-offs, in a small italian district. spinoffs are very frequent within industrial districts and can be considered an important way of transferring tacit knowledge from an existing firm to a newly formed one. the present work fits into this cognitive perspective and aims to understand the role played by the founders’ learning processes and the relationships established in previous work activities in the creation of born global firms. this study differs from earlier works on born global firms for two main reasons: a) the object of analysis is a specific sector and a given production hub; b) the phenomenon is examined through the multiple case analysis explorative method. the research not only highlights the regional character of the phenomena, but also delves into the role played by certain external factors (which affect the different attractiveness of foreign markets compared to the domestic one). a further significant aspect emerging from the investigation, relates the founders’ previous working experiences (as an employee/manager), representing a time of learning and development of personal relationships which are able to facilitate the process of accelerated internationalization of the new firm. keywords: born regional firm; founders’ work experience, industrial district; personal relationships; spin-off. 1. introduction this paper fits into the scientific debate that started in the 1990s on companies that follow strategies of rapid internationalization, which means that they internationalize already at the time of birth or immediately afterwards (rennie, 1993). these firms (defined “born global” for the first time in a mckensey study) are able to sell their products in international markets immediately after their birth and to realize a significant share of turnover in foreign markets in a short period of time following their constitution (knight and cavusgil, 2004). in the last international journal of economic behavior, vol. 10, n. 1, 2020, 113-132 114 decade, several internationally published studies have shown that “immediate internationalization” is a development path pursued by firms in all countries and in all industrial sectors (i.e., both high-tech and low-tech industries). the empirical evidence on the widespread growth of this kind of company has highlighted some limitations of the traditional theories on firms’ internationalization processes, theories which were unable to explain how some small young companies could rapidly grow in foreign markets despite the limited resources they possessed (mcdougall et al., 1994). therefore, a wide-ranging debate on the specific characteristics and determinants of this internationalization opened up in the early 1990s (zucchella, 2006; zander et al., 2015; dzikowski, 2018; romanello and chiarvesio, 2019; jiang et al, 2020). although the number of studies on this topic have grown exponentially in the last three decades, the matter of born international firms is still very relevant today (cavusgil and knight, 2015; oyna and alon, 2018). indeed, several scholars believe that an adequate understanding of this phenomenon has not yet been achieved (cesinger et al., 2012; zander et al., 2015; knight and liesch, 2016; rodriguez-serrano and martin-armario, 2019; paul and rosado-serrano, 2019). this paper aims to contribute to the scientific debate by analyzing the peculiarity of the processes of “early internationalization” of two firms located in the range hood manufacturing district of fabriano (in central italy). another objective is to detect the main factors that may have facilitated the processes of rapid internationalization in the observed cases, distinguishing between those that are related to the firms’ localization within an industrial district and those that are unrelated to belonging to a cluster. the location of firms within an industrial district can influence the internationalization of smes, as district firms are in a good position to access and develop the necessary resources for their foreign expansion (musso, 2006). within such a context, geographical proximity encourages frequent contact among firms, which facilitates knowledge production, dissemination, development, and accumulation (kowalski, 2014, 184). imitating any one firm’s strategies and exchanging knowledge about foreign markets could be instrumental to the rapid internationalization of small district firms. for example, a study by weerawardena at al. (2007) highlighted that literature on the accelerated internationalization of firms has neglected the aspect pertaining to “learning that is undertaken by these firms and their founders prior to the firm’s legal establishment”. later, de clercq et al. (2012) stated that the issues of learning and knowledge are central components underlying the causes, processes, and outcomes of early internationalization. this work contributes to accelerated internationalization research, by studying those industrial district processes that can influence the rapid internationalization of firms. in particular, the focus is on born international companies originating as spin-offs from other district companies. this study adds new knowledge on accelerated internationalization, by analyzing the role of the learning processes, as well as the knowledge and networks of relationships developed by the founders of born global spin-offs in their previous work activities within an industrial district. spin-offs are new firms formed by entrepreneurs who previously worked at other firms in the same industry. as the majority of spin-offs begin their venture in similar areas to their previous one, this kind of new firm start-up represents a powerful source of industry agglomeration (becattini, 2000; klepper, 2009; buenstorf and costa, 2018; furlan and cainelli, 2020). within industrial districts spin-offs are a significant means of knowledge transfer from “an existing firm, which operates as an incubator for entrepreneurship, to a newly born firm” (camuffo and grandinetti, 2011, 822). therefore, the knowledge useful for the firm’s internationalization, as well as the human resources’ international orientation could both be transferred through spin-off processes from a highly internationalized district firm to a new one (klepper, 2009; buenstorf and costa, 2018; masili and curina, 2018). 115 this work differs from other studies on firms’ early internationalization for two main reasons. firstly, the phenomenon of accelerated internationalization is analyzed by adopting a qualitative method based on a multiple case study of an explorative nature. colovic and lamotte (2014, 450) consider qualitative case studies more suitable than quantitative methods as they can provide a more detailed explanation of how industrial districts can facilitate the early internationalization of smes. second, the study focuses on the international development of two small firms located in a specific small industrial district (in fabriano, situated in central italy), characterized by a specialized production of range hoods. according to lopez et al. (2009) the analysis of born global firms in specific industrial sectors could be a useful approach in the aim of gaining a deeper knowledge of the factors that can favor or hinder the rapid internationalization of the firm. 2. literature review 2.1. the growth of small and medium-sized firms in foreign markets between “stage models” and “accelerated internationalization” as effectively noted by coviello and mcauley (1999), the internationalization of small and medium-sized enterprises (smes) has been previously addressed by three main theoretical research streams: the foreign direct investment theory, the “stage” models of internationalization and the network perspective, which focuses on the behaviors of firms within networks of interorganizational and interpersonal relationships. from this study it emerged that the stage models were the most used theoretical framework and that scholars proposed several different stage models. however, the most influential has been the one developed by johanson and vahlne (1977, 1990), often referred as the uppsala model. according to the uppsala model, internationalization is a process of gradual capacity building, through which companies slowly accumulate the necessary resources to face the uncertainty of foreign markets (eriksson et al., 1997). these models assume that, before starting to significantly export, companies implement a growth process on their domestic market. such gradualness depends on a learning process, which aims to develop the specific knowledge and resources that are essential to successfully face the uncertainties of foreign markets. first of all, knowledge and resources are progressively developed through experience in the domestic market (which is known by the company) and then, in the larger foreign markets (leonidou and katsikeas, 1996). according to this model, internationalization occurs incrementally and is influenced by increased market knowledge and commitment. it is described in terms of market selection and mechanisms used for market entry, in this way (coviello and mcauley, 1999): for example, firms improve their foreign market knowledge through initial expansion with low risk, indirect exporting approaches to similar, psychically close markets. over time and through experience, firms increase their foreign market commitment. this in turn, enhances market knowledge, leading to further commitment in more distant markets, including equity investment in offshore manufacturing and sales operations. as illustrated in the ‘logical “scheme” in figure 1, gradual internationalization models show that the direct experience of individuals who manage activities in a foreign market triggers a “learning” process, which allows the company to deepen its knowledge of the foreign market and to develop those skills required to operate successfully within that market (silvestrelli, 2008). this decreases the management’s risk perception of operating in the foreign market and 116 increases their willingness to invest more resources, by creating, for example, a direct sales operation or a manufacturing activity (michailova and wilson, 2008). one of the main merits of the stage model is that it highlights the relevance of experience and knowledge as the basis of every firm’s internationalization path (musso, 2006). in this perspective, the learning process is the mechanism by which tacit knowledge is generated, through the transformation of experience (kolb, 1984; hånell et al., 2020). in particular, experiential knowledge is the form of tacit knowledge that individuals within a firm learn directly from past outcomes and decisions (and then apply to present-day choices) or indirectly by observing others’ experience in an organizational network (reuber and fischer, 1997; eriksson et al., 1997; bruneel et al., 2010; fletcher and harris, 2012; de clercq et al., 2012). experiential knowledge is mainly acquired through learning-by-doing, and it is not easily expressed formally nor is it easily transmitted to others (michailova and wilson, 2008). figure 1 – logical “scheme” of the interaction among the elements underpinning the model of a firm’s gradual internationalization (adapted from silvestrelli, 2008, 4) learning by doing and by interaction reduction of managers’ perceived risk of operating in the foreign market experience acquired (by mangers) in operating in a foreign market increased propensity to invest “more resources” in the foreign market increased knowledge of the foreign market in the gradual theory of internationalization, the learning process allows companies to overcome the difficulties related to the geographical distance and to the “psychic distance”. the latter implies a greater difficulty in interpreting a reality which could be very “distant” from the one of the company’s country, from a cultural, linguistic, social, and institutional point of view (mezias, 2002). much of the research published on smes internationalization has confirmed these difficulties faced by firms in their international expansion and it has also identified the need to generate specific skills to overcome them and operate properly on foreign markets. in recent decades, however, an increasing number of studies have spotlighted how, despite being young and having very few resources, some small enterprises begin exporting immediately after their start-up (mcdougall et al, 1994). “born global” companies sell their products abroad since their inception and they are able to penetrate foreign markets that are geographically, culturally and socio-institutionally distant without following the process of knowledge accumulation, typical of firms that follow the stage model of internationalization (rennie, 1993; lopez et al., 2009). 2.2. the born global firm: a yet-to-be defined conceptual category that contains heterogeneous situations despite the large number of studies on the topic of firms’ early internationalization, scholars have not yet reached a uniform and shared definition of the born global concept (cesinger et al., 2012). this type of company’s internationalization process is more focalized on exports and it differs from the “international new venture” type of company that develops international 117 activities, already at a young age, that concern different phases of the value chain (oviatt and mcdougall, 1994; zander et al., 2015). however, from a scientific point of view, the main challenge for reaching a consensus is determined by the variety of criteria used by several studies to distinguish born global firms from other categories of firms. among the wide range of studies on this form of internationalization, in most cases born global firms have been identified using one or more of the following criteria (madsen, 2013): a) the speed (or precocity) of internationalization, which has been measured by the time that elapses between the establishment of the firm and the first sales on foreign markets. some scholars consider born global those firms that have internationalized within two years of their establishment (rennie, 1993), others look at three years (knight and cavusgil, 2004), and others still consider a timeframe of up to six or even ten years. b) the intensity of internationalization, which relates to the minimum share of exports on total turnover that the firm must achieve (within a certain time period from its establishment), in order to be considered “born global”. some studies used a threshold of 25% (knight and cavusgil, 2004), others of 50%, and some, even of 75% (rennie, 1993). c) the extent (or breadth) of the firm’s geographical international expansion, i.e., the minimum number of foreign markets which the company must enter (by a certain time from its establishment), in order to be considered born global. in some cases, only those firms exporting to at least three foreign markets were considered born global; in others, only those operating on a plurality of foreign markets or on continents other than that of origin of the company were given the born global label. as pointed out by lopez et al. (2009, 1230), the theoretical foundation of these thresholds is not clear, and their inhomogeneity, which, in certain cases could be justified by the size of the company’s country of origin, makes it difficult to compare the results of research carried out by different scholars on firms in different regions, countries, or industrial sectors (knight and liesch, 2016, 98). in recent years, in fact, scholars have proposed a more precise framework of analysis to distinguish the different paths taken by companies in their pursuit of rapid internationalization. gabrielsson et al. (2004) distinguish, for example, the born global firm, which quickly achieves more than 50% of its turnover in foreign markets localized on continents other than that of the firm’s country of origin, from the born international firm, which attains (in a short period of time after establishment) more than 50% of its turnover abroad, but in foreign markets localized within the continent of origin. kuivalainen et al. (2007, 254) also distinguish between the “real” born global firm and the “only apparent” born global firm (also called “born-international” firm). according to lopez et al. (2009), the hypothesis that the number of truly born global firms is increasing is hardly defendable in the face of the empirical evidence pointing to a very low share of the world largest multinationals that meet all the criteria for having a real global market presence and with a turnover spanning all the continents1. indeed, these scholars showed that in the software industry of costa rica most of the companies analyzed followed a gradual approach to internationalization. moreover, the majority of the few companies that exported soon after their establishment were not actually born global, but born regional, because they exported their products to foreign markets within the continent of origin. 1 the study by rugman and verbeke (2004) showed, for example, that out of 380 multinationals (among the world’s largest ones), 320 made more than 80% of their sales in countries within their home regions. therefore, if one considers the geographical extension of the sales markets, most of these firms cannot be considered global, but regional. 118 very similar findings were obtained by sui et al. (2012): their study on a sample of canadian small and medium-sized exporters (smes) showed that born global firms represented a smaller proportion (of the whole) than born regional firms (16% vs 27%). worthy of note is that, according to a recent study of swedish start-ups in the manufacturing sector, in the decade 1998-2008, born global companies were a very rare event and interestingly, their incidence appears invariant over time (braunerhjelm and halldin, 2019) 2.3. factors influencing the accelerated internationalization of smes several scholars have identified which factors can favor a rapid internationalization of the company. they are classified as either “exogenous”, i.e., related to the environment in which the company operates, or “endogenous”, i.e., connected to the characteristics and the actions of the decision-makers internal to enterprises (zucchella et al., 2007). a compilation of the factors that have been most frequently considered in the literature was recently provided by jiang et al. (2020). the exogenous ones included: the industrial sector peculiarities, where the company operates, the characteristics of the market, and the geographical area in which it is located. one relevant aspect is, for example, the size of the company’s domestic market, compared to that of (its) foreign markets. a firm may decide to enter one or more foreign markets immediately, when it has a production capacity that exceeds the absorption potential of the domestic market (rennie, 1993). instead, among the endogenous factors, jiang et al. (2020) consider the firm’s strategy, the values and perceptions of the founder, the characteristics of the team of individuals who founded the company, and the characteristics and competence of the company as a whole. however, it should be noted that in the early phase of setting up a new business, difficulties in distinguishing between these two categories might emerges. indeed, the competitive strategy pursued by the born global firm, which is often based on differentiation and on the decision to meet the needs of a specific “market niche” (musso, 2006; baronchelli and cassia, 2014), is a reflection of the strategic decisions made by the entrepreneur and the group of individuals who contributed to setting up the company (zucchella et al., 2007; musso and francioni, 2013). the location of the firm within an industrial cluster is considered an exogenous factor that can facilitate the adoption of rapid internationalization strategies. in the last two decades, several empirical studies have tested the claim that firms located within the same industrial district benefit from a complex system of factors (skilled and specialized labor, knowledge exchanges, easy access to information, innovative propensity, etc.) that can help the internationalization of firms (brown and bell, 2001; musso, 2006; belso-martinez, 2006; pla-barber and puig, 2009; d’angelo et al., 2013; andersson et al., 2013; kowalski, 2014; bettiol et al., 2019). a firm’s location within a cluster influences not only its industrial processes, but also its commercial ones, which concern the relationships with foreign markets and the related distribution channels (musso, 2006). by contrast, only few of studies focused on the link between a firm’s location within an industrial district and the accelerated internationalization of the firm (sopas, 2001; zucchella et al., 2007). a high presence of foreign companies within a district, for example, has been considered a factor that can accelerate the internationalization of district firms because it exposes them to international competition (jiang et al., 2020). however, studies on the role of spin-offs on the accelerated internationalization of industrial district firms are still limited. spin-offs represent a mechanism that is closely tied to geographical clustering (furlan and cainelli, 2020). indeed, inside the cluster entry barriers tend to be lower than elsewhere because “needed assets, skill, inputs, and staff are often readily available at the cluster location, waiting to be assembled into a new enterprise” (porter, 1998, 84). however, the widespread phenomenon of spin-offs arising within industrial districts emphasizes the role of the learning 119 process accomplished by the founders of the new firm prior to its legal establishment (agarwal et al., 2004; camuffo and grandinetti, 2011; dahl and sorenson, 2014). through the spin-off mechanism, industry-specific knowledge and international experience are transferred from a parent company to a newly established one, and this transfer could be conducive to an accelerated foreign expansion of the new firm. klepper (2002) showed, for example, that the firms best equipped to cope with the competition were those founded by people who had gained lengthy experience in leading companies within the same sector. brugnoli (1990, 82) also highlighted that the previous occupations of the founders can contribute to the success of a new firm, when the experience accumulated allows the new entrepreneur not only to learn industry-specific knowledge, but also to consider the entrepreneurial activity both “feasible and attractive”, to acquire a “reputation and credibility” within the sector, and to develop adequate functional and general management skills. in line with kingh and liesch (2016), who consider the integration of different scientific fields a good strategy for improving understanding of the born global phenomenon, the present work has built on the findings of the literature on industrial districts and on spin-offs in order to improve understanding of accelerated internationalization processes. in sum, it is the intent of this study to underline that the strategic decisions of companies wishing to pursue rapid internationalization do not arise from nothing, but are often based on in-depth tacit knowledge of the sector, accumulated by their founders in previous work experiences as employees or managers of other district companies that operate in the same sector or in a related industry. 3. methodology on a methodological level, the study of a single sector is justified by the fact that the internationalization process may not have the same complexity in all industries (lopez et al., 2009). in the present study the choice of the sector is justified by its specific characteristics. the italian firms operating within the range hood sector have a very high propensity to export their product, and they are concentrated in a limited territorial area (the district of fabriano), where accelerated internationalization represents the rule, rather than the exception. the research followed a methodology of exploratory cases with the scope of achieving a more in-depth and detailed understanding of the phenomenon of born global firms within a specific sectoral and territorial context (yin, 2014). the analysis is based on one interview of almost three-hour with the founder and the administrative manager of the first firm, two interviews of two-hour with the founder and the administrative manager of the second firm. the goal of the interviews was to understand how each company developed its first contacts with foreign customers, what kind of entry strategy it adopted, why it decided to immediately enter foreign markets, what role the previous work experiences of the founders played in the international firm’s development, and how the local context may have influenced the strategic decision to pursue rapid internationalization. 4. main characteristics of the range hood sector in italy data on the value of range hoods production from the main european producing countries is shown in figure 2. in this sector, italy is in a leading position, with much higher production values than those of germany and poland. according to 2018 eurostat data, 46% of european production of range hoods, in value terms, was concentrated in italy. 120 figure 2 – evolution of production values of the main european countries, specialized in the manufacturing of range hoods (our own extrapolation of eurostat data; values expressed in millions of euros) instead, figure 3 shows the value figures relating to the dynamics of italian exports and imports of range hoods from 1991 to 2018. it is plainly evident that the value of exports in 2009 fell to half of what they were in 2006. it should be noted that this huge drop in exports was not only due to the sharp decline of product demand, caused by the international financial crisis (which began in 2007/2008), but also to the decision made by the larger companies located in the fabriano district to transfer production of their cheapest lines of range hoods to low-cost countries (bellagamba, 2018). figure 3 – evolution of italian exports and imports of range hoods from 1991 to 2018 (our own extrapolation of eurostat data; values expressed in millions of euros) 121 however, in the years following 2012, exports have tended to stabilize at levels that are significantly higher than those of imported hoods. as a result, the trade balance of the italian range hood sector is still strongly positive and, according to eurostat data, exports account for more than 80% of production in aggregate terms, even in more recent years (2017, 2018). moreover, according to istat data, about 31-33% of italian hood exports are directed towards non-european countries. this denotes the ability of italian producers to export toward geographically distant markets, despite the increasing competition coming from low-cost producers, such as poland, mexico, turkey, and china2. another salient feature of the sector is the strong geographical concentration of manufacturers in the fabriano district. in 2010, more than 85% the sector turnover at the national level came from companies located in the marche (region) production pole (studiabo, 2012, 86). this characteristic is not accidental. it can be traced to the fact that in the late fifties, in this production area, an innovative firm introduced the first range hood for domestic use on the market (bellagamba, 2018). this company and the others (that arose around that first one) have been able to significantly improve the product offered, from both a functional and aesthetic point of view; the range hood was transformed into an object of design, which today represents a constant and indispensable element of the home kitchen’s décor. as noted by fortis (2016, 153), the expansion of the companies in this industrial district “was particularly impressive in the late nineties”. in 1999, exports of range hoods from the ancona province (where the district is located) represented 55% of world exports and this figure was higher than that of the other two major exporters, germany and spain. in recent years, the structure of this sector has undergone profound changes, and there has been a concentration of the supply by just a few leading firms, which have created very internationalized groups (bellagamba, 2018). these groups operate both as sub-contractors of large manufacturers of household appliances (and in this case, they sell their products under the customer’s brands) and as independent producers of own-brand products. according to some estimates, in 2010 just three companies controlled about 50% of the global range hood market (studiabo, 2012, 86). despite the two firms under investigation are small in comparison to the industry leaders, they differentiate themselves for design, technology, and quality of their offering. for confidentiality reasons, we called the two firms ‘alfa’ and ‘beta’. 5. the alfa case 5.1. previous work experiences of the founder alfa was founded in 1997 by a former employee of the main range hood manufacturer in the fabriano district, which employed (at that time) more than 900 workers and 85% of its turnover came from exports. the founder of the new business had joined the firm of origin in 1975, with a three-month technical assignment that consisted in assembling a rather complex painting plant. he had been chosen by the employer firm for his specific skills as a blacksmith and electrician that he had developed in his previous work as a craftsman. at the end of the technical assignment, he was hired as a factory worker. subsequently, the company owners entrusted him with increasing responsibilities: from department head he became factory manager, then head of purchasing and technical development and, finally, he 2 since 2019, china has become the world’s largest exporter of range hoods, in value terms. indeed, in the last 15 years chinese hood exports have tripled from eur 181 million in 2008 to eur 548 million in 2019. (source: www.exportplanning.com). 122 took on the role of general manager from 1985 until 1995. at that point, the direction of the company was taken over by the owner and the assignment as general manager ended. in the following year, he worked for another range hood manufacturer, localized in jesi (a town near fabriano). then, in 1997, he decided to start a new business for the production of range hoods, with a small capital (equivalent to 103,000 euros of today) and with the support of three female collaborators for the administrative, commercial, and production areas respectively. worthy of note is that the administrative director had also had previous work experience on which to draw. indeed, she had worked for a paper manufacturer first and then, for a construction company, before embarking on the new entrepreneurial venture. 5.2. features of the firm’s international development the company started its business selling its products exclusively to customers in foreign markets. it was twenty years after its establishment, i.e., in 2017, that it only then began to sell its range hoods on the domestic market. it should be noted that this decision to enter the italian market was the direct consequence of the company’s response to the requests of a ligurian distributor, who, after seeing and appreciating alfa’s products at the eurocucine kitchen trade show convinced the founder to consider the possibility of selling range hoods in italy, too. thus, alfa began an activity aimed at identifying distributors in the main italian regions, who were not only willing to sell the products, but who also had the adequate skills and marketing competence to correctly sustain and promote this typology of product. however, it should be stressed that the company’s recent entry on the italian market has in no way changed its basic connotation which remains strongly internationalized. indeed, sales of alfa products on the domestic market currently do not exceed 4% of the total turnover, which is still almost completely achieved on foreign markets. the first foreign markets were chosen for their size, in terms of inhabitants. as pointed out by the founder during the interview: the company’s expansion logic was to look for customers in those countries where they were more numerous. as he put it, “where, perhaps, a few crumbs had escaped the big range hood producer and allowed the small one to enter the market.” considering the number of inhabitants, italy could also be an interesting market. however, the decision to exclude this country was made for two main reasons. a) the geographical dispersion and the fragmentation of italian kitchen manufacturers and retailers. italian manufacturers of kitchen furniture (that is, the main customers of range hood producers) are dispersed over several regions (such as tuscany, veneto, and marche) and they are also very small. this second element implies orders of small quantities of many different models of range hoods. the configuration of this industry in other, large european countries is very different. for example, in germany there is a much higher concentration of producers and the top four make up a high share of the sector’s total turnover. it is obvious that the establishment of business relationships with these customers offers the seller the opportunity to satisfy larger orders, often focused on just a few models of hoods. b) the huge differences in the terms of payment. the founder pointed out that the terms of payment from alfa’s foreign customers, compared to those from italian customers, are still very short today, ranging from 5 to 15 days after delivery of the goods. the practices of italian customers are very different: often between missed initial payments, reminders, of post-dated checks, the actual payment could end up being made 150 days after delivery of the product. therefore, alfa started to export to germany and france and the target customers in these foreign markets were, essentially, kitchen manufacturers and importers of household appliances and household items. the company has never been interested in large-scale retailers because, although these operators are able to buy in large volumes, they usually 123 pay little attention to the quality of products and sell them at very low prices. furthermore, it has never tried to sell its products to large appliance manufacturers because they were the main customers of the range hood manufacturer where the founder had worked for a long period of time, before establishing the new company. alfa developed its first relationships with customers in foreign markets in different ways. for example, the first contact with an important kitchen manufacturer in the french market happened thanks to a chance meeting with a salesman from a local range hood manufacturer (known to the founder in a previous occupation). this person put him in touch with an italian buyer, commissioned by the french manufacturer to identify potential suppliers of kitchen components in the italian market. instead, the initial relationships with some potential customers in the german market were developed by the founder thanks to a business trip, organized in 1997, to visit and show the first models of hoods to different customers distributed throughout germany. the next step was participating in the biennial trade show in cologne. however, one of the best opportunities to meet the most important kitchen manufacturers in germany (such as nobilia, elke, and nolte) came from attending a trade show (specialized in components and accessories for the kitchen sector) that alfa’s founder discovered thanks to the indications of a german agent. this fair takes place every year in northern germany, where the largest, german kitchen manufacturers are located. it should be noted that at this particular trade show, alfa was in an advantageous position, as it was the only range hood manufacturer to exhibit its products. the founder gave another example of a fortuitous relationship that was forged with an important dutch customer, thanks again, to a chance meeting, this time at an airport with an agent for a hood manufacturer located in northern italy. this agent in charge of the dutch market had just lost a major customer, as a consequence of the director’s decision to fire his purchasing manager because he did not select suppliers with transparent approaches. as the agent became aware of the desire of the ex-manager (founder of alfa) to set up a new business, he put him in touch with a dutch customer, who would then place an order for 1200 hoods, assuring the company three months of production in the first year of activity. today most of the company’s turnover comes from customers in major european countries and especially, from germany (which generates 40% of the company’s sales). in recent years, a commercial presence has also grown in farther markets, such as egypt, vietnam, jordan, dubai, singapore, tunisia, and israel. nevertheless, exports to these distant markets account for only a little more than 2% of turnover. 5.3. main elements of the company’s competitive strategy the company was established with limited resources and a high use of production outsourcing. the founder already knew the main local suppliers of components and processing technologies and was also known by them. at an early stage, to enter the first foreign markets, the company designed hoods, which were positioned in the mid-range of the market and sold under its own brand. it then developed product lines with high-end items, focusing on product differentiation, through the offer of technologically advanced decorative hoods, with an innovative design. however, the firm’s differentiation strategy is not limited to the products but involves services, as well. indeed, alfa offers its foreign customers immediate availability of all products in the firm’s range. more specifically, this service consists of making available a warehouse to each foreign kitchen manufacturer (or distributor), from which this customer can pick up the product according to his/her needs. under this agreement, the range hoods are formally purchased (and payed for) by the customers when they are picked up from the warehouse that is conveniently located to them. 124 another service that is part of the firm’s differentiation strategy is rapid development of new hood models, particularly important in meeting the heterogeneous needs of individual customers. this service is made possible by the “platforms of products” used in the design of new kitchen hoods; this concept was developed by the founder, who relied on the technical skills he had gained in his previous occupations. the use of platforms not only facilitates the production and assembly of components, to obtain the final product, but also simplifies the activity of technical service centers, accelerates the development of new hood models, and makes it easier to approve products that comply with the regulations of individual foreign countries that the company intends to enter. it should be noted that these same technical skills were then transferred to newly hired engineers directly by the founder himself, through internal training. today the company has a turnover of about 24 million euros, employs 110 people, and the organizational structure consists of a commercial office, with seven employees (who speak 11 different foreign languages), a customer service manager, a logistics coordinator, a designer (who is responsible for the rendering of products and the production of videos to explain to the customer how to install the products), and a technical office, consisting of eight highly qualified people and a laboratory. 6. the beta case 6.1. the previous work experiences of the founders beta was established in 1996 by three former managers who had previously worked for a range hood company in the fabriano district, which, at that time, was the second largest producer in terms of employees (with more than 400 employees) and the third largest, in terms of turnover. the founders’ company had a strong international vocation and exported 98% of its turnover to more than 80 countries, located in all continents. the majority shareholder of the new company had been the chief accountant of the company of origin. he had been hired at the time of its establishment in 1976 and, over the twenty years spent there, he was given increasing responsibilities, until he became general manager and partner of a subsidiary of the company, specializing in the production of electric motors. the second partner of the new company is german, and his previous experience involved range hood marketing in the german market. in the new firm, he was entrusted with the responsibility of central european markets. the third partner (a minority stakeholder of the new firm) had occupied the position of production manager in the company he had originally worked for; in the new one he assumed the role of technical director. in addition to these three core figures, from the very beginning an accounting manager implemented an effective accounting system to control the costs and the revenues of products (on a quarterly basis) and a monthly economic plan to control the profitability of sales. it is interesting to note that all three former employees decided to each leave the company where they were employed, when the owners ceded control of the company to a us multinational, which wanted to strengthen its commercial presence in european markets, where the acquired company had a consolidated position. this change had not compromised the positions of the three employees/managers, who had all been reappointed to new roles by the new owners. therefore, the new company, beta, was not born from a deliberate ousting strategy of the parent company, but from the autonomous impulse of the three employees to become entrepreneurs. this impulse may have been fueled, too, by a disagreement over the lines of strategic development of the parent firm, after the acquisition. 125 6.2. features of beta’s international development during the first years of activity (after its establishment) beta exported 100% of its turnover and sales were directed toward two european countries: germany, accounting for 80% of turnover and spain, accounting for the remaining 20%. the absence of sales on the italian market is tied to the founders’ previous work experience. they seized on the opportunity to satisfy a foreign demand for the product, thanks to the foreign customers that the two founders already knew from their previous commercial experience. these same founders set up a small company in germany in 1996, which was responsible for the activities of marketing and technical assistance for the main markets of central europe. this commercial unit was headed by the german partner. the turnover initially achieved in germany was developed essentially by this partner, who had overseen this area in his previous occupation, as well. moreover, the turnover generated from spain derived from the contacts developed by the majority shareholder who, as general manager of the company of origin, had dealt with the iberian market; in that capacity, he had personally met a distributor who would then be important for the start-up of the new company. thus, at the beginning, the german company followed the customers in central european countries, while the fabriano-based company, in addition to taking care of the production activity, followed the needs of the customers from the rest of the world. there is no doubt that the relationships developed by the founders in their previous work experience were vital for the start-up of the new firm. however, many new customers were later met, and relationships established in various ways, such as participation in trade fairs, through services offered by the italian offices of foreign countries’ chambers of commerce, on the internet, etc. the importing wholesaler is beta’s preferred channel of distribution. at the beginning, more than 50% of the turnover came from a german wholesaler. as the number of customers increased, the german wholesaler’s share gradually decreased. moreover, to serve the french, us, and uk markets more attentively, the company created three small (micro) companies consisting of the owner and one employee. beta entered the italian market a few years after its establishment. by the year 2000, the company’s range hood sales in italy accounted for approximately 30% of total sales. today, the company reports a turnover of about 13 million euros and 41 employees. 6.3. main elements of beta’s competitive strategy since its inception, the company’s competitive strategy has been based on two fundamental elements: a) the search for a distinctive competitive positioning, aimed at meeting the needs of the mid-high and very high end of the market, which were not adequately met by the other local competitors; b) the choice to maintain a very lean production system, that is, with a low level of vertical integration. the founders have always sought to differentiate their products from the competitors’, especially to avoid directly competing with the company in which they had previously been employed. in fact, because of this differentiation, several foreign customers who had started to buy the hoods from the new company continued, nevertheless, to buy from the company of origin of the founders, because the product ranges of the two companies addressed different market groups and had distinctive characteristics. only later did the company expand the range of products offered, introducing cheaper models to meet the needs of customers in emerging 126 markets, such as india, eastern europe, russia, and south america. in these geographical areas, customers were less likely to buy luxury hoods. the company has always been characterized by a high propensity to innovate. in 1997 it launched an aspiration hood with an aluminum fan and shell, which featured very low noise, despite its very high suction capacity. another innovative product was the “compatible modular system”, which allowed the customer to compose up to 250 different product options, by combining the various models of the two components of the hood. today, the company continues to show a high innovative propensity and a tendency to offer high-end products, such as the new downdraft hood models. the previous occupation(s) of the founders was relevant, not only for the international firm’s expansion, but also in the design and development of the first models of range hoods. indeed, in their previous experience they had the opportunity to assess which products were received most favorably by the market. as stated by one of the founders during the interview, the company of origin offered a wide variety of models, but only a few “actually” made up a significant share of the turnover. this knowledge was particularly useful in the development of the first hood models. moreover, previous experience was also instrumental in reducing problems and flaws in the design of new hood models. 7. conclusions and implications from the analysis of the two cases of rapid internationalization it clearly emerged that the observed companies cannot be considered “born global” but rather, “born international” or “born regional”. despite exporting a high share of turnover, in fact, it occurred only in markets within their continent of origin. more specifically, immediately after their establishment alfa and beta, instead of selling their products on the domestic market, exported substantial percentages of their turnovers toward other european countries (and especially to germany). this empirical evidence is coherent with the thesis of the regionalization of a company’s internationalization processes and the consequent rarity of truly born global firms (rugman and verbeke, 2004; braunerhjelm and halldin, 2019). the decision to sell first in foreign markets and only later in the italian market was motivated by the greater attractiveness of the former compared to the latter. indeed, these markets had more favorable structural characteristics than those of the italian market and were much more advantageous in terms of payment lead times. the two companies in this study were born as spin-offs of highly internationalized medium-sized companies. as evidenced in many prior studies, this way of creating new businesses represents the basis for the formation of the industrial districts’ entrepreneurial fabric. moreover, spinoff is also an important conduit for the transfer of tacit knowledge between companies. in both spin offs, the founders’ previous employments were a significant factor developing in-depth knowledge of the opportunities present in foreign markets, to assimilate an “international vision” of the business, to form functional and general management skills, and to acquire a certain reputation and credibility within the sector. in addition, the personal relationships developed in the founders’ previous work were instrumental to identifying their first trading partners in the foreign markets (sharma and blomstermo, 2003). furthermore, former experience also conditioned the strategies pursued by the new firms too. in fact, both firms tended to adopt product strategies and entry modes that aimed to avoid situations of direct competition with the founders’ original employers. in conclusion, as shown in figure 4, in the case of spin offs, it can be assumed that born regional firms are able to skip the first phases of the traditional international stage models, when the founders (or the components of the company’s management team) have already experienced 127 these stages and the related learning processes inside the firm where they had worked, before starting the new business (reuber and fischer, 1997). in the two cases observed in this study, the new firms were ‘new’ in relation to their establishment date but were ‘old’ in terms of the experience of their founders (michailova and wilson, 2008) this study has important implications for companies and for policy makers. at the managerial level it highlights the relevance of tacit experiential knowledge, acquired by the founders of the born regional firms through prior working experience within the district, for rapid penetration of the new firm in foreign markets. however, the knowledge needed for early export success is not limited to that gained by the founders in foreign market activities, but also includes know-how and experience in product innovation and operation management essential for making innovative products with high quality standards and in the administrative field important for controlling costs, revenues, and profitability of products, customers, channels, etc. (laanti et al, 2007). moreover, new firm founders should not only strengthen pre-existing personal relationships within the industrial district but should also proactively develop new external relationships to acquire the knowledge needed to successfully design, manufacture, and commercialize their products in foreign markets (freeman et al., 2010). figure 4 – simplified scheme of the international “stages” followed by the company of origin of the founder and by the born regional spin-off (our own extrapolation based on the empirical analysis). in relation to public policies implications, they should aim at preserving the economy of those industrial districts severely affected by the competition coming from products manufactured in low cost countries. in this context, born international firms could revitalize the cluster and public policies could encourage a new generation of spin-offs through training programs that would enhance the entrepreneurial capacity of talented employees with a strong international orientation (eurofound, 2012). experienced managers, possessing in-depth knowledge of the industrial sector and of the main foreign markets, are critical resources for the creation of new, highly internationalized firms. the birth of these firms can have a positive effect on the cluster’s capacity to cope with international competition, especially when its firms try to differentiate their products and market targets from the parent companies in order to fill gaps they have perceived in current products or services (porter, 1998). the main limitation of this work concerns the results that can only be applied within the industrial sector examined and cannot be generalized. however, the study has some valid cues for future research developments. first of all, future analysis should measure the firm’s internationalization in term of geographical extension as well as intensity, clearly distinguishing born regional from born global firms, because the determinants of the two paths could be very different. the regional stage 1: the firm only sells on the domestic market stage 2: the firm makes the first exports stage 3: the firm exports a high share of its turnover stage 4: the firm produces the product abroad stage 3: the firm exports a high share of its turnover firm of origin of the founder spin-off (born regional firm) time = human resources with managerial roles 128 path, for example, has been strongly encouraged by integration policies implemented by governments over the last few decades (d’angelo et al., 2013). another interesting aspect to be further developed concerns the distinction of firms based on the dynamics of their international expansion (hagen and zucchella, 2014). for example, the observed firms showed an “inverted internationalization” dynamic, as they entered the domestic market only after they consolidated their sales in foreign countries. third, future research should consider the influence of different typologies of start-up firms, clearly distinguishing between industrial district spin-offs and other types of start-ups. this distinction is 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(2007). the drivers of the early internationalization of the firm. journal of world business, 42 (3), 268-280. 1 economy and society changes in the post-covid era editorial of the international journal of economic behavior, vol. 11 as western countries are approaching post-covid normality, the common sentiment is that the pandemic has been an epochal watershed for the international economic and geopolitical landscape. it is not difficult to predict that the world will be significantly different to what it was before 2020. however, even before the pandemic, some to long-term trends − such as the digital and ecological transition − were already clearly visible. at the same time, a redistribution of global economic power had already been underway for some years, with china (and the asian countries linked to it) as a primary actor of an apparently unstoppable growth capable of questioning the leadership of the united states. in this context, europe is losing ground due to a stagnant economy and a critical political-institutional inertia. the pandemic has accelerated these trends, but also spurred stronger policy responses from governments. looking at the next years, four main trends deserve to be highlighted. the first is linked to the fight against climate change: to overcome this challenge, it will be essential that the recent announcements for the pursuit of climate neutrality by 2050-2060 are accompanied by concrete actions. so far not all countries have shown similar sensitivity to these challenges, both for political reasons and because of their different levels of economic development. furthermore, some countries may not have sufficient financial autonomy to support their energy transition. this is also why it is increasingly important to have common and shared rules on how much sustainability is worth. this is an essential information, so that investors can base their choices on plausible projections. the ecological transition towards new 'clean' and 'green' business models will be successful only if the world of business and finance find the right incentives to invest in new energy sources and aim for more sustainable production. the second trend is related to the digital transition. technologies such as artificial intelligence, machine learning, internet of things are becoming more and more pervasive. however, digitization could further amplify inequalities, both between countries and within them. if in the past many studies reported a positive impact of digital technologies in terms of energy saving or for the substitution effect of the change in the industrial structure (takase and murota, 2004; rexhäuser et al., 2014), more recently the debate highlighted the negative impact in terms of energy consumption and consequent emissions deriving from the diffusion of certain innovations, first of all cryptocurrencies (gallersdörfer, 2020; vranken, 2017; lange et al., 2020; gelenbe and caseau, 2015). in all cases, the technologies falling within the category of industry 4.0 generate effects on employment that have been little considered except through studies that demonstrate the positive employment effects from the adoption of digital technologies (gesi, 2012). recent analyzes (dantas et al., 2021) have highlighted that the effect of innovations related to industry 4.0 can also lead to negative results. one of the recognized problems is related to the impact on a social level and in particular on the generation of jobs (bai et al., 2020; korhonen et al., 2018). it is estimated that about 8.5% of the global manufacturing workforce international journal of economic behavior, vol. 11 n. 1, 2021, 1-4. https://doi.org/10.14276/2285-0430.3239 2 will be replaced by technologies related to industry 4.0 by 2030, corresponding, in the case of china alone, to 14 million jobs (oxford economics, 2019). the greater efficiency that is determined at the system level and the lower need for human work should leave room for a corresponding development of social and welfare activities, allowing the reallocation of the many people who, inevitably, will be replaced by machines that will be increasingly autonomous (dantas et al., 2021). the third trend is that related to demography and the aging of population. in recent years europe faced this issue more than the other continents, showing a ratio of over 65 to under 15 of over 130%, with obvious implications in terms of sustainability of the welfare systems. the rapid aging of the population represents a great challenge for europe, with the need to find the resources to provide services to a population more in need of care and assistance, in the face of an ever-lower share of workers. in any case, all sectors related to services for the elderly are set to grow in the coming decades. finally, the fourth major trend concerns distribution systems and the way in which they impact on consumer behavior. the pandemic has generated an acceleration in a process of change in consumer behavior that was already underway (druica et al., 2020). this is happening not only with reference to the purchase of products, but also for the social aggregator role that traditional retail palyed. in fact, the way in which retailing has so far contributed to characterize the places of sociality (town centers, shopping centers) is destined to deeply change. the growing share of e-commerce is leading to redefine the business models of companies. many businesses around the world have become aware of having to reconsider their market relationships starting from marketing channels (fortuna et al., 2021). the shift to online sales has been much faster than expected, pushing companies to rethink their strategies as regards the way of relating to the market, both in terms of communication and in the use of marketing channels, from multichannelling, to omnichanneling (musso and adam, 2020). the new scenarios that will emerge will in any case be characterized by high variability, given the developments in technologies that continually evolve and put into question every progress, making it only temporary. the articles in this issue of ijeb deal with some of the main issues involved in these changes. the first article from maria-magdalena roșu and răzvan-mihai băcanuand entitled “bridging intention-action gap for healthcare measures during the covid-1 19 emergency period” focuses on the distance between intention and action in the case of the healthcare measures during the covid-19 lockdown. the results of the study confirm the existence of an intention-action gap regarding general healthcare measures, and it highlights the mitigating role of the context-related impediments on the engagement with healthcare measures. the article from mehrnaz kouhihabibi, entitled “feeling the pulse of trade in the age of corona: artificial intelligence and e-commerce” provides an overview on the effects of the coronavirus epidemic on the global economy, especially the world's major economies and countries most affected by the crisis. the study puts in light that future discussions should focus more on measuring the impact of covid-19 on innovation, efficiency, teamwork and on collaboration, with an orientation towards common good as a purpose of brands and organizations. the contribution entitled “corporate social responsibility practices in the retail sector: a multiple case study analysis of us retailers”, from laura bravi, presents a longitudinal analysis on five american companies, leaders in the retail sector, as regards social responsibility practices. the study shows that long-term collective benefits is the main goal for large retailers and it is not just a matter of green/social washing initiatives. 3 joseph o. jiboku, peace a. jiboku and adeyemi o. babasanya are the authors of the article entitled “poverty and unemployment in nigeria: the case for advancement of technical vocational education and training (tvet)”, that puts in light the lack of skilled human capital as one of the main reasons for increasing levels of poverty and unemployment in nigeria. the study indicates the technical vocational education and training program as a strategy for addressing the issue. the article entitled “the ‘torre del cerrano’ marine protected area and the european charter for sustainable tourism in protected areas as an ecotourism management tool”, from guido capanna piscè, proposes a critical analysis of the documentation produced by the torre del cerrano marine protected areas (italy), according to the european charter for sustainable tourism (ecst) in protected areas. ecst is a voluntary management tool and certification that enables protected areas to develop sustainable tourism for the benefit of the environment, local populations, businesses, and visitors. huseyn mammadov, with his contribution entitled “car price prediction in the usa by using linear regression”, proposes a model, based on linear regression, to predict car prices in the u.s market, in order to help new entrants to understand the pricing factors/variables in the u.s automobile industry. the last article from mario risso and andrea paesano is entitled “retail and gamification for a new customer experience in omnichannel environment”. the article aims at exploring the use of gamification to improve the customer experience in retailing, facing the new challenges of omnichannelling. finally, in this issue there is a book review that worth to be considered. the book is authored by vasant raval and its title is “corporate governance. a pragmatic guide for auditors, directors, investors and accountants” the book provides practical insights illustrating theory with recent cases, proving to be a great source of information for anyone that has to do with the ecosystem of corporate governance such as professional accountant, securities lawyer, economist, financial analyst, and auditors. fabio musso editor-in-chief references 1. bai, c., 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(1994), "integrazione europea e distribuzione commerciale: politiche comunitarie ed evoluzione del fenomeno", economia e diritto del terziario, n. 1, issn: 15939464, pp. 129-175. references microsoft word 3 (19-1) c ganiyu 27 a study of the influence of entrepreneurial orientation on the business performance of auto artisans firms within lagos state metropolis in nigeria rahim ajao ganiyu university of lagos, nigeria received: november 24, 2018 accepted: july 3, 2019 online published: august 28, 2019 abstract this study investigates the relationship between entrepreneurial orientation and business performance of small scale auto artisans within lagos state metropolis. descriptive survey research design was adopted using quantitative research approach. questionnaire was used to elicit information from the respondents selected through multistage sampling technique. descriptive statistics were used to present a snap view of the data collected, while correlation, regression analysis and anova were used to test the hypotheses. results of the analysis established that all the entrepreneurial orientation dimensions (innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) are significantly related to one another and business performance. also all the entrepreneurial orientation dimensions individually and jointly significantly predicted and influenced business performance. findings of the study also revealed that the degree of entrepreneurial orientation is related to the year/period the business has been in operation. the study concluded that the competitive nature of contemporary business environment, require that firms are highly entrepreneurial-oriented to succeed. the study recommended that small scale entrepreneurs should develop capability that will foster entrepreneurial orientation so as to build a formidable learning and adaptive organization. key words: innovativeness; risk taking; proactiveness; competitive aggressiveness; autonomy; small scale artisans; business performance. 1. introduction the connection of entrepreneurship to economic growth and development is founded on simple instinctthe conversion of ideas into profitable commercial opportunities. the above logical interrelationship has propelled growing recognition of entrepreneurship as a dynamic feature of contemporary business world (thurik & wennekers, 2001; arunma, 2009; rahim, 2017). international journal of economic behavior, vol. 9, n. 1, 2019, 27-47 28 the study of entrepreneurship dates back to the prominent work done by richard cantillon and adam smith in the late 17th and early 18th centuries (baporikar, 2013). in the opinion of drucker (1985), entrepreneurs are people who foresee change and capitalize on opportunity to create commercial and economic value. entrepreneur in french parlance refers to somebody who “undertakes” and by so doing inspired economic development through innovative ways of doing things (gregory, 2001). from economics perspective, an entrepreneur is a person who is willing to bear the risk of a new business venture if there is reasonable opportunity for profitable return (carree & thurik, 2003). in nigeria, entrepreneurship spirit and practice is as old as the history of mankind (olagunju, 2008). according to ogundele (2007), the endorsement of indigenization decree of 1978 and government privatization policy of the early 80s’ propelled an intense change to entrepreneurship development in nigeria. entrepreneurship in nigeria cuts across peddling business, street hawking, retail transaction, small scale artisans, furniture/upholstery business and repairs and maintenance works among others. entrepreneurship impacts economic performance in both developed and developing nations in different ways such as employment generation, poverty reduction and nation’s socio-economic development among others (ghavidel, farjadi, & mohammad, 2011; sulaimon, rahim, akintunde, & ajiroba, 2015). in the opinion of cioppi, musso, pencarelli and savelli (2014) and hassan, maina, and mahammad (2016), the degree of entrepreneurship success is contingent on how the operators react to the development in the marketplace by adopting proactive strategies to sustain competitive advantage. entrepreneurs engage in numerous forms of behaviors prior to the commencement and subsequently after forming the organization. such behavioral tendencies, according to drucker (1985) and dess, lumpkin, and mcfarlin (2005) are linked to diverse factors such as innovativeness, doggedness, entrepreneur personality traits and growth pattern of the business. behaviors preceding the commencement of business venture comprise idea generation/screening, resources gathering and allocation of investment among others (baron, 2007). behaviors subsequent to commencing a business relate to marketing decisions, investment decisions and managerial behaviors (chell, 2008). as expressed by stevenson and jarrillo (1990), a business venture and its owner can be labeled as entrepreneurial if its pattern of behaviors and practices are preoccupied with the recognition, evaluation and utilization of opportunities, independently of its directly owned and controlled resources. the idea of entrepreneurial orientation (eo) is founded on the perspective that certain skills and capabilities are pivotal to business success. the dimensions advocated by lumpkin and dess in 1996 have come to be the most widely used entrepreneurial orientation measures in research (lumpkin & dess, 1996). these dimensions are: innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy. entrepreneurial orientation connotes the distinguishing features of a firm as reflected in its management competence to take quality decisions and engage in innovative business practices (lumpkin & dess, 2001). according to wiklund and shepherd (2003), eo connotes the strategy making methods that offer business enterprises a strong basis for business success. with growing complexity in managing business activities, entrepreneurial orientation (eo) can be considered as one of the key factors to ensure the success and sustainability of business organizations. a vibrant automobile sector has played major roles in the industrial growth of many nations. however, nigeria is yet to fully develop her automobile manufacturing industry and repair/maintenance services compared to those that of the developed world. there is therefore, a necessity to take a deeper look at the developments in the sector with a view of repositioning it towards progress and sustainability. previous researchers reported that eo influence firm performance (lumpkin & dess, 2001), some contended that the link between the two variables is context specific (wiklund & shepherd, 2003), while others claimed that the relationship 29 between the two variables is contingent on a number of factors such as environment, financial capability, and culture (hermann, alexander, & matthias, 2010). the contradiction between eo and performance appears to be ongoing. based on a review of relevant literature, this study account for numerous diverse views of how eo is related to business performance. the paper provides the reader with an in-depth understanding and analysis of the issues introduced above in order to explain and offer some significant implications related to the topical issue. eo affects the degree in which businesses develop skills and capabilities to cope with changing business environment. it is against this backdrop that a study of this nature is imperative in the auto artisans sector in nigeria. 1.1 statement of the problem some decades ago, numerous global automotive firms were choosing nigeria to launch markets for their cars. most prominent among the automotive brands in nigeria are hyundai, kia, bmw and mercedes benz to mention a few. most of these cars are configured with up-to-date navigational devices and information systems among others, thus, requiring adept skills to repair and maintain. in addition, the development has changed the nature of auto artisan works to the one that requires innovative talents and capabilities. small scale auto artisan businesses have come to be a vital occupation due to a growing automobile market in nigeria and in line with the growth of automobile businesses, investors have ventured into this sector. academics have noted that starting a business is a risky venture and noted that the chances of smallbusiness owners surviving the first five-years is very narrow, hence the need to develop capability to overcome some of the teething challenges (akabueze, 2002; taiwo, ayodeji, & yusuf, 2012). according to lukman, moshood, morufu and bolaji (2016), indigenous entrepreneurs lack competitive edge due to inadequate competence in critical areas such as managerial competence, social networks, technology adoption and institutional support among others. the report of a study carried out by united nations industrial development organizations –unido reported that the rate of business mortality in nigeria is very high, with only 20 per cent of small businesses struggling to survive and the remaining 80% showing high tendency of failure (unido, 2017). a study conducted by small and medium enterprises development agency of nigeriasmedan (2013), reported that the capability gap by sectoral analysis indicated that competent artisans are readily available in most of the sectors surveyed in nigeria, but the capacity utilization is on the average. as observed by dangogo and muhammed (2014), the foremost difficulty of small businesses in nigeria is not only their small size but poor learning and adaptive capability which impede their growth prospect and sustainability. against the aforementioned backdrop, small businesses require entrepreneurial orientation to convert these challenges to opportunities. the influence of eo on firm performance is an extensively studied area within the field of entrepreneurship, but the outcomes of these findings vary from a strong positive relationship to low and no significant relationship (lumpkin & dess, 2001; hughes & morgan, 2007; rauch, wiklund, frese, & lumpkin, 2009). the contradictory findings concerning the relationship between the two variables suggest the need for further research, particularly, in the context of small and medium scale enterprises-smes’ in a developing country like nigeria. deriving from the aforementioned, this study seeks to fill some of the aforementioned lacuna identified in the literature by investigating the influence of entrepreneurial orientation on business performance of small scale auto artisans within lagos state metropolis in nigeria. 30 1.2 objectives of the study this study seeks to accomplish the under listed objectives. 1. to investigate the relationship between entrepreneurial orientation (comprising of innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) and business performance of auto artisan firms within lagos state metropolis in nigeria. 2. to examine if the degree of entrepreneurial orientation differs with respect to years of operations of auto artisan firms within lagos state metropolis in nigeria. 1.3 research questions the study hypothesized that: 1. what is the relationship between entrepreneurial orientation (comprising of innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) and business performance of auto artisan firms within lagos state metropolis in nigeria? 2. does the degree of entrepreneurial orientation differ with respect to years of operation of auto artisan firms within lagos state metropolis in nigeria? 2. literature review and theoretical framework 2.1 definition and meaning of entrepreneurial orientation the landmark research conducted by miller in 1983 laid the foundation for the concept of entrepreneurial orientation in academic literature (covin & lumpkin, 2011). according to miller (1983), a firm is considered to be entrepreneurially oriented if it engages in productmarket innovation, embarks on somewhat uncertain ventures and forge a preemptive and innovative move to outperform competitors. the notion of eo describes the outlook of companies who pursue innovative and risky ventures. there are three approaches to operationalizing a firm’s entrepreneurial orientation. these are: managerial perceptions, firm behavior, and resource allocation. managerial perception encompasses firm-level factors such as strategy, structure, decision-making practices that are related to firm performance (naman & slevin, 1993). as reported by covin and lumpkin (2011), theorizing entrepreneurship as a firm behavior has numerous advantages. firstly, firm behavior can be openly perceived and evaluated. secondly, organization-level characteristics, such as entrepreneurial strategymaking procedures or talent of the management team, permit (or obstruct) entrepreneurial activity. thirdly, firm behavior can be sustained through the formation of tactics, configurations, cultures and other organizational occurrences, making it responsive to managerial intervention and control. as pointed out by covin and wales (2011), the concept of eo does not have a commonly acknowledged meaning. entrepreneurial orientation, according to lumpkin and des (2001) refers to the processes and practices of decision making undertakings that promote new opportunities. schumpeter (1934) defined entrepreneurial orientation as the procedure by which people or establishments discover and exploit novel business opportunities within an industry. zahra, sapienza, and davidsson’s (2006) conceptualized eo as the guidelines and standards used for decision making. in the opinion of sandeep and harpreet (2012), eo relates to a firm‘s strategic orientation which captures the degree of innovativeness, readiness to take risk, technological capability and preemptive stance toward competition. notwithstanding the contradictions in defining eo, scholars have generally considered eo as the most appropriate factor determining entrepreneurship development (wales, & gupta, 2011). 31 2.1.1 dimensions of entrepreneurial orientation there has been huge debate regarding the measurement of entrepreneurial construct. the two views that dominated academic literature on eo are: uni-dimensional and multidimensional. the uni-dimensional view of eo is credited to miller (1983) and covin and slevin (1986), while lumpkin and dess (1996) is credited as the scholar who promoted multidimensional concept. the two perspectives generalize that eo denotes specific organizational–level behavior that offer a basis for entrepreneurial actions (lumpkin & dess, 2001). the most common dimensions of eo are discussed below. innovativeness innovativeness is a vital component of eo because it mirrors the structure through which firms seek new opportunities founded by changes in product line and investment in both human and material resources (lumpkin & dess, 2001). according to dess, lumpkin and mcfarlin (2005), innovations can be categorized into: technological innovativeness, product-market innovativeness and administrative innovativeness. technological innovativeness includes mainly research and engineering efforts directed at developing new products and production processes. product-market innovativeness relates to market research, product strategy and innovation in marketing communication. administrative innovativeness embraces uniqueness in management styles, control systems and organizational structure. risk-taking risk taking is a dimension that exemplifies the facet of a firm‘s strategic posture to venture into business areas whose outcomes are not only difficult to predict but very risky. risk-taking is usually linked with entrepreneurship because the notion of entrepreneurship includes some element of risk-taking. accordingly, strategic risk-taking connotes actions such as venturing into the unknown, heavy borrowing and/or commitment of substantial portions of corporate assets into investment decision (baird & thomas, 1985). proactiveness proactiveness relates to opportunity-seeking and forward-looking viewpoint characterized by the introduction of new products and services ahead of competitors (okpara, 2009). the crux of proactiveness is the zeal to act ahead of rivals and by so doing drive first mover advantage (ambad &wahab, 2013). competitive aggressiveness competitive aggressiveness narrates the capability and scope of a firm‘s operations on the basis of a resilient aggressive posture and adaptive reaction to competitors’ actions (lumpkin & dess, 2001; kraus, harms, & schwarz, 2005). businesses that possess competitive aggressiveness posture tend to adopt a hostile posture or unconventional approaches towards rivals in an effort to outperform competitors (lyon, lumpkin, & dess, 2000). autonomy autonomy is connected to the capability to make independent decision or take action by an individual in an attempt to create a new venture or a novel business idea (rauch et al., 2009). autonomy offers a basis to empower organizational members, the liberty/flexibility to launch new product and entrepreneurial creativities to resolve teething problems (covin & wales, 2012; arisi-nwugballa, elom, & onyeizugbe, 2016). 32 2.2 an overview of the connection among entrepreneur, entrepreneurship and entrepreneurial orientation despite the connection among entrepreneur, entrepreneurship and entrepreneurial orientation, there are sharp distinctions among them. the term entrepreneur is formerly derived from the french parlance “entreprende”, which refers to an undertaking of an idea, to seek for an opportunity, being innovative and ability to accomplish individual’s desires by venturing into business (kuratko & hodgetts, 2004). as expressed by shelton and darling (2001), an entrepreneur is a person or an innovator who recognizes, develops and transforms opportunities into practical ideas that create value. norman and john (1983), depict two types of entrepreneurs: the craftsman-entrepreneur and the opportunistic-entrepreneur. the craftsmanentrepreneur refers to a person with specific technical training, degree of confidence and those inclined to seek business opportunities. the opportunistic-entrepreneur on the other hand, possesses high notch flexibility/orientation with a tendency to acquire higher level of education and social consciousness (smith, 1967). from the viewpoint of social psychology, entrepreneurship has been deliberated as intentional and planned behavior by an individual (krueger, reilly, & carsrud, 2000). entrepreneurship, according to shane (2003) refers to such activities that encompass the searching, assessment and utilization of opportunities to produce innovative goods and services through organized markets and processes. entrepreneurship, according to pirich (2001) is not a static phenomenon and its horizon extends beyond mechanical and economic factor. entrepreneurship has to do with change and is usually connected with choice-related issues and risk taking to capitalize on opportunities. according to conner (1991), entrepreneurial orientation is the core of resource-based theory which advocates that the resources needed to compete in the market are fundamentally contingent on entrepreneurial orientation. in the opinion of covin and wales (2012), entrepreneurial orientation of an organization is reflected by the degree to which the top executives are motivated to take business-related risks and capability to adapt to change with a view of competing aggressively to gain competitive advantage. scholars such as drucker (1985) and covin and lumpkin (2011) maintained that an entrepreneur require some psychological characteristics such as risk taking, capability and doggedness among others to succeed. mcguinness (2008) posits that the dissimilarity between entrepreneurial orientation and entrepreneurship is the distinction between content and process which elucidate the progression of how to be entrepreneurial. in the opinion of lumpkin and dess (1996), the distinction between entrepreneurial orientation and entrepreneurship is that eo exemplifies vital entrepreneurial practices that answer the question of how new businesses are created, whereas the term entrepreneurship discusses the content of entrepreneurial decision by focusing on what entrepreneur undertake. 2.3 the connection of entrepreneurial orientation to business performance performance is an expansively used notion in many fields of studies as a measure of how an entity is performing. performance is an assessment of how well a firm achieves its intended objective. from organizational viewpoint, performance relates to how well the business organization is managed and the value the firm offer to its stakeholders (wu & zhao, 2009; prabin, 2016). according to antony and bhattacharyya (2010), business performance is viewed as a measure of organizational success with respect to the worth it provides to both internal and external customers. the relationship between eo and business performance is contingent on the indicators adopted to evaluate performance (lumpkin & dess, 2001; stam, souren, & elfring, 2013). a number of scholars elucidate multiplicities of performance indicators; nonetheless, the consensus is between financial and non-financial measures. non-financial measures comprise high satisfaction and global success ratings made by owners or business 33 managers, customer satisfaction and corporate reputation, while financial measures consist of issues such as sales turnover, return on investment, profitability growth, liquidity structure and leverage ratio among others (combs, crook, & shook, 2005). large streams of research have documented positive relationship between eo and firm’s performance (kraus, rigtering, hughes, & hosman, 2012; karaoglu, bayrakdaroglu & san, 2013). as submitted by lumpkin and dess (2001), eo is a source of competitive advantage, therefore, possession of higher intensities of eo permit firms to recognize and capitalize on opportunities faster than non-entrepreneurial companies. the relationship between eo and business performance differ across studies. while some scholars have reported that companies that adopt entrepreneurial orientation perform much better than firms that do not (lee, lee & pennings, 2001; wiklund & shepherd 2003), other academics reported lower correlations between eo and firm performance (lumpkin & dess, 2001; dimitratos, lioukas, & carter, 2004), while some researchers were unable to discover any significant relationship between eo and business performance (george, wood, & khan, 2001; covin & wales, 2012). 2.4 theory of creative destruction a renowned economist in the 20th century, joseph schumpeter (1951) promoted the theory of creative destruction founded on how the entrepreneur drives innovation and engagement to create disruptive changes. innovative behavior by the entrepreneur is seen by schumpeter as a crucial endogenous cause of change that drive economic system (van praag, & versloot, 2007). other scholars such as drucker (1985) sponsor the “creative imitation theory” connected to the notion of change that enable exploitation of opportunities by an entrepreneur. accordingly, innovation represents the medium through which entrepreneurs initiate to produce innovative products. inkele and smith’s (1974) recommended the need-to-improve theory to enrich theoretical understanding of entrepreneurial development which describes the behavior of entrepreneurs and inspire people to continually pursue innovative business ideas. kirzner (1973) proposes “theory of entrepreneurship alertness” which holds that alertness is a collective trait required by prosperous entrepreneurs to succeed. the alternative description advocated by kirzner (1973) submits that the preponderance of innovations may be much more incremental to create radical change. according to him, innovation does not materialize automatically, but is driven by entrepreneurship and as such requires public policies support. 2.5 empirical review arief , thoyib and sudiro (2013) found that eo is positively connected to firm performance with strategic flexibility playing an intermediating role. the outcome of a research conducted by baker, mahmood, and ismail (2015) on a sample of 500 managers of smes’ in malaysia also reported similar findings between eo and performance of smes. results of the study carried out by amin (2015) among smes’ randomly selected from the electronic and electrical sector and beverage industries in malaysia reported positive association between eo and business performance. civelek, rahman, and kozubikova (2016) carried out a study on a sample of 1141 smes out of which 740 were micro enterprises. findings of their study reported that younger micro firms are more proactive, innovative and willing to take risks than the older micro businesses. george et al. (2001) and wiklund and shepherd (2003) reported insignificant link between eo and business performance. the relevance of context to the connection between eo and business performance is highlighted in a meta-analysis study carried out by rauch, johan, micheal, and lumpkin (2004), who reported that ‘national culture’ is a very influential moderator in eo-performance relationships. okeyo, gathungu, and k’obonyo (2016) examined the link between eo, business development services, business environment and 34 firm’s performance. the outcome of their study revealed that business development services play an intervening role in the eo and performance relationship and that external environment control this association. in addition, the study findings demonstrated no role of internal environment on the eo-firm’s performance. a research carried out by muthee-mwangi and ngugi (2014) examined the influence of the dimensions of eo on the growth of micro and small enterprises (mses) in kenya. the results exposed that the dimensions of eo (risk-taking, innovativeness, proactiveness, and entrepreneurial managerial competence) exert significant positive effect on the growth of mses’. a study carried out by soininen (2013) investigated major drivers and performance influence of eo on smes’ during economic predicament. the results discovered that the dimensions of eo had a major positive influence on a company’s long-run growth, signifying that eo has positive implications on business performance. in addition, the study reported that during the time of economic crisis, the diverse dimensions of eo had both positive and negative influence on the performance of smes’. a study carried out by matchaba-hove, and vambe (2014) in the retail sector in south africa reported that the dimensions of eo such as competitive aggressiveness, innovativeness, and proactiveness had a substantial positive effect on the success of the business, but autonomy and risk-taking do not. the study conducted by kusumawardhani (2013) assessed the connection of eo to the performance of indonesian smes’. findings of the study revealed that pro-activeness was the only dimension of eo that exerts influence on smes’ performance. 2.6 research hypotheses based on the objectives of the study, it is hypothesized that: ho1: there is no significant relationship between entrepreneurial orientation (consisting of innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) and business performance of auto artisan firms within lagos state metropolis in nigeria. ho2: the degree of entrepreneurial orientation will not significantly differ with respect to years of operations of auto artisan firms within lagos state metropolis in nigeria. 3. methodology this study used descriptive survey research design to gather quantitative data on the variables of interest. most of the auto artisan businesses are small scale in nature and operate as an informal business; this poses challenges in getting a reliable sampling frame for the study. the sample is determined based on simplified formula proposed godden (2004) for computing sample size from infinite population. n =   2 2 ε p1pxz  n =   2 2 0.05 50.0150.096.1 x n = 384.16 n = 385 where n = minimum sample size. z = z-value (95% confidence level which is 1.96). 35 p = population proportion of 50% (0.05). c = confidence interval or margin of error allowable in the sample estimate of population which is estimated to be 5% (0.05). using the formula, the researcher arrived at 385 sample size for the study. the auto artisan services investigated in this study comprises of auto mechanics, auto electricians, auto panel beater and auto sprayers. the survey was addressed to the owner-managers of the firms, since policy issues and business decision are generally handled by the owner-managers of the company. the choice of auto artisan is based on the fact that automotive services have evolved from mechanical based repair to high-tech profession with cohesive electronic and computer systems that require dexterity and innovativeness on the part of the operators. majority of auto artisans in nigeria are independently owned and operated businesses, as such there may be some sort of limitations to the degree of their entrepreneurial orientation and by extension their performance. the choice of lagos state as the study area is founded on the statistics published by small and medium enterprises development agency of nigeria in 2013, that lagos state has the highest number of smes’, and its urbanization status has attracted growing number of micro enterprises such as auto-artisans firms (small and medium enterprises development agency of nigeria, 2013). in addition, its cosmopolitan nature makes this study very relevant to her mega city plan. this study adopts the multistage sampling technique. firstly, the population was stratified into four: auto mechanics, auto electricians, auto panel beater and auto sprayers. in the second stage, volunteer sampling technique was used to identify those that are willing to participate in the survey. in the third and final stage, each of the auto artisans in the study population was labeled and simple random sampling technique (via lottery approach) was adopted to ensure each auto artisan had an equal chance of being selected. the two variables investigated in this study are: entrepreneurial orientation and business performance. this study used the five dimensions of eo which was developed by lumpkin and dess (1996). in measuring business performance, self-reported measures by the owners/managers were used, because it has wider application and validity (yang, 2008). the justification for using perceived performance measures (such as customer retention, speed of service delivery, quality of design, flexibility strategy, networking practices, growing customer base, corporate reputation and declining customer complaints among others) is due to the commonly held belief that small enterprises may be reluctant in disclosing confidential financial information about their business (al-swidi & al-hosam, 2012; messersmith & wales, 2013). questionnaire was used as instrument of data collection and anchored on a five-point likert scale ranging from “not true at all” to “very much true”. in all, 26 items were adapted to measure entrepreneurial orientation and 8 items to evaluate business performance. to confirm the suitability of the survey instrument (questionnaire), validity assessment was evaluated through face and content validity. face and content validity was carried out by contacting two university academics with expertise in entrepreneurship and business management to peruse the instrument. subsequently, pilot study was conducted to determine the internal consistency of the measures. as indicated in table 1, the pilot study recorded cronbach alpha values that exceeded α=0.7 for all the constructs, indicating that the scales are reliable and trustworthy for data analysis (hair, money, page, & samouel, 2007). table 1 – reliability test constructs no of items cronbach’s alpha innovativeness 7 .811 proactiveness 6 .736 36 risk-taking 5 .713 autonomy 4 .722 competitive aggressiveness 4 .702 business performance 8 .731 the data collected with the aid of questionnaire were analyzed using descriptive statistics. the data analysis technique consists of frequency distribution and percentages. pearson correlation, regression analysis and anova were used to test the hypotheses. 4. results and discussion out of the targeted sample size of 385, a total number of 291 copies of questionnaire were comprehensively filled, returned and usable for data analysis, which represents a return rate of 75.58%. table 2 shows the number of operators surveyed. table 2 – number and spread of surveyed auto artisan operators s/no. auto artisans operators no of operators surveyed % of total surveyed 1. auto mechanics 98 33.68 3. auto electricians 73 25.08 4. auto panel beater 66 22.68 5. auto sprayers 54 18.56 total 291 100% as shown in table 3, 92(31.6%) of the auto artisan surveyed commenced their businesses between 1-5 years, 135(46.4%) launched operation between 5-10 years and the remaining respondents 64(22%) began operations between 11 years and above. as regards the size of operating capital, 50(17.2%) operate with less than n1,000,000, 98(33.7%) operate their businesses with capital between n1,001, 000-n5,000,000, 69(23.7%) have capital size between n5,001,000-n10,000,000, and the remaining 74(25.4%) firms have capital size between n10,001,000 and above. a large percentage (78.4%) operate as one man business and the remaining respondents 63(21.6%) operate as partnership. monthly turnover of the firms surveyed revealed that a large majority 112(38.5%) recorded monthly turnover of less than n1,000,000, 89(30.6%) have documented turnover between n1,001,000-n5,000,000, 76(26.1%) raked between n5,001,000-n10,000,000, and the remaining firms 14(4.8%) indicated turnover between n10,001,000 and above. in term of employment size, a large majority 243(83.5%) of the firms have less than 10 employees, some 37(12.7%) have between 11-20 employees and the remaining firms constituting 11(3.8%) surveyed have 21 employees and above. the fact that the large majority have employees less than the required 20 employees as outlined in most definition of small scale enterprises may be connected to the fact that most auto artisan form of employment is done through apprenticeship and the employment condition is subject to training duration that is not permanent. 37 table 3 – profile of firms covered in this study profile frequency percentage (%) duration/ years of operation 1 5 years 92 31.6 6 10 years 135 46.4 11 years and above 64 22 size of operating capital less than n1,000,000 50 17.2 n1,001,000 – n5,000,000 98 33.7 n5,001,000 – n10,000,000 69 23.7 n10,001,000 and above 74 25.4 form of ownership solo operator 228 78.4 partnership 63 21.6 number of employees less than 10 employees 243 83.5 11 – 20 employees 37 12.7 21 employees and above 11 3.8 monthly turnover less than n1,000,000 112 38.5 n1,001,000 – n5,000,000 89 30.6 n5,001,000 – n10,000,000 76 26.1 n10,001,000 and above 14 4.8 4.1 research hypothesis one what is the relationship between entrepreneurial orientation (consisting of innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy) and business performance of auto artisan firms within lagos state metropolis in nigeria? table 4 – means, standard deviations, and correlations matrix of entrepreneurial orientation and business performance variables mean sd 1 2 3 4 5 6 innovativeness 3.53 .759 1 risk taking 3.46 .667 .522** 1 proactiveness 3.63 .678 .500** .560** 1 competitive aggressiveness 3.11 .929 .300** .407** .495** 1 autonomy 3.25 .548 .376** .414** .557** .518** 1 business performance 3.44 .608 .727** .778** .827** .692** .661** 1 *p<0.05 pearson correlation is significant at 0.01 levels (2-tailed) and n = 291 table 4, shows the descriptive statistics (mean, and standard deviation) of entrepreneurial orientation and business performance. the mean values for both variables (entrepreneurial orientation/its dimensions and business performance) ranged from 3.11 to 3.63, which is relatively high and standard deviations ranged from .548 to .929. preliminary analysis was run to ensure that all multivariate assumptions (normality, homoscedasticity, linearity, test for independence of the error terms, and multi-collinearity) were met. as revealed by the results of multivariate assumptions test, all the aforementioned conditions were satisfactorily met. to study the nature and direction of relationship between entrepreneurial orientation and business performance, pearson correlation analysis was conducted. 38 as depicted in table 4, inter-correlations among entrepreneurial orientation and its five dimensions revealed low to moderate positive and statistically significant correlations (the correlation ranged from .300 to .560 and p< 0.01). likewise, there exists a statistically high positive significant correlation among all the entrepreneurial orientation dimensions and business performance. specifically, innovativeness and business performance (r=.727, p<0.01), risk taking and business performance (r=.778, p<0.01), praoctiveness and business performance (r=.827, p<0.01), competitiveness aggressiveness and business performance (r=-.692, p>0.01), and autonomy and business performance (r=.661, p<0.01). the patterns of the correlations among entrepreneurial orientation/its dimensions and business performance confirmed the dimensional structure proposed by lumpkin and dess (1996) and its associated influence on business performance (karaoglu et al., 2013). following the confirmation of association among entrepreneurial dimensions and business performance of auto artisans, multiple regression analysis was run to determine the influence of eo on business performance. the regression model is depicted in table 5. as shown in table 5, the regression model shows the following statistics f(1, 289)= 1585.685, p=.000, adjusted r2 = .964 and r2=96%. the anova sub-analysis in table 5 also shows that the eo dimensions significantly predict the relationship between entrepreneurial orientation and business performance (f=1585.685, p=.000). the coefficient row in table 5, indicated that all eo dimensions significantly predicted the modelproactiveness (β=.325, t=20.941, p =.000), risk taking (β=.288, t=20.051, p =.000), innovativeness (β=.292, t=21.481, p =.000), competitive aggressiveness (β=.268, t=19.701, p =.000), and autonomy (β=.112, t=7.903, p =.000). the dimension that contributed most to the model is proactiveness (β=.325, t=20.941, p =.000). the outcome of this study is similar to the research carried out by kemelgor (2002) who reported a substantial association between eo and business performance among firms in the netherlands and the u.s. results of a study conducted by hermann et al., (2010) reported similar results that demonstrated a positive link between eo and business performance in the austrian electrical and electronics industry in europe, but only in situations in which a dynamic environment is combined with high opportunity to financial capital or a relatively stable environment combined with low access to financial capital. wiklund and shepherd (2005) corroborates hermann et al. (2010) findings and asserted that there is lack of comparisons and the difficulty of generalizing the association between eo and business performance in european context. research conducted by jocelyn (2018) among 32 women in fishery-related occupation in sagay city coastal areas in phillipines reported findings that corroborate the outcome of this study. the study reported the need for high level of orientation in terms of innovativeness, pro-activeness and risk-taking in managing small-businesses. findings of the study done by vanessa, amalia and flavio (2016) which tested the association between eo and firm performance in small brazilian enterprises corroborates the findings of this study. research carried out by kumarpeli, and semasinghe (2015) in sri lanka reported a finding that is similar to this study. their study reported that eo has an influence on the growth of smes’. similarly, the results discovered that innovativeness and risk-taking have a positive impact on the growth of smes’; on the other hand, pro-activeness has no significant effect on the growth of smes. a study done by kraus et al. (2012) on the influence of eo on the performance of 164 smes’ in the netherland during the global economic and financial crisis reported findings that substantiate that all the eo dimensions contribute to business performance. yu-ming et al. (2018) using a survey of 324 small and medium-sized enterprises (smes) in china, discovered a similar positive association between entrepreneurial orientation and performance of smes’ in the area of absorptive capability, environmental dynamism, and technological innovation. 39 table 5 – model summary model r r square adjusted r square std. error of the estimate .982 .964 .964 .114 anova model sum of squares df mean square f sig. regression 103.600 1 20.720 1585.685 .000 residual 3.724 289 .013 total 107.324 290 coefficients model unstandardized coefficients standardized coefficients t sig. b std. error β (constant) .258 .047 -5.390 .000 proactiveness .292 .014 .325 20.941 .000 risk taking .263 .013 .288 20.051 .000 innovativeness .234 .011 .292 21.481 .000 competitive aggressiveness .157 .008 .268 19.701 .000 autonomy .125 .010 .112 7.903 .000 4.2 research hypothesis two the degree of entrepreneurial orientation will not significantly differ with respect to years of operations of auto artisan firms within lagos state metropolis in nigeria. table 6 – descriptive statistics: entrepreneurial orientation and years of operation age groups n mean std. deviation std. error 1 – 5 years 92 3.42 .584 .061 6 – 10 years 135 3.30 .560 .048 11 years and above 64 3.74 .641 .080 table 7 – anova: entrepreneurial orientation and years of operation sum of squares df mean square f sig. between groups 8.361 2 4.180 12.166 .000 within groups 98.963 288 .344 total 107.324 290 source: field survey, 2017. table 6, shows that the auto artisan operators that have been in business for 11 years and above demonstrate tendency of high degree of entrepreneurial orientation (as revealed by the mean value), follow by those in business within 5-6 years, and lastly, those that have been in business between 6-10 years. to determine whether the variation is significant anova was run. as depicts in table 7, the degree of entrepreneurial orientation is significantly related to the number of years of firm’s operations f (2, 288) = 12.166, p-value was equal to .000, which indicates that p<.05. although the means scores across the years of operations (as shown in 40 table 6) varies, the effect size, computed using eta-squared was .078 and considered to have a medium effect (cohen, 1988, cited in pallant, 2010). from the above results, hypothesis two which postulates that no significant difference exists between the degree of entrepreneurial orientation and years of operations among auto artisans in lagos state, nigeria is not supported by the finding of this study. however, the medium eta squared value of .078, signifies that the results is slightly dependent on sample size effects. results of this analysis indicate that over time businesses develop vibrant competences through learning, knowledge building, adaptive capability that enable them to act innovatively to exploit opportunities better than those that are just coming into the market. as expressed by sambamurthy, bharadwaj, and grover (2003), by developing capabilities and skills through knowledge building, businesses craft strategies that help them to cope and manage change. in addition, a firm that has been in business for long may have more competences to innovate which accelerate the flow and transformation of novel knowledge, contribute to the generation of new knowledge and technological advancement that enhances firm’s performance (wiklund, 1999). 5. conclusion and implications this study investigates entrepreneurial orientation and business performance of auto artisans firms within lagos state metropolis in nigeria. findings of the study revealed significant positive relationship among all the dimensions of entrepreneurial orientation. similarly, all the five dimensions of eo significantly influence business performance of auto artisan operators. in addition, the study documented that the degree of eo is significantly related to the number of years the firm has been in operation. the quest for entrepreneurship in nigeria across sectors is remarkable; nonetheless, the realization of the full potential of these opportunities has been dampened by a number of factors which is connected to weak capability in developing entrepreneurial orientation. entrepreneur’s capability to tap into sustainable business opportunities is only realistic with high spirit of entrepreneurial orientation which requires constant orientation to develop and transform business idea into profitable venture. as expressed by lackner 2002 (cited in hermann et al., 2010), eo does not a constitute a secret defensive tactic under all environmental circumstances, therefore, eo might rather be pursued in fast changing environments that offer innovative opportunities and where the business has adequate financial resources. the reality of eo in a business setting is the outcome of organizational practices, decision making techniques and styles employed by the firm in the quest to act entrepreneurially (sascham, coen, mathew, & vincent, 2012). as expressed by amron, and mahmud (2015), business performance of small scale businesses can be enhanced if the operators innovate and develop strategic perspectives of managing business. according to del baldo and aureli (2012) and lukman et al. (2016), for entrepreneurs to gain competitive advantage, issues such as managerial knowledge, social network and institutional support among others should be addressed. similarly, to enhance the commercial viability and competitiveness of entrepreneurship, there is need for the operators to transit from their traditional approaches to contemporary practices, which require high entrepreneurial orientation (lukman et al., 2016). entrepreneurs need to develop the required business orientation in order to cope with the challenges that inhibit business development and sustainable competitive advantage. entrepreneurs that are risk-tolerant and innovative, jettison the conventional authoritarian and hierarchical configurations predominantly noticeable in most businesses (kuratko, ireland, & hornsby, 2001; amron, & mahmud, 2015). in addition, eo is significantly connected to intangible outcomes such as knowledge management, capacity expansion and job satisfaction that are instrumental to improving business performance (aktan & bulut, 2008). as expressed 41 by walter, auer and ritter (2006), eo is considerably desirable particularly in hostile and dynamic business environment, thus, the adoption and application of entrepreneurial orientation represent the much needed requisite trait needed to build successful business enterprises. this study has contributed to existing studies by empirically demonstrating the link that exists between entrepreneurial orientation and business performance of auto artisans, especially in developing nations, such as nigeria. therefore, successive studies can gain insights about how entrepreneurial orientations shape business performance. this study demonstrated the practicability and worth of replication of research study concerning the contradiction between eo and business performance. the findings of this study are expected to inform and guide small scale entrepreneurs in crafting preemptive decisions that are capable of increasing their competitiveness and overall performance. the outcome of this study is also anticipated to instruct a new perspective in public policy intervention to strengthen small scale business growth and sustainability. 5.1. limitations and suggestion for further studies this study has some limitations owing to the limited nature of its geographical area, relatively small sample size and conceptual scope. first, it focuses on only auto artisan operators, thus, other businesses in other sectors of the economy are outside the scope of this study. academics need to conduct research on the actual situation in other key sectors of the economy and in other states of the federation. thus, it would be meaningful if the sample size and study context are broaden to enlarge the generalization and conclusions drawn from the findings of this study. second, the study used self-reported data obtained through a cross sectional survey method. empirical research design using cross-sectional data may result to other causal interpretations; therefore, a longitudinal methodology towards broader understanding of eo and business performance link would contribute to literature. the third limitation of this study is the absence of how personal and socio-demographic factors influence the relation between eo and business performance of auto artisans. given this recognition, the propositions highlighted in this paper should be examined to see if and how the association between the variables under investigation differ with respect to socio-demographic variables. 5.2 recommendations this study offers the following recommendations: 1. business organizations, particularly small business ventures must develop capability that will foster entrepreneurial orientation particularly the proactiveness dimension (which was found to be the most influential dimension in the context of this study), through formation of professional association, networking, and participation in entrepreneurship training and development. this will provide a basis for building a formidable learning and adaptive organization that will foster understanding and development of absorptive capacity to cope with growing complexity of business environment in nigeria. 2. to develop the needed entrepreneurial orientation, there is need for small scale business entrepreneurs to capitalize on entrepreneurship training and development programmes outlined by the federal government of nigeria through various agencies such as national directorate of employment-nde, small and medium scale development agency of nigeria-smedan, bank of industry-boi among others to enable them improve their capability and knowledge. 3. in order to promote small scale entrepreneurship in nigeria, it is vital to develop a culture of entrepreneurial risk taking. this will encourage and promote the degree of 42 business formation and development. this can be accomplished through entrepreneurship education and campaigns, as well as specific training and development initiatives tailored to forge the drive and tenacity of aspiring entrepreneurs to venture into business. references 1. akabueze, b. 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(2013), "is industrial districts logistics suitable for industrial parks?", acta universitatis danubius. œconomica, vol 9, no 4, pp. 221-233. microsoft word 1 (20-02) erfani c 3 determinants of foreign direct investment in asian countries: an empirical analysis g. rod erfani transylvania university, usa jack berger indiana university, usa received: december 24, 2019 accepted: march 16, 2020 online published: may 20, 2020 abstract the increasing importance of foreign direct investment (fdi) in the global economy manifests the efforts of countries to attract foreign investment. the purpose of this paper is to examine empirically the determinants of inward fdi for a panel of asian countries. a pooled ordinary least squares (ols), semi-log fixed-effects (fe) regression model is utilized to analyze the determinants of fdi in a sample of six asian countries. the balanced panel data consists of india, singapore, china, south korea, turkey, and malaysia from 1995-2013. the dependent variable is fdi net inflows. the explanatory variables include democracy, inflation, human capital, economic growth, domestic investment, trade openness, and financial development. the fixed effects regression results show all variables with exception of the financial development variable are statistically significant and have the expected sign. key words: foreign direct investment; global trade; economic growth and development. 1. introduction traditionally, developed countries have dominated both foreign direct investment (fdi) inflows and outflows. however, since the early 1990s, globalization has significantly increased the relative importance of fdi inflows into developing countries. while worldwide fdi inflows decreased from 2015 to 2018, fdi inflows into developing countries has remained relatively stable (unctad 2019). this is consistent with recognized trends over the past 20 years during which middle-income and low-income countries have slowly accounted for an increasing proportion of fdi inflows. the potential benefits of fdi flows into developing countries may include higher economic growth and development resulting from additional capital resources, transfer of technology, entrepreneurial skills, and the training of their labor force. however, the realization of these potential benefits remains a subject of controversy. the importance of fdi in the international economy has greatly increased since the 1980s. privatization and liberalization international journal of economic behavior, vol. 10, n. 1, 2020, 3-13 4 of the service sector, such as telecommunications, transportation, and public utilities, have stimulated more investment opportunities. the increasing importance of fdi in the global economy reflects the efforts of countries to attract foreign investment. in order to encourage foreign investment, developing countries provide a variety of economic incentives to foreign investors, such as temporary tax exemptions, investment subsidies, and duty-free imports of capital goods. developing countries have a higher likelihood of receiving net capital inflows, since a capital-scarce country (e.g., a developing country) is more likely to have a higher return on its investments than a capital-abundant country (e.g., a developed country). the purpose of this paper is to examine empirically the determinants of inward fdi for a panel of asian countries. a pooled ordinary least squares (ols), semi-log fixed-effects (fe) regression model is utilized to analyze the determinants of fdi in a sample of six asian countries. the panel data consists of india, singapore, china, south korea, turkey, and malaysia from 1995-2013. furthermore, a hausman test employed to determine whether a fixed or random effects model is preferred. the empirical findings of this study are of particular interest to policymakers in developing countries as they adopt economic policies to attract fdi inflows. multinational corporations (mncs) increase the level of world income by reallocating resources between countries. mncs function as a solution to the lack of national savings many developing countries experience. mncs are valuable sources of foreign currency due to their stability and longevity in the host country. fdi has shown “the most resiliency to economic and financial crises” (unctad 2018). this stability is evidenced by the heavily supported notion that fdi has been the most stable component of the balance of payments over the past 15 years. in contrast, debt-related flows and portfolio equity flows, two other sources of foreign currency, are volatile to economic conditions. history has shown this to be true as developing countries continue to rely heavily on debt from foreign commercial banks (demirhan 2008). portfolio equity investment is more volatile than fdi as it can be sold off quickly and does not require building of physical facilities. due to the diffusion of technology and inflow of capital, fdi originating from mncs provides many benefits, including increases in tax revenue, exports, product availability, human capital, employment/job creation, and decreases in production costs. thus, in the words of adam smith, “by pursuing [their] own interest, [mncs] frequently promote that of the society more effectually than when [they] really intend to promote it” (smith 2003, originally published in 1776). according to the 2018 unctad report, inflows are higher on average in developing and transition economies. the hecksher-ohlin (ho) model can explain the higher rates of return in developing countries. the ho model theorizes that countries with higher relative endowment in capital (i.e., developed countries) will export capital to countries with lower relative endowment in capital (i.e., developing countries) in order to gain a higher rate of return. according to the 2019 unctad’s world investment report, fdi inflows decreased from $1.5 trillion to $1.3 trillion (13%), between 2017 and 2018 (figure 1). while worldwide fdi inflows decreased for the third consecutive year in 2018, fdi inflows into developing countries increased and remained relatively stable (figure 2 and figure 3). the share of developing countries of global fdi inflows increased from 46% to a record 54% between 2017 and 2018 (figure 2). fdi inflows to developing countries in asia and oceania increased by about 4%, equating to us$513 billion in 2018, with the majority being inflows to china/hong kong, singapore, and india. asian countries are the world's top recipients of fdi inflows, accounting for 33% of global fdi inflows. asia and its inflows of fdi as a percentage of world fdi inflows increased from 25% in 2016 to 33% in 2017 (unctad 2018). with regard to the organization of the paper, we review key literature on determinants of fdi (section ii). in section iii, we describe methodology and data used to examine the determinants of fdi inflows for a 5 representative panel of developing countries. then, we report empirical findings of our study (section iv). finally, we summarize our main findings, draw conclusions, and suggest implications for economic policy (section v). figure 1 – global foreign direct investment inflows (annual) us dollars at current prices in billions source: world investment report (2019), unctad, united nations figure 2 – foreign domestic investment inflows global and by group of economies, 2017 and 2018 (billions of us dollars) source: world investment report (2019), unctad, united nations 1.357 773 590 551 692 949 1.403 1.891 1.480 1.172 1.365 1.561 1.470 1.431 1.357 2.034 1.919 1.497 1.297 0 500 1.000 1.500 2.000 2.500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 b il li o ns o f u s d o ll ar s 759 475 494 155 414 691 1497 557 342 513 147 459 706 1297 0 200 400 600 800 1000 1200 1400 1600 developed economies transition economies developing economies: asia and oceania developing economies: america developing economies: africa developing economies world billions of us dollars . 2018 2017 6 figure 3 – foreign domestic inflows global and by group of economies, 2000-2018 (billions of us dollars) source: world investment report (2019), unctad, united nations 2. review of literature this study examines the determinants of fdi in a sample of six asian countries, consisting of india, singapore, china, south korea, turkey, and malaysia. many past studies include some, but not all, of the aforementioned countries. in our study, an econometric model is developed to examine relevant explanatory variables with their respective proxies, utilizing the panel of selected countries for the study period of 1995-2013. trade openness is one of the most common explanatory variables found in related literature. in kumari (2017), williams (2015), and das (2017) studies, trade openness is positive and insignificant. in contrast, trade openness is positive but significant in ranjan (2011) and tsaurai (2017). the most universally accepted proxy for trade openness is exports plus imports as a percentage of gdp. in an interesting study by ali asghar (2016), four different variables for trade openness are employed interchangeably, namely, exports/gdp, imports/gdp, (exports + imports)/gdp, and (exports + imports)/gdp per capita. applying a random effects regression model to a panel data of south asian countries for the study period of 1998-2010, asghar finds all four variables to be significant. the results show that each independent proxy is positive and significant, highlighting the importance of trade openness as a determinant of fdi. market size and economic growth are other commonly used variables in the literature studying the determinants of fdi. gdp and gdp per capita are frequently used as a proxy for market size. gdp growth and gdp per capita growth are often used as a proxy for growth. economou et al. (2017) and kumari (2017) find market size to be positive and significant. however, not all studies using a variable to proxy market size find positive and/or significant results. das (2017) utilizes total population as a proxy for market size, finding it to be negative and significant, using 2005-2014 data for india. in theory, a large market size is thought to attract foreign investors as it seemingly represents a potential demand 0 500 1000 1500 2000 2500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 transition economies developed economies developing economies world 7 for the final product. however, if foreign investors were only interested in the manufacturing of intermediate goods, then the host country’s market size would not be as significantly important. given that asia trades relatively more manufacturing intermediates than both north america and europe, market size may not be as critical in attracting fdi (mirodot 2009). economic growth is also frequently used as an explanatory variable instead of market size. gdp growth is both a positive and significant variable in the study by williams (2015). similarly, gdp per capita growth is both a positive and significant variable in the study by hussain (2016). financial development is another explanatory variable widely tested in the literature. stock market capitalization, as a percentage of gdp, and domestic credit, as a percentage of gdp, are two of the most widely used proxies for financial development. most studies find financial development to be statistically insignificant. kaur (2013) employs fixed effects, random effects, and pooled ordinary least square (ols) regressions to examine how financial development affects fdi in a panel of five major emerging national economies comprising of brazil, russia, india, china and south africa (brics). kaur shows that stock market capitalization to gdp is positive and significant for only the pooled and fixed effects models. in this study, domestic credit to private sector, as a percentage of gdp, which measures the banking sector’s ability to provide credit in the forms of loans to private firms, is surprisingly negative and significant for both the pooled and fixed effects models. using a panel of 88 countries, including china, south korea, malaysia, and turkey, and a fixed-effects model, erdogen (2015) finds stock market capitalization to gdp and domestic credit to private sector to gdp to be both positive and significant. shah (2016) uses a random effects model with a panel of middle eastern and north african countries and finds domestic credit to private sector to be positive and significant, whereas stock market capitalization to be insignificant. the sign and significance of financial development proxies seem to vary heavily dependent on the panel used and does yield consistent results. svirydzenka (2016) argues that this is likely because commonly used proxies, such as stock market capitalization and domestic credit to private sector, measure only financial depth rather than financial development. svirydzenka developed a financial development index, which combines various variables, as a proxy not only for financial depth (size of financial institutions and markets), but also for financial access and efficiency in both financial markets and institutions. although not yet widely used in literature, this new index provides a much more accurate depiction of the entire financial sector’s development. inflation is commonly used as an explanatory variable in studies to measure economic stability. countries with rapidly inflating currencies will not be attractive to foreign investors, as such shows signs of uncertainty, risk, and lower long-term profitability. furthermore, an inflating currency will also lead to reductions in domestic investment and economic growth. it is important to know the effects of inflation to countries’ foreign direct investment inflows. though it seems that inflation will have a negative impact on fdi, this is not always the case. williams (2015), ranjan (2011), and tsaurai (2017) find inflation to be the expected sign of negative and significant. however, das (2017) and erdogen (2015) both find it to be positive and significant which seems counterintuitive to economic theories. some studies such as tampakoudis (2017) find inflation to be insignificant. like financial development, inflation is a variable that yields inconsistent results. human capital is essential to countries to attract fdi and their economic growth is a commonly used variable in related literature. according to robert barro, a renowned researcher of economic growth, in terms of per capita income, poor countries tend to converge with rich countries if they have high human capital per capita (barro 1991). secondary school enrollment is commonly used as a proxy for human capital and is reported as both significant and positive in empirical studies, including kamath (2009) who focuses on india. some studies, such as hecock (2013), finds secondary school enrollment to 8 be insignificant. the united nations’ human development index (hdi) is also regularly used as a proxy for human capital and is considered more comprehensive as it accounts not only for education, but also for quality of life, health, and life expectancy. results of studies using hdi are mixed. das (2017) finds hdi to be negative and insignificant, while tsaurai (2017) finds it to be positive and significant. most studies that include a domestic investment variable only account for public investment in infrastructure. numerous infrastructure proxies have been used with contrasting results. kumari (2017) uses total electrical power consumption over a certain period of time as a proxy for infrastructure and finds it to be negative and significant. williams (2015) uses the number of telephones per 1,000 people as a proxy for infrastructure and finds it to be positive and significant. whereas infrastructure only accounts for public investment, gross fixed capital formation accounts for both public and private domestic investment. lautier (2012) define in theory why gross fixed capital is a more correct variable for determining both public and private domestic investment. private investment, like public investment, can also attract fdi through reducing “transaction costs,” promoting the “inter-firm division of labor,” and furthering the diffusion of technology (lautier 2012). private investment can also increase fdi inflows because domestic investors have a greater depth of and access to domestic information than foreign investors. therefore, high levels of domestic investment can signal a healthy domestic economic climate to foreign firms. gross fixed capital formation (gfcf) is found to be a significant and positive in lautier (2012). panigrahi (2012) utilizes a three-country panel, china, india, and malaysia and finds gfcf to be positive and significant. some studies in developing countries, such as jong (2015) in nigeria, actually find gfcf to have a negative sign. nevertheless, the majority of literature points to more of a positive relationship between domestic investment, development, and fdi inflows. numerous institutional variables are used in existing literature. one of such variables is democracy. due to their “executive constraint and judicial independence,” democracies can enforce property rights, which is attractive to foreign investors and may lead to greater fdi inflows (farazmand 2015). however, since democracies do a better job of preventing monopolies and oligopolies in business, mncs may hence invest in autocratic countries due to their increased profit opportunities and possibility of rent-seeking (farazmand 2015). firms located in countries with more authoritarian regimes may have a greater ability to influence government policy decisions. there are several measures of democracy used in literature, such as the freedom house’s democracy index, the polity iv’s democracy index, and the international country risk guide’s (icrg) democratic accountability index. however, the icrg’s index is “targeted toward foreign investors” and, therefore, is most appropriate to use for studies related to fdi (asiedu 2011). previous studies that used a democracy index find statistically significant results. dumludag (2009) uses the icrg index and finds it to be significant for a panel of developing countries. farazmand (2015) uses the polity iv’s index and finds positive and significant results in a generalized least squares (gls) model for a panel of countries that includes malaysia, turkey, and singapore. studies, such as nazeer (2017) and topal (2016), create political instability and political risk indices by combining a democracy index with other widely used institutional variables, such as corruption, law and order. nazeer (2017) uses a political instability index comprising of government stability, corruption, law & order, democratic accountability, and bureaucracy quality from the icrg index and finds it to be positive and significant. 9 3. data and methodology this study examines the determinants of fdi, using a data panel of representative asian countries. a pooled ordinary least squares (ols), semi-log fixed-effects (fe) regression model is utilized to analyze the determinants of fdi in a sample of six asian countries. the balanced panel data consists of india, singapore, china, south korea, turkey, and malaysia for the study period of 1995-2013. furthermore, a hausman test employed to determine whether a fixed or random effects model is preferred. the regression model takes the following form: y= β0 + β1xit + β2xit + β3xit + β4xit + β5xit + β6xit + β7xit + €it (1) where,  subscript i denotes the six representative countries while subscript t denotes times (country i at time t);  x is a vector of explanatory variables and β is a vector of unknown parameters to be estimated. the following semi-log fixed-effects (fe) regression model is utilized to evaluate the major determinants of fdi inflows: ln(fdi)it = β0 + β1(inf)it + β2(dem)it + β3(smcap)it + β4(gdppcg)it + β5(gfcf)it + β6(hc)it + β7(trade)it + €it (2) where,  subscript i denotes the six countries (i = 1-6) and subscript t denotes times in years (t=1995-2013);  ln (fdi)it= dependent variable (the natural logarithm of fdi inflows);  (inf)it = inflation, consumer prices (as annual % change);  (dem)it = democratic accountability variable;  (smcap)it = stock market capitalization to gdp;  (gdppcg)it = gdp per capita growth (as annual % change);  (gfcf)it = gross fixed capital formation (as % of gdp);  (hc)it = human capital of country;  (trade)it = trade (as % of gdp);  €it (epsilon) = stochastic (or random) error term, serving as a proxy for all those variables that are omitted from the model but collectively affect fdi inflows. the parameters in equation 2 are unknown and must be estimated empirically. the coefficients (β1β7) represent the rate of change of the dependent variable (fdi) as a function of change in the independent variables. €it is the error term and includes all the variations in fdi not explained by the independent variables. a hausman test is used to determine whether a fixed effects or random effects model is preferred. the p-value is 0.00, which is less than 0.05, so a fixed effects model is the preferred method. the data sources include world bank’s world development indicators, st. louis federal reserve, penn world table’s (pwt) human capital index, international country risk guide (icrg), and un's human development reports. the dependent variable (fdi) is foreign direct investment net inflows in constant 2010 usd. inflation (inf) is used as a proxy for economic instability. it is expected that inflation will have a negative coefficient because higher economic instability should result in less fdi. foreign investors are less likely to invest in a country if its currency is rapidly inflating. for the democracy (dem) 10 variable, the democratic accountability variable of the international country risk guide (icrg) index is used. this index measures how accountable governments are to their people. the ratio of stock market capitalization to gdp (smcap) is used as a proxy for financial development. it is defined as the ratio of the value of all listed shares of a country’s stock market to its gdp. while stock market capitalization is one of the most widely used proxies for financial development. however, many researchers find it insignificant. gdp per capita growth (gdppcg) variable (as annual % change) is expected to have a positive sign because foreign investors would understandably be interested in the profit opportunities of a rapidly growing economy. gross fixed capital formation (gfcf, as % of gdp) is used as a proxy for domestic physical investment. gfcf reveals the percentage of a country’s gdp, which is comprised of fixed capital. this fixed capital could include capital that fosters production, such as manufacturing plants and machinery. it could also include infrastructure that is more commonly found in developed countries, such as, schools, hospitals, and roads. the expected sign for gfcf is positive. the penn world table’s (pwt) human capital index is used as a proxy for human capital (hc). the united nation’s human development index (hdi) is also used as a proxy for human capital and is more detailed than secondary school education, since it also measures health and quality of life. however, given its wider range of measurements, hdi was multicollinear with many other variables used in this study, and therefore, was dropped in favor of the pwt’s human capital index. trade, as a % of gdp, is used as a proxy for trade openness. trade openness is the sum of imports and exports of goods and services, normalized by gdp. it is calculated as imports plus exports divided by gdp. the expected sign for this variable is positive. 4. empirical results the correlation matrix in table 1 shows that there is no evidence of multicollinearity between the independent variables (all correlations between any two variables are less than 0.5 in an absolute value). that is, no two predictor variables are highly correlated which leads to the possibility that our interpretation of coefficients will be incorrect. the financial development index created by svirydzenka (2016) had a correlation of 0.93 with the human capital index used in our model, and therefore, was dropped from the model as a proxy for financial development, in favor of stock market capitalization to gdp. table 1 – correlation matrix inf dem smcap gdppcg gfcf hc trade inf 1 dem 0.0479 1 smcap 0.2869 0.3443 1 gdppcg -0.1351 -0.1731 0.005 1 gfcf -0.3146 -0.2200 -0.0467 0.4197 1 hc -0.3684 0.0684 0.1281 -0.1694 0.005 1 trade -0.2590 -0.3981 -0.2805 -0.2266 -0.1683 0.4273 1 table 2 shows the fixed-effects estimation results. the adjusted r-squared is 0.82 and the probability of f statistics is 0.000, which both indicate a goodness of fit. the durbin-watson statistic is 1.93; there is no evidence of autocorrelation in our model. all variables except smcap are found to be significant and have the expected sign. inf is negative and significant, while dem, gdppcg, gfcf, hc, and trade are all positive and significant. although smcap is insignificant, it still has the expected positive sign. from review of literature, it is apparent that similar studies in the past also found financial development proxies to be 11 insignificant. these common proxies for financial development measure only financial depth (size of financial institutions and markets relative to aggregate economic output). table 2: fixed effects model estimation results. dependent variable = fdi (inflows) explanatory variable regression coefficient standard error t-statistic p-value c (constant) 14.0571 1.0938 12.8520 0.0000 inf -0.0129 0.0050 -2.5766 0.0114** dem 0.2311 0.0938 2.4622 0.0155** smcap 0.0025 0.0024 1.0277 0.3066 gdppcg 0.0341 0.0162 2.1006 0.0382** gfcf 0.0464 0.0133 3.4946 0.0007*** hc 2.2529 0.3766 5.9821 0.0000*** trade 0.0082 0.0031 2.6598 0.0091*** asterisks indicate statistical significance at the 1, 5, and 10 percent levels adjusted r2 = 0.82 f-statistics = 43.5 p* < 0.1 p** < 0.05 p*** < 0.01 # of observations = 114 durbin watson =1.93 5. summary and conclusions a semi-log fixed-effects regression model is utilized to analyze the determinants of fdi in a sample of six asian countries. a panel data consisting of india, singapore, china, south korea, turkey, and malaysia from 1995-2013 is employed. the dependent variable is fdi net inflows. the explanatory variables included in our econometric model are the following: democracy, inflation, human capital, economic growth, domestic physical investment, trade openness, and financial development. furthermore, a hausman test is employed to determine whether a fixed or random effects model is preferred. the fixed effects model estimation results show all variables, with the exception of the financial development variable, are statistically significant and have the expected sign. the results of this study reveal that gross fixed capital formation as both a positive and significant determinant of fdi, suggesting that foreign capital does not come at the expense of domestic capital, but rather is attracted to it. human capital is also positive and significant, meaning foreign investors are interested in developing skilled labor. this is beneficial for our panel of representative countries as high human capital results in more benefits from fdi inflows, such as technological diffusion and knowledge spillovers. human capital as a significant determinant of fdi is noteworthy for future studies as a new index from penn world table is applied in this study. as expected, we find inflation to be negative and significant determinant of fdi, indicating that developing countries should emphasize monetary responsibility in order to prevent economic instability. trade and gdp per capita growth have their expected sign and are significant determinants of fdi. in conclusion, the empirical findings of this study are of particular interest to policymakers in developing countries as they adopt economic policies to attract fdi inflows. policymakers need to focus on promoting domestic capital, education, trade openness, monetary responsibility, and development of the financial sector. 12 6. research limitations and future research the ratio of stock market capitalization to gdp is utilized as a proxy for financial development in this study. although this financial development proxy has the expected sign, it is insignificant, which is consistent with the current literature. the financial development index developed by svirydzenka (2016) was multicollinear with the human capital index used in our model. therefore, it was dropped from the model as a proxy for financial development, in favor of stock market capitalization to gdp. the new broad-based index of financial development introduced by svirydzenka (2016) may be applied as a possible solution to this problem as it combines measures for financial depth (size of financial institutions and markets), financial access, and financial efficiency. thus, further studies are warranted to apply this new financial development index. furthermore, larger sample sizes provide more information and reliable empirical results. references 1. asghar, ali (2016). foreign direct investment and trade openness: the case of south asian economies. international journal of innovation and applied studies, 17(2), 513521. 2. asiedu, e., & lien, d. d. 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(1997), “the changing role of trade co-operation in regional economies: a case study”, proceedings of the 37th european regional science association congress, roma, università degli studi di roma "tor vergata", facoltà di economia, august 26-29. 33. musso f. (2005), l’impresa commerciale minore in italia, cedam, padova. 34. musso f. (2010), "small retailing, town centres and inland territories. an “extended town centre management” perspective", public administration & regional studies, 3rd year, n. 2 (6), galati university press, pp. 37-58. microsoft word 9 (19-16) lawal 137 an examination of governance typology in nigeria higher education system abdulazeez abioye lawal pan atlantic university, lagos, nigeria waidi adeniyi akingbade lagos state university, ojo, lagos, nigeria hameed omotola ojodu lagos state polytechnic, ikorodu, lagos, nigeria received: september 13, 2019 accepted: november 18, 2019 online published: december 18, 2019 abstract nigeria higher education institutions (nheis) are facing a number of challenges that border on corporate governance (cg) practices. cg includes the issues of autonomy and accountability. in developed and developing countries, autonomy is being extended to heis for flexibility in fulfilling the mandate of teaching, research and community service. this paper explores cg culture and its challenges in nheis. a qualitative survey research method was employed through structured interviews of selected nheis key stakeholders and extensive deskbased research. the results of the interviews and content analysis of operational documents of selected high ranking nheis revealed the adoption of corporate governance structures and processes. the study also recognised the non-existence of disclosure of cg practice. challenges such as inadequate funding, excessive interference by government, domineering influence of unions, faulty composition of cg constituents and poor leadership are some factors affecting effective governance in these institutions. consequently, proper funding, leadership training, empowerment of these institutions and complete and periodic disclosure of application of cg practices are recommended. key words: corporate governance; nigeria higher education institutions; stakeholders. 1. introduction sustainable development is increasingly driven by the advancements and application of knowledge through effective higher education and good governance (mustapha and nofiu, 2017 and nazar et al, 2018). in every civilized society, education has been the most important international journal of economic behavior, vol. 9, n. 1, 2019, 137-163 138 engine of growth and driving force for socio-economic performance in organization (asadullah & ullah, 2018; popescu 2011). higher education is the organized learning activities at the tertiary level (jaja, 2013). the national policy on education of nigeria (2004) defined tertiary education to include universities, colleges of education, polytechnics and monotechnics. these institutions were established to blaze the trail in the production of required workforce equipped with a unique education tailored to address nigeria problems (ogunruku, 2012). the tripartite mandate of teaching, research and community service of higher institutions were derived from the age long core values characterized by intellectual vitality, academic freedom, ethical caring, diverse community and individual well-being (okogie, 2013; pucciaretti & kaplan, 2016). tertiary education is generally acknowledged as the citadel of knowledge, education and human resources development. the world bank maintained that the single most important key to development and poverty alleviation is education (deboer et al, 2002). little wonder, why the united nations education. scientific and cultural organization (unesco) recommended that developing nations should invest a minimum of 26% of total budget allocation to education sector (ahmad, 2015; ekundayo & ajayi, 2009). in developed and developing countries of the world, investment in education is premised on the efficacy of education in solving socio-political, economic and technological problems. in nigeria, this is far from the reality (ahmad, 2015). previous findings on the state of higher education in nigeria confirmed the degradation of nigerian education system (obiyo and lencee, 2011, ahmad, 2015). most of these institutions are characterized by unethical practices, poor quality of graduates, internal politics, bureaucracy, conflicting values, inadequate funding, low motivation, centralization of authority and decision making, global competition and poor cg culture (lawal 2008; bamiro 2012; issa and mohammed, 2014 and ahmad and adepoju, 2017). higher education institutions (heis) are facing dramatic changes. increasing enrolment, diversification of programs and revenue base, new modes of delivery, diversity in profiles, growing internationalization and emphasis on research and innovation are leveraging on knowledge production of hei (hannard and alexander, 2016). recently, the strategy of internationalization has become imperative to access large pool of talents and conversely it exposes heis to competitors who seek to capture the same resources (pucciarell and kaplan, 2016). internationalization has resulted into international ranking and accountability of heis. as rightly remarked “high ranking universities have three connected factors concentration of talents, abundant funding and appropriate governance” (salmi, 2009). accountability is also becoming an important element of governance in heis. the trend toward greater transparency and public accountability is evidenced through quality assurance framework, performance related funding, market mechanism and participation of external stakeholders (crous, 2017 and hannard and alexander, 2015). nigeria higher education (nhe) has undergone substantial deregulation resulting into participation of private sector. nhe needs to react to competitive environment similar to development in telecommunication and utilities sectors. despite the deregulation, government and supra agencies are still involved in hei system through various regulations, policies and recommendations to quality assurance and public resource allocation. nhe cannot succeed within the contemporary competitive environment without good leadership and sound governance (crous, 2017). in nigeria, cg is becoming important to the extent that several initiatives, structures and institutions have been established to address governance in various organizations. 139 empirical evidence on governance of nhe has received little attention.(davis, 2005). extant research focuses on governance of large corporate firms such as banks, multinational corporations and insurance firms on the premise that the findings of these studies can be generalized to other institutions. thus, nhe governance remains essentially unaddressed. higher education in nigeria is in travail. the system is riddled with crises of various dimensions and magnitudes. a number of multifaceted problems have inhibited goal attainment and are raising questions, doubts and fears on effective and efficient management of these institutions (ajayi and haastrup, 2016). against this backdrop, the successive governments have instituted a number of reforms aimed at improving the level of governance in these institutions. this article seeks to address the foregoing research gap by examining governance in nhe in order to determine how institutional actors are made responsible for the naturally defined mandate of teaching, research and community service. our study contributes to literature in two ways. theoretically, it helps to clarify the concept of governance as applicable to nhe. second, it adds to and differs from previous studies. while previous studies have addressed effect of governance on organizational determinants (e.g.blerins et al 2018, abdulazeez et al 2016), the present study answers the question, “what is the typology of governance system in nhe”? empirically, our study provides insight into challenges of governance of hei in a developing economy like nigeria. it addresses the factors institutional managers need to focus for performance improvement. 2. review of literature and theoretical framework 2.1. conceptual framework cg has received increased attention because of crises of confidence created by the failure of large corporations due to high-profile scandals involving abuse of corporate power and in some cases alleged criminal activities of corporate officials (kazmi, 2008). global disasters such as unethical financial reporting by enron, world com, parmalat, and maxwell in u.k., dawoo in korea, regal bank in south africa, cadbury, oceanic bank and intercontinental bank in nigeria, confirmed the growing need for transparency and accountability in corporate management (uwigbe, 2013). the concept of corporate governance has been defined differently in literature. astradian, (2010) defines cg precisely “as the system by which companies are directed and controlled. the revised principles of corporate governance of oecd expanded this definition by describing it as: “procedures and processes according to which an organization is directed and controlled. the corporate governance structure specifies the distribution of rights and responsibilities among different participants in the organization – such as boards, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision making” (oecd, 2005). the foregoing perception of cg mainly from agency theory has been criticized as inadequate. neubauer and lank (1998) provided a board view of cg by defining the concept as “a system of structures and processes to secure the economic viability as well as the legitimacy of the corporation (.......) economic viability means securing the long-term sustainability to development of the firm. in summary, cg is devoid by universally acceptable definition. most definitions are divisible into narrow and board perspectives. a narrow definition focuses on cg structure. the concept is concerned with the structures and systems of control by which managers are held accountable to those who have legitimate stake in an organization (jacoby, 2005). a broad 140 perspective is cg as a process. it is considered as the heart of both a market economy and a democratic society (oyejide and soyibo, 2001). meanwhile, the notion of governance in heis is a combination of both the structure and process. it is a structure which strives to preserve the integrity of academic value system. similarly, cg is a process of positioning universities vis a vis their larger environment to make them receptive and answerable to external messages, demands and expectations (fried, 2006 p.81). for the purpose of this study, the term governance refers to all the structures, processes and systems involved in planning, organising, directing and controlling of heis resources in response to the needs of the society. 2.2. corporate governance (cg) of higher institutions (his) in developed and developing countries cg is not only applicable to industrial operations, organizations whether private or public sectors need effective cg. higher institutions are increasingly being challenged by globalization, diversity of work force and complexity of environment. the problems of internal politics, work ethics, inadequate financing, overconcentration of authority and inability to compete in the global market are manifestations of poor corporate governance culture (basheka, 2015). cg in higher institutions according to basheka, (2015) is the process for distributing authority, power and influence for academic division among various constituencies. the council, the senate/academic board, faculty, department staff, students, administration, unions, committees and subcommittees play significant role in higher institutions cg. in recognition of the vital role of modern corporations in sustainable development, there has been increasing global initiatives toward the design and implementation of corporate governance principles for effective performance. most of these initiatives featured prominently in developed countries like united kingdom, united states of america, and australia. developing countries like india, south africa and nigeria have also taken bold steps to address the issue of cg (oyejide and soyibo, 2001).cg in these countries was initially confined to corporate giants and multinational corporations; however, the trend has been extended to heis with the growing need for an educated society (ogunruku, 2012). generally, governance measures were designed and implemented to tackle institutional and managerial dysfunctions. governance arrangements were instituted to address governance scandals in the post 1992 u.k. university sector scandals, netherland double students’ enrolment, united states students’ loan scandal and australian universities practice of cutting corners to attract foreign students.(salmi, 2008). in australia, the bosch reports and hilmar reports laid the foundation for promotion of good cg. australian heis are incorporated by statutory legislations that influence the governance. the legislation stipulates the structures and guidelines in relation to the roles of the council and principal officers (crous, 2017). the deloitte report reviewed and aligned governance of australian heis with contemporary governance and management practices. the main features of the reforms include increase in the size of councils, increase in the number of independent council members, promoting the use of standing committees with independent members and retaining the power of senate in governance of academic, research and learning (deloitte, 2014). in south africa, the state supervision model is adopted; higher education act of 801 of 1997 and national qualification framework of 2008 amended in 2012 provide guidelines for institutional governance. these acts empower the minister of higher education to intervene in case of poor performance. these statutes provide the ministry of higher education assisted by 141 council of higher education with ultimate responsibility for quality assurance. the internal structures of south africa heis include councils responsible for strategic decision, academic board/senate for academic matters. the senate/academic board comprised of mainly academic employees with representation of non-academic staff and students (crous, 2017). there is significant body of literature on shared governance in higher institutions. most literature concentrates on the concept of agency and trust. to address the concept of shared governance, olson (2009) explained that shared governance is not a novel topic or unique in the 21st century. however, there is a number of misinformation. shared governance is more complex than committee system and communication is a fundamental requirement for success of shared governance. american federation of teachers (aft) noted that shared governance is under attack, corporate style of business model that is more interested in physical outcomes rather than academic pursuit and their independent merits are challenging the shared governance. hoy, gage, and tartar (2006) extended discussion on institutional governance to trust conversation by placing the idea in the context of school mindfulness. this concept becomes apparent in contemporary institutional governance. studies conducted by keizer and sam (2014) demonstrated that many faculties consider governance as a luxury but participants disagree with this notion. a strong foundation is the position of resources and funding which are considered as the basis for strengthening boards in institutional governance (yang, 2015). 2.3 corporate governance in nigeria higher institutions the history of heis in nigeria is traceable to the early 1930s when yaba higher college was established following the elliot commission report. subsequently, other higher colleges were instituted in zaria, enugu and ibadan in 1940s. in 1948, university college of ibadan was founded as a campus of university college of london. subsequently, the ashibi commission report led to the establishment of regional universities in nsukka, ife and zaria in 1962 to provide high level manpower for the emerging public sector. the university of lagos was also established as a federal university. about the same time, regional polytechnics or colleges of technology were established in kaduna, enugu, ibadan and benin to produce technical manpower and colleges of education in zaria, ondo and owerri for training of secondary school teachers. later in 1970, the university of benin came into existence as the fourth regional university. these universities were regarded as the first generation universities (ogunruku, 2012). the evolution of second generation universities started in 1975 when seven federal universities came on board in ilorin, port harcourt, calabar, jos, maiduguri and sokoto. during this period, many federal and state heis were established (ogunruku, 2012). the third generations of universities were founded in the early 1980s with the establishment of universities of technology and agriculture in owerri, makurdi, bauchi, minna and abeokuta. at the same time, many states like imo, ondo, lagos, oyo, cross river established state universities borne out of the political and economic exigencies of the time (ajayi and haastrup, 2016).a new development was witnessed in the 1990s with the evolution of private heis. in fact, the fourth generations nheis were established between 1991 till date (ogunruku, 2012).the summary of heis in nigeria offering approved and accredited programs are provided in the table1. governance of university college of ibadan (now university of ibadan) naturally tapered from that of its main campus of london (ogunruku, 2012). other universities, particularly, the first generation universities adopted the governance structures of the early british universities 142 (ajayi and haastrup, 2016). these structures were incorporated into the various laws and statutes of various institutions. the statutes establishing these institutions such as federal universities of technology act 1986, the universities (miscellaneous provisions) (amendment) act 2003 etc. provide for the external and internal structures of governance. the external structures involve the participation of key stakeholders in institutional decision making of nheis. they include the ministry of education and agencies like nigeria universities commission (nuc), national board for technical education (nbte) and the national council for colleges of education (ncce) charged with the responsibility of monitoring the quality of services rendered by nheis. for example, the national university commission (nuc) act no 1 of 1974 states that the commission is committed to improve the quality of programmes through the injection of requisite inputs as well as assuring quality process and output. nuc by virtue of section 10(1) of the federal education act law of the federation vested in the body very wide and enormous power with respect to supervision and regulation of university education in nigeria.(iruonagbe and egharvebe,2015). these regulatory bodies ensure orderly development and adequate funding of heis. their activities include: i. accreditation of courses ii. approval of courses and programs iii. maintenance of minimum academic standard iv. monitoring of government institutions v. monitoring of private institutions vi. prevention of the establishment of illegal heis vii. implementing appropriate sanctions (ekundayo and ajayi, 2009) quality assurance is the key mandate of these regulatory bodies. quality assurances in heis include internal and external mechanisms put in place by the institutions and accreditations agency respectively. the regulatory bodies employ various variables to determine quality assurance of programmes and institutions. they include minimum academic standard, impact assessment, visitation, carrying capacity and admission quota, accreditation, publications, research assessment, structures, infrastructures and utilities. evaluation of existing staff strength, capacity building for teaching and non-teaching staff, exchange programmes for teaching personnel and students, institutional ranking and external moderation system (bannet 1997). the constituents of internal governance structures are those established by the statutes of nheis. they include the councils, the senate/academic boards, congregation, convocation, and faculty/school boards. the council is the highest decision making authority of nheis. the composition of the council has been reviewed in line with global best practices. for instance, the universities (miscellaneous provision) (amendment) act of 2003 adjusted the position of the governing councils of nigerian universities to have more internal members than external members in order to drive the system effectively and efficiently. the act also guarantees the autonomy of the university by providing the councils with full responsibility for good management, growth and development of the institutions. in summary, the key actors in nheis governance can be structured into academic oligarchy; intermediary organization actors and state actors (hernard and mitterle, 2015). academic oligarchy is visible in faculty boards, senates, academic boards and stakeholders on governing boards. the group is otherwise known as “academic elite” and promote in academic council. stakeholders in he range from students, academics, government community 143 representatives, alumni, unions and cultural groups to newly recognized actors like industry representatives. students as stakeholders in institutional governance occupy marginal roles. however, their advisory capacities and informal structures give their voice a stronger impact (bergan, 2003). intermediary organization actors comprising the governing councils, vice chancellors, rectors, provost, chief executive officers etc. who are responsible for day to day management. this responsibility entails different administrative tasks. state actors include relevant ministries, departments and government advisory agencies supervising nheis. nigeria he is characterized by strong state intervention. supervising nheis was seen as a state instrument of financial accountability. quality assurance agencies like national universities commission (nuc), national board for technical education (nbte) and national council for colleges of education (ncce) review programs and institutions and their influence varies from auditing and accreditation of programs to system. 2.4 theoretical framework the two key divergent theories that underpin perception and approaches to cg are “agency, theory”, and stewardship theory”. agency theory suggests that organizations can be viewed as a nexus of a contract between the principal (shareholders) and agents (corporate management). an agency problem exists when the management fails to act in the interest of the owners leading to friction and mistrust (obasan, 2014). for management to act ethically in the interest of the principal, application of cg principles is inevitable. the main criticism of the theory is the assumption that corporate executives are self-centred and irresponsible (kazmi, 2009).thus, agency theory develops primarily to direct and control the business by ensuring that management acts in the best interest of the shareholders. heis of course do not have shareholders. some heis might have tendency to see themselves as corporations, however the strong argument is the existence of academic boards which contradicts the analogy. in stewardship theory, corporate management is considered to be obedient servant managers; they will act in the best interest of the owner/principals. as “stewards” their interests are aligned with those of the owners. (davis et al 1997). the stewardship perspective suggests that corporate managers are satisfied and motivated when organisational success is attained. stewardship theory is more relevant to non-profit sector but falls short of providing a framework for heis governance issues. this approach assumes that managers want to do a good job and will act as effective stewards of the company. this is more sympathetic to the position of heis staff than agency theory. it nevertheless fails to capture the role of governing bodies, takes no account of legal and constitutional provisions of academic governance and provides a narrow definition of corporate management roles which is appropriate for the academic community. the agency theory is associated with a less trusting environment and provides for stringent measures using extrinsic rewards. at the other extreme, a stewardship theory is associated with more trusting environment and provides more intrinsic and empowering type of control. heis with legally defined objectives as the advancement of learning do not fit comfortably within the foregoing theories (shattock, 2006). rhoades (2005) proposed a shared governance model at the university level that focuses on democratic accountability. while universities are recognized to have variety of functions, among these are generating revenue for academic institutions, producing knowledge and wealth to boost global competitiveness of corporations. 144 this trajectory has made heis to become increasingly capitalist in nature. therefore, rhoades (2005) proposed a shift toward democratic accountability model to include internal and external stakeholders known as shared model. a governance model developed by american association of universities professors provided the foundation for a shared model. the share a model was also proposed by mcdaniel (2017), the model provides for inclusion of meaningful stakeholders in all committees and governing body compositions to secure their trust in governance. as clearly indicated by hoy, gage ⅲ, and tartar (2006) trust is a multi-faceted concept with five key components of openness, honesty, competence, predictability and benevolence. trust becomes a building block for successful institutional climate. the essence of shared model governance is to spread authority over a broader spectrum of stakeholders instead of isolating within the context of university models. 2.5 corporate governance and performance the relationships between various aspects of governance and performance have been studied using different theoretical and empirical perspectives. theoretically, effective governance is essential for long term success. it is a vital ingredient for balancing order and equity of society, ensuring accountability and protection of human rights and freedom (kwakwa and nzekwu, 2003). empirical evidence on the relationship, between corporate governance and performance has been mixed (adewusi et al, 2013). a first bunch of empirical reports support of positive relationship between cg and some indices of performance such as profitability, stock returns, share price and reduction incidence of corporate failure (uwigbe, 2013; blevins et al, 2018; zagoiched and gao, 2016, abdulazeez et al 2016and aliya and robina, 2007). a second stream of studies argues that governance suppresses corporate performance. jack and johl (2009) argued that outside directors with multiple appointments have negative effect on performance. meanwhile, studies conducted by adewusi et al (2013) and arora and sharman (2016) did not find significant relationship between cg and performance. an important conclusion from the foregoing studies on the combined effects of governance is that empirical evidence is contingent on a number of contextual factors. studies conducted by garcia-meca et al (2015) echoed this position by revealing the moderating effect of regulatory and investors’ protection environment on the relationship between board diversity and performance of banks. from the review of literature, there appears to be some visible gaps. first, most of the literature focused on cg in developed economies. second, the few empirical reports are corporate based. therefore, in recognition of the significant role of heis in sustainable development, there is need to empirically examine corporate governance of nheis. 3. research methodology 3.1. research methods following clarks (1998) theoretical concepts of hei governance, the present research focuses on governance of heis operating in the dynamic and developing nigerian environment. within these contexts, we explore the following two postulates:  the typology of governance in nheis and  challenges of institutional governance in nhe this exploratory study utilized qualitative approach to facilitate in depth and contextual analysis of governance in nheis. qualitative research strategy usually emphasized on words 145 rather that quantification of data and embodies a view of social reality as a constantly shifting emergent property of individuals’ creation (brynam and bell, 2011).crosswell (1994) recommends using qualitative approach to describe experiences. this recommendation is highly relevant to answering research questions of the study. qualitative research is designed to explore rather than predict a specific phenomenon (saibah and xiao, 2014). moreover, mustapha and nofiu (2017) described the state of the art of corporate governance in nigeria to be at the evolutionary stage, the need for a qualitative research for a more in-depth investigation is essential. 3.2. data collection sources empirical data were gathered by conducting structured interviewed with key institutional stakeholders of nheis. the interviews focus on exploring governance practices on one part and challenges of institutional governance on the other part. majority of the interviews were transcribed verbatim to allow for subsequent analysis. interviews were conducted with significant governance actors. the interviews lasted for 15-30 minutes. the email enquiry included a request to participate in a short interview. no compensation was offered. table 2: provides detailed informative in the interviewees. respondents were also promised anonymity of name and their respective organizations. the second category of data collection was generated from archival sources. the interviews were complemented by extensive desk-based research (e.g. institutional websites, annual reports, institutional laws and some media releases) to ensure credibility. content analysis of records has become a popular method for qualitative and quantitative analysis in management and international business research (ajai and kumar, 2018). the method was chosen for its ease of extracting data and drawing conclusions from variety of communication tools (ritchie, 2014). 3.3. population, sample size and sampling technique heis constitute the tertiary education in nigeria. they include universities, polytechnics and colleges of education (bamiro, 2012).the population of the study comprises 162 universities, 119 polytechnics/monotechnics and 86 colleges of education established by federal, state and private investors. a similar studies conducted in south africa by crous (2017) also used the list of approved and accredited hels. the sampled institutions were 10 high ranking universities, 10 high ranking polytechnics and 10 high ranking colleges of education. the choice of these institutions was based in availability and accessibility of records on cg and the fact that governance provides explanation for academic excellence in these institutions. the thirty nheis were selected based ranking conducted by regulatory agencies. the ranking assessed quality of staff, capacity building, strategic plan, master plan, students’ enrolment, teaching quality, infrastructure and existence of a well-developed entrepreneurship development program to mention just a few. nine interviews were conducted across these categories. a purposeful sampling approach (saunder et al 2015) was employed to select participants relevant to the study. interviewees comprised chairman governing council, executive secretary of regulatory agency, vice chancellor, rectors, registrars, provosts and bursars of these institutions who are regarded as accounting officers and drivers of change process. 146 4. data analysis and results the numerical and non-numerical data were critically analysed using content analysis enriched by tables and figures to provide some insights on corporate governance in nhels. the analysis process commenced with transcribing the data from the interview. the transcripts were then summarized. an analysis of secondary information was also conducted to further corroborate the transcribed data. documents such as conditions of service, enabling laws, annual reports, information available from web sites, vision, mission, strategic planning, organization structure, and organizational manual and so on were contently analysed to ensure rigor in the data collection process. 4.1. application of corporate governance (cg) practices in 30 high ranking nigerian higher institutions table iii shows the application of cg in nheis is similar to shared governance structures of the uk. the internal governance structures of shared governance are found virtually in all the institutions. the external governance structures are in forms of state involvement in institutional governance. an important finding is the absence of annual report on disclosure of application of cg principles. shared governance entails stakeholder involvement in decision making and is becoming one of the key principles of cg practices embraced by heis worldwide. examples are found in europe and developing countries; conversely, the us heis institutional governance is diverse in nature. most u.s. states have unique governance structures governed by strong board of trustees (crous, 2017). external governance of heis is based on state supervision which is used in developed and developing countries. in south africa, europe and united states, there are ministries and agencies responsible for overseeing the heis compliance with rules and regulations and formulating educational policies that frame the strategic plan of heis (crous, 2017). the major internal constituents of governance are usually provided by the statutes establishing nheis. they include the governing councils (gc), executive management, management committee, senate/academic boards, faculty board, etc. the executive head of nheis is known as vice chancellor/rectors/provosts. the autonomy of nheis was expanded by granting the gc and executive heads more power in decision making. the university (miscellaneous) amendment act 2003granted the autonomy to nigerian universities by providing the council with full responsibility for good management, growth and development. the selection of the executive head is usually by the gc for a single term of 5 years. the size and membership of the council vary depending ownership structure. membership also is composed with representation from internal and external stakeholders. 4.2. composition of governing (gc) councils in 30 high ranking nigerian higher education institutions table iv reveals that sampled nheis gc range from ten to twenty-three. while some nheis have all dvcs on the gc, others have provision for only one. senate/acb representatives on the gc also vary. the federal institutions provide for more representation, states have less and virtually none in private institutions. some institutions have alumni representation. one of the polytechnics allows for the representation of organized private sectors, such as manufacturers association of nigeria (man), lagos state chambers of commerce and industries (lcci). all the federal and states institutions provide for the representation of ministry of education. in addition, federal institutions have representatives of regulatory bodies like nuc, nbte and ncce. some nheis have representatives of professional bodies e.g., coren. private 147 institutions have council members comprising the board of trustees of the funding organizations. committee system is also an essential component of cg in nheis. the common standing committees of nheis (gcs) are: financial and general purposes, tenders boards, development, audit, appointments and promotions committees. the composition of these committees depends on the provisions of the statutes. conventionally, stakeholders in heis gcs include internal and external members. the newly recognised actors are mainly industry representatives, community authorities, alumni, unions and cultural groups. the influence of these stakeholders ranges from simple funding to supervisory (lauzzaretti and tavoletti, 2006). the position and power of these stakeholders differ from one system to another. in strong multi-stakeholders, gcs have representative roles to play. in hungary, france and germany strong executive powers are assigned to vcs, rectors and provosts (crous, 2017, blenche and kogan, 2017). in europe and other developed countries students’ involvement in governance has been increasing over the years. (bergan, 2003). nheis have no students’ representatives in both internal and external governance structures. statutes of nheis provide for a senate/academic board. the body is academic governance and is accountable to the gc. it has responsibility for academic and research activities. table v contains the summary of composition of senate/academic boards of sampled nheis. 4.3. composition of the senate/academic boards of 30 high ranking nigerian higher education institution from table v, nheis have the vice chancellors (vc)/rectors/provosts and their respective deputies, librarians, deans of students affairs, campus heads, academic directors, directors of academic planning, heads of departments and representatives of congregation in the composition of the senate/academic boards. nheis do not have staff and students union’s representatives in senate/academic board as practiced in developing countries. the senates/academic boards of participating institutions also adopt a committee system of governance. research grant and staff development, business committee, committee of directors/deans, curriculum committee and students disciplinary committee are common to sampled institutions. some of these nheis also operate a joint committee of the gc and senate particularly on appointments and promotions of academic staff. operation management of the nheis is vested with the principal officers appointed by the councils and comprising the vc/ rector/provost, dvc/ deputy rector/deputy provost, registrar, bursar and the university/polytechnic/college librarian. to achieve organizational wide participation in decision making, an expanded management known as management committee is put in place. the committee is composed of the principal officers, dean student affairs, deans of faculty/schools, directors of ventures, director academic planning, director of works, director health administration, chief internal auditor and director public relations. the committee exists to advise the executive management on the day to day running of the institution. apart from the foregoing statutory internal structures, there are management and advisory committees which further enhance participation in decision making. vice chancellors, provosts and rectors operate a committee system to advice on strategic and non-strategic issues. examples are executive management, management, ceremonies, sports and games, students and staff discipline, staff and students welfare, research and development, external relations, congregation, security and housing committees. the adoption of committee system enhances the beauty of cg in nheis. it also facilitates capacity building and participative management. 148 management of nheis also engage in interactive sessions with all stakeholders including students, teaching and non-teaching staff, ministries, departments and agencies (mdas) of the governments, royal fathers and the hosting communities. faculty boards, school boards and academic departments also play important role in cg of nheis. they are responsible to the senate/academic board and are expected to report their activities to the senate/academic board for approval. in addition, they provide inputs for academic and management decisions. congregation is statutory recognised but has no executive functions, yet is strategic to good governance and order of nheis. the statutes in all cases prescribe that congregation shall comprise all full time academic staff who hold a degree of any heis recognised for the purpose of the statute by the vc/rectors/provosts not being honorary degrees. a meeting of the congregation is usually held periodically for the purpose of receiving reports of nheis activities. it offers the most convenient forum for disseminating vital information and exchanging views freely on issues affecting stakeholders. statutes of nheis also provide for convocation, in nigerian universities, it is usually presided by the chancellor, in his absence, vc and where both are absent, the deputy vc. the convocation comprises all officers of heis as mentioned in the schedule of the statutes and all academic staff and all graduates of heis are members of the convocation. the purpose is to confer degrees, diplomas and fellowships on graduates and members of the society. furthermore, the conditions of service and financial guidelines are two basic cg instruments common to nheis. the nhis conditions of service regulates appointments of various categories of staff. it addresses issues like compensation package, promotion, staff discipline, retirement, leave, and governance procedure. the financial guidelines of nheis outline the primary responsibility of the ceos on financial matters, responsibility of spending officers, bursary, internal audit, budgetary provisions, order of work, tenders, acquisition of assets, payments, income, insurance, etc. 4.4 challenges of corporate governance in nheis from the scheduled interviews on design and implementation of governance in nheis, the major emerging themes are internal and external challenges. funding was found to be one of the major internal challenges affecting effective adoption of cg. majority of the stakeholders argued that inadequate funding from the government and owners of nheis did not allow for effective cg practices. this situation is echoed by comments of the following stakeholders: “the polytechnic relies heavily on government subvention to survive. the total monthly personnel costs are over 210 million naira and the monthly subvention from the state government is 153 million naira which is grossly inadequate. to complement the subvention, part time programs are run to boost internal revenue generation. the operation of part time system affects the quality of education. moreover, the institution is not in full control. the state that provides the bulk of funds for running the institution usually dictates the programs and projects to channel the funds”. (rector) “the university still faces numerous challenges, the key of which is inadequate funding. while we deeply appreciate the crucial support of the government, a lot more is required if we have to realize our dream of becoming a world class institution in the not too distance future” (vice chancellor)”. 149 “while appreciating the state government for all the past and continued support towards the development of the college, made possible through release of capital grant and increase in subvention, like “olive twist”, the council is requesting for more assistance from the government to supplement internally generated revenue base in order to bring the college into an amiable standard. i come to our aids to improve the infrastructural base of the college (chairman, governing council). inadequate funding and breakdown of infrastructure in nheis since the commencement of economic recession in the late 1980s has resulted into employment many staff that have no business in academic environment. such people have limited understanding of the system; they are products of the prevalent emergency situations. nhels also witnessed a lot of bellicose unionistic interventions for redeeming this deplorable situation. in fact, rather than these interventions leading to progression in performance of nhels, the system witnessed retrogression (ajayi and haastrup, 2016). as one executive secretary observed: “records from the boards quality assurance department indicate a worrisome level of continued existence of expired programs in most state polytechnics. this is a serious problem that if left unaddressed would greatly affect our standards. this problem is further compounded by the menace of over enrolment driven solely by desire to generate revenue. while there is need to complement government subvention, education remains a social investment that is quality conscious” (executive secretary, regulatory agency). a similar disturbing symptom of poor cg in nheis is the historical evolution and changing dynamism of staff unions whose instruments for negotiation is strike. over the years, these unions had embarked on strikes to press for their demands (assem, dima, sarah, 2007). as rightly noted by a registrar: “majority of the strikes are caused by financial and other problems of nheis and traceable to government who routinely bypass the management and governing council to issue all sorts of instructions and circulars” (registar). over the years, nigeria higher education system has witnessed a number of crises leading to instability of academic calendar. for nheis to achieve effective governance and ultimately succeed, peaceful academic environment is a sin quo none. a rector remarked: “the greatest challenge faced by ceo of tertiary institutions in nigeria is the issue of staff embarking on strike for improvement in working conditions and students protesting a decision or policy of the institution. we have had a crisis-free in the polytechnic since the inception of the administration in 2015. this indeed is a worthy celebration and contributes to our sound governance” (rector). another group of stakeholder, executive secretary of a regulatory agency agreed with the position of the rector by commenting: 150 “there is also the problem of increasing wave of management and union conflicts threatening the smooth running of academic calendar. there is need for partnership between the board, governing councils, rectors and other relevant agencies to solve the problem in order to maintain quality in the system.” (executive secretary, regulatory agency). resulting from reliance on government for funding is the interferences of the state in administration of these institutions which is also a major challenge. admission of quality candidates and recruitment of qualified manpower to fuel cg practices are problematic considering the frequent requests from civil servants, public officers and politicians. as rightly remarked by a provost of college of education: “there are criteria for selection of prospective candidates for admissions and recruitment of manpower. such criteria are compromised to accommodate requests from top government functionaries. this to a large extent would affect the quality of students and staff” (provost). most nheis were established by various statutes. these laws contain relevant information relating to appointment of key officers. in some cases the laws are violated to satisfy the need of the key stakeholders. for example, a state government recently filled the vacuum created by the death of a college provost through selection of a university lecturer in acting capacity without following normal procedure. nheis where political considerations and loyalty to the government were the main criteria for the appointment would be governed based on the dictates of the government and politician rather than application of cg principles. leadership is another major challenge. effective implementation of cg in these institutions is contingent on good leadership in both teaching and non-teaching departments. also good leadership is necessary at the councils. leadership in nheis requires not only professional competence but administrative acumen to successfully implement cg principles as rightly echoed by a rector: “some officers have professional skills but majority of these leaders lack administrative experience to stir the affairs of the institutions. the passage of the new pension law by the government created leadership vacuum for my institution. majority of experienced staff retired to take opportunity of the old pension schemes. the mass retirement of experienced staff left the administration of the institution in the hands of inexperienced staff. in addition, the composition of the present council constituted an impediment to effective to cg practices. council comprising members from the geo political zones of the states appointed not on the basis of skills and experience but political affiliations will not provide for robust decision making process”(rector). this sentiment is supported by executive secretary of a regulatory agency. “the board observes with dismay, the trending practice of recruitment and promotion of unqualified staff especially in the academics, in clear violation of prescribed rules. appointment should not be based at the whims and caprices of those in authority but based on laid down rules. anything contrary will only water 151 down standards and make our products half-baked” (executive secretary, regulatory agency). meanwhile, the present composition of federal universities councils designed to favour internal members is also a major challenge. while some members are elected to the council with leadership skills and commitment, a number of these elected officers lack the skills, experience and attitudes to contribute positively to the development of the institutions. they are just squarely politicians pursuing the narrow interest of their sponsors. moreover, the domineering influence of unions on election matters has its decreasing impact. a situation in which elective positions are influenced by the unions will create mediocrity and shift of loyalty. a former registrar commented on the negative effect of this development in his valedictory speech delivered in june 2010 as follows: “a council with this composition is obviously not in good position to take an independent view of the affairs of its university; such council will be more concerned with internal politics” (registrar). in the same vain, appointments of leadership of academic and non-academic units by the vc/rector/provost on the basis of personal and principle of giving job to the boys will also affect quality of output negatively. higher education is the foundation for sustainable development and its creation must be based on clearly articulated, formulated and implemented educational programs. establishment of heis on political, regional or tribal sentiments will negatively affect effective governance. this external challenge was acknowledged by a union leader: “government establish he purely on political sentiments and now unable to meet the minimum standard due to poor funding. in fact, most of the infrastructures in the state polytechnics are tertiary education trust fund projects” (president, academic staff union). 5. conclusions and recommendations 5.1. conclusions the mandate of higher institutions to develop a whole man mentally, morally and physically is being seriously challenged nationally and internationally. effective cg is a sine qua non for long term corporate success. (menihukpong, 2013). intellectual capital is the most important resources in knowledge-based organizations. its importance is increasingly appreciated in the world of business (bontis, 1996; bradley, 1997; keenan and aggestam, 2001.) cg practices were initially confined to corporate giants and businesses. however, the trend has started to take roots in nheis with growing need for an educated society. governance in nheis has been under spotlight for several years due to leadership problem, poor funding, and mismanagement of resources, government interference, organizational politics, and influence of unions and faulty composition of gc to mention just a few. cg addresses the issues of autonomy and accountability. in most developed and developing countries, autonomy is being extended to nheis for flexibility in meeting the societal needs. autonomy of these institutions also implies societal accountability (pandey, 2004). various governance models have been documented in recommending best governance practices for quality education. there is no model that fits all 152 situations. however, an effective model must seek for greater accountability, transparency, competition and fewer regulations. state involvement in nheis is supervisory in nature with ministry of education and regulatory agencies playing oversight functions. the internal governing structures of nheis are the council, senate/acb and management. the council serves as a focal point of governance. it is the highest decision making body for good order and governance. the recent changes in composition of internal governance structures of nheis are directed towards empowering the council and management effective performance. 5.2. recommendations in view of the foregoing, it is therefore recommended that attempts by the various nigerian governments in granting autonomy to higher institutions through the various enabling laws should be used as opportunities by nheis to take full responsibility for good cg. this system of administration must be accountable, transparent, participatory, ethically caring, motivating, guarantees free flow of information and guarantee fundamental human rights. to sustain public confidence, the gc should include more external members with a focus on strategic direction and little interference in management. disclosure of internal government practices which is one of the core aspects of international best practices is virtually non-existent in nheis. hence, commitment of these institutions to cg principles of independence, transparency, accountability and responsibility is in doubt. nheis irrespective of nature must be accountable to all stakeholders. while this does not imply uncontrolled interference by the stakeholders, it imposes on obligation on the nheis to periodically report and to have their performance examined in transparent manner. although, congregation reports delivered by vice chancellor/rectors/provost provide some account of stewardship. without disclosure of application of cg principles by the councils and management, the stakeholders will find it difficult to hold the constituents of governance accountable. usually, cg reports must be prepared, published and submitted to the government through the ministry of education. such reports will list the contribution of nheis to the society and can be used for the purpose of benchmarking. in addition, a national database that will guarantee access of these documents for public use should be established. 5.3. contribution to knowledge meanwhile, the study makes important contributions to theory and practice. first we expand the existing small number of studies on cg in nheis. this study clearly describes the internal and external governance structures of nheis and the importance of cg in the performance of these institutions in light of developments in the global environment. second, the study highlights some challenges faced by nheis in achieving good governance. third, we demonstrate the absence of disclosure of application of cg in institutional reports which needs adequate attention. 5.4. suggestions of future research nevertheless, the findings of this exploratory study must be interpreted with care. it has some limitations. hence, suggestions for future studies deserve some comments. the study focused mainly on few nheis and generating data from only key stakeholders. a more comprehensive study on nheis incorporating both academic and non-teaching staff would be desirable in order to enlarge the sample size and increase the possibility of generalizing the findings for future studies. 153 finally, a study of this nature is expected to improve performance and subsequently ranking of nheis in the global environment. consequently, it is suggested that future study should analyse institutional governance practices and performance. references 1. abdulazeez, d.a; ndibe, l. and mercy, a. 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(2016). corporate governance and performance of financial institutions, journal of economics and business, 82, 17-41. 157 appendix table 1 – higher institutions offering approved and accredited programs in nigeria s/n institution type federal state private total 1 colleges of education a 22 47 17 86 2 polytechnics/monotechnics b 28 43 48 119 3 universities c 41 47 74 162 total 91 137 139 367 source: (a) national council for colleges of education (ncce) website 2018 (b) national board for technical education (nbte) website 2018 (c) national universities commission (nuc) websites 2018 table 2 – interviewees and interviewed schedule details s/n organisation type position rank n/v qualification experience in cg 1. university federal vice chancellor tmt v b.sc., m.sc., ph.d. 8years 2. polytechnic state registrar tmt v b.sc mpa 5years 3. university federal registrar tmt n b.sc., m.sc., ph.d. 8years 4. polytechnic federal rector tmt v b.sc., msc, ph.d. 8years 5. polytechnic state rector tmt n b.sc., msc, 4years 6. polytechnic private rector tmt n b.sc., m.sc. 8years 7. regulatory agency federal executive secretary tmt v b.sc., m.sc., ph.d. 8years 8. college of education state chairman, governing council tmt n b.a, ma, mpa 4years 9. polytechnic federal union president mm n hnd 5years key: tmt/mm: top management/middle management v/n: voice/recording/note taking 158 table 3 – application of corporate governance practices in best 30 higher institutions in nigeria s/n institution year of establ ishme nt statute constituents of internal governance constitue nts of external governan ce disclo sure of cg practi ces principal officers 1 university of ibadan (ui) 1948 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 3 dvcs, registrar, bursar, university librarian 2 covenant university, ota (cu) 2002 incorporated trustees board of regents, senate, faculty board, department nuc, board of trustees, federal ministry of education none vc, dvc, registrar, director financial services, director centre for learning resources, director physical planning and resources, university chaplain 3 university of nigeria, nsukka (unn) 1960 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 3 dvcs, provost college of medicine, registrar, bursar, university librarian 4 obafemi awolowo university, ile-ife (oau) 1962 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 2 dvcs, registrar, bursar, university librarian 5 federal university of technolog y, minna (futm) 1983 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 2 dvcs, registrar, bursar, university librarian 6 university of lagos (ulg) 1962 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 3 dvcs, registrar, bursar, university librarian 7 ahmadu bello university, zaria (abu) 1962 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 2 dvcs, registrar, bursar, university librarian 8 federal university of agricultur e, abeokuta (fuab) 1988 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 2 dvcs, registrar, bursar, university librarian 9 university of ilorin (ulr) 1975 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 3 dvcs, provost college of health services, registrar, bursar, university librarian 159 10 federal university of technolog y akure (futa) 1981 university miscellaneous provision 1993, amendment 2003 councils, management, senate, faculty board, departments nuc, federal ministry of education none vc, 2 dvcs, registrar, bursar, university librarian 11 federal polytechni c nekede, imo state (fpn) 1978 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 12 federal polytechni c ilaro, ogun state (fpi) 1979 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 13 kaduna polytechni c kaduna (kpk) 1956 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 4 the polytechni c ibadan (tpi) 1970 ibadan poly edict 1970 councils, management, academic board, board of school, departments nbte, state ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 15 federal polytechni cbida (fpb) 1977 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 16 auchi polytechni c auchi (apa) 1963 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 17 institute of manageme nt and technolog y enugu (imt) 1973 imt edit no.10 of 1973 councils, management, academic board, board of school, departments nbte, state ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian and director of works 18 federal polytechni c offa (fpo) 1992 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 19 rufus giwapolyt echnic owo (rgp) 1979 rufus giwa poly edict of 1979 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian and chairman committee of deans 20 yaba college of technolog y yaba (yct) 1947 federal polytechnics acts 2004 amendment 2017 councils, management, academic board, board of school, departments nbte, federal ministry of education none rector, 2 drcs, registrar, bursar, polytechnic librarian 21 adeyemi college of education, ondo (ace) 1964 federal college of education acts 1986 councils, management, academic board, board of school, departments ncce, federal ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 160 22 federal college of education zaria (fcz) 1962 federal college of education acts 1986 councils, management, academic board, board of school, departments ncce, federal ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 23 niger state college of education, minna (ncm) 1975 niger state edict n.s.l.n number 3 of 1983 councils, management, academic board, board of school, departments ncce, state ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 24 federal college of education (special) oyo (fco) 1977 federal college of education acts 1986 councils, management, academic board, board of school, departments ncce, federal ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 25 federal college of education, kano (fck) 1965 federal college of education acts 1986 councils, management, academic board, board of school, departments ncce, federal ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 26 federal college of education, abeokuta (fca) 1976 federal college of education acts 1986 councils, management, academic board, board of school, departments ncce, federal ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 27 college of education warri (cew) 1979 college of education 1995 amended edict. councils, management, academic board, board of school, departments ncce, state ministry of education none provost, 1 deputy provost, registrar, bursar, college librarian, director of works and maintenance 28 emmanuel alayande college of education oyo (eco) 1976 edit no.16 vol 30, 2005 councils, management, academic board, board of school, departments ncce, state ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian, director of works. 29 college of education, agbor (cea) 1979 college of education 1995 amended edict. councils, management, academic board, board of school, departments ncce, state ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian 30 college of education ikereekiti (cei) 1977 college law no.3 of 1999 councils, management, academic board, board of school, departments ncce, state ministry of education none provost, 2 deputy provosts, registrar, bursar, college librarian source: compiled by the authors 161 table 4 – composition of governing councils according to the statutes of best 10 nigeria universities, polytechnics, and colleges of education composition of governing councils according to the statutes of best 10 nigeria universities s/n membership ui cu unn oau fum unlg abu fuab lrn futa 1 non-executive chairman 1 1 1 1 1 1 1 1 1 1 2 executive chairman 3 vc/recto 1 1 1 1 1 1 1 1 1 1 4 dvc/dep. rector/dep. provost 3 2 3 2 2 3 2 2 3 2 5 rep senate/acb 4 4 4 4 4 4 4 4 4 4 6 rep congregation 2 1 2 2 2 2 2 2 2 2 7 rep ministry of education 1 1 1 1 1 1 1 1 1 8 rep convocation 1 1 1 1 1 1 1 1 1 1 9 rep students 10 rep geo political zones 9 9 9 9 9 9 9 9 9 11 rep of regulatory 12 rep professional 13 rep industrial ass 14 rep alumni 15 rep bot 4 16 rep of university 17 rep national council for women total 21 15 21 20 20 21 20 20 21 20 composition of governing councils according to the statutes of best 10 nigeria polytechnics s/n membership fpn fpi kpk tpi fpb apa imt fpo rgp yct 1 non-executive chairman 1 1 1 1 1 1 1 1 1 1 2 executive chairman 3 rector 1 1 1 1 1 1 1 1 1 1 4 dep. rector 2 2 2 2 2 2 2 2 2 2 5 rep acb 2 2 2 2 2 2 2 2 2 2 6 rep congregation 3 3 3 3 3 3 3 3 3 3 7 rep ministry of education 1 1 1 1 1 1 1 1 1 1 8 rep convocation 3 3 3 3 3 3 3 3 3 9 rep students 10 rep geo political zones 5 5 5 5 5 5 5 5 5 5 11 rep of regulatory 1 1 1 1 1 1 1 1 1 1 12 rep professional 13 rep industrial ass 1 1 1 1 1 1 1 1 1 1 14 rep alumni 1 1 1 1 1 1 1 1 1 1 15 rep bot 16 rep of university 17 rep national council for women total 21 15 21 20 20 21 20 20 21 20 (continuing) 162 (following) composition of governing councils according to the statutes of best 10 nigeria colleges of education s/n membership ace fcz ncm fco fck fca cew eco cea cei 1 non-executive chairman 1 1 1 1 1 1 1 1 1 1 2 executive chairman 3 provost 1 1 1 1 1 1 1 1 1 1 4 dep. provost 2 2 2 2 2 2 2 2 2 2 5 rep acb 2 2 2 2 2 2 1 2 2 2 6 rep congregation 3 3 3 3 3 3 1 3 3 3 7 rep ministry of education 1 1 1 1 1 1 1 1 1 1 8 rep convocation 2 2 2 2 2 2 2 2 2 2 9 rep students 10 rep geo political zones 5 5 5 5 5 5 5 5 5 11 rep of regulatory 1 1 1 1 1 1 1 1 1 1 12 rep professional 13 rep industrial ass 14 rep alumni 1 1 1 1 1 1 1 1 1 1 15 rep bot 16 rep of university 1 1 1 1 1 1 1 2 1 1 17 rep ministry of finance 1 total 21 20 21 20 20 21 18 22 21 20 source: compiled by the authors table 5 – senate composition of best 10 nigerian universities, polytechnics, and colleges of education according to the statutes academic board composition of best 10 nigerian universities according to the statutes s/n composition ui cu unn oau ftm ulg abu fua ulr fta 1 vc/rector/provost √ √ √ √ √ √ √ √ √ √ 2 dvc/dep. rector/dep. provost √ √ √ √ √ √ √ √ √ √ 3 registrar √ √ √ √ √ √ √ √ √ √ 4 campus heads/directors √ √ √ √ √ √ √ √ √ √ 5 deans √ √ √ √ √ √ √ √ √ √ 6 dean students affairs √ √ √ √ √ √ √ √ √ √ 7 director ict √ √ √ √ √ √ √ √ √ √ 8 director academic planning √ √ √ √ √ √ √ √ √ √ 9 heads of departments √ √ √ √ √ √ √ √ √ √ 10 professors/chief lecturers √ √ √ √ √ √ √ √ √ √ 11 librarian √ √ √ √ √ √ √ √ √ √ 12 senate representative √ √ √ √ √ √ √ √ √ √ 13 representative of congregation √ √ √ √ √ √ √ √ √ √ 14 representative of unions 15 students union representative 16 rep of council (continuing) 163 (following) academic board composition of best 10 nigerian polytechnic according to the statutes s/n composition ui cu unn oau ftm ulg abu fua ulr fta 1 rector √ √ √ √ √ √ √ √ √ √ 2 dep. rector √ √ √ √ √ √ √ √ √ √ 3 registrar √ √ √ √ √ √ √ √ √ √ 4 campus heads/directors √ √ √ √ √ √ √ √ √ √ 5 deans √ √ √ √ √ √ √ √ √ √ 6 dean students affairs √ √ √ √ √ √ √ √ √ √ 7 director ict √ √ √ √ √ √ √ √ √ √ 8 director academic planning √ √ √ √ √ √ √ √ √ √ 9 heads of departments √ √ √ √ √ √ √ √ √ √ 10 professors/chief lecturers √ √ √ √ √ √ √ √ √ √ 11 librarian √ √ √ √ √ √ √ √ √ √ 12 senate representative √ √ √ √ √ √ √ √ √ √ 13 representative of congregation √ √ √ √ √ √ √ √ √ √ 14 representative of unions 15 students union representative 16 rep of council academic board composition of best 10 nigerian colleges of education according to the statutes s/n composition ace fcz ncm fco fck fca cew eco cea cei 1 provost √ √ √ √ √ √ √ √ √ √ 2 dep. provost √ √ √ √ √ √ √ √ √ √ 3 registrar √ √ √ √ √ √ √ √ √ √ 4 campus heads/directors √ √ √ √ √ √ √ √ √ √ 5 deans √ √ √ √ √ √ √ √ √ √ 6 dean students affairs √ √ √ √ √ √ √ √ √ √ 7 director ict √ √ √ √ √ √ √ √ √ √ 8 director academic planning √ √ √ √ √ √ √ √ √ √ 9 heads of departments √ √ √ √ √ √ √ √ √ √ 10 professors/chief lecturers √ √ √ √ √ √ √ √ √ √ 11 librarian √ √ √ √ √ √ √ √ √ √ 12 senate representative √ √ √ √ √ √ √ √ √ √ 13 representative of congregation √ √ √ √ √ √ √ √ √ √ 14 representative of unions 15 students union representative 16 rep of council source: compiled by the authors 23 feeling the pulse of trade in the age of corona: artificial intelligence and e-commerce mehrnaz kouhihabibi sapienza university, italy received: august 20, 2021 accepted: october 21, 2021 online published: november 8, 2021 abstract covid-19 directly has had a negative economic impact on the supply chain, demand, financial markets, investment, production, and international trade, whose consequences could change the geopolitical position of countries in the world. quarantine policy which has been associated with changing the working pattern and consumption of users, although it has harmed some economic sectors, has been able to save countries from the risk of complete closure with ict capacities. this article attempts to provide an overview of the effects of the coronavirus epidemic on the global economy, especially the world's major economies and countries most affected by the crisis, in general, possible development scenarios, and how the epidemic will affect society and examine the global economy. next, by examining statistics and information published from reputable global sources on the current state of the coronavirus epidemic, the effects of the virus epidemic on important sectors of the global economy, such as financial markets, labor market, energy market, and travel and tourism industry are discussed and reviewed. finally, in order to identify the various economic strategies for managing the effects of this crisis, the economic policies of different countries in the face of the coronavirus epidemic were briefly reviewed. keywords: coronavirus; economy; business; information technology; marketing strategy. 1. introduction the year 2020 will be remembered as the year of the covid-19 pandemic, the first time that nearly any country on the globe was forced to briefly confine individuals, close businesses, and control human activity to reduce physical encounters (chen et al., 2021; craven et al., 2020; zhang, et al., 2020a; xu et al., 2020). the covid-19 pandemic, a massive and unexpected phenomenon, proved to be a significant re-shifting factor in social (gong et al., 2021) and economic life as we know it, as shown by a changing workforce, demand metamorphosis, supply chain shocks, and resulting shifts in business models. beginning in january 2020, businesses all over the world had several workers placed on lockout, big supply chain challenges on a wide perspective, even, in some cases, infiltrations to act, that had not yet happened before and in the record (patnaik et al., 2021; alfaro & jeong 2020). customers' international journal of economic behavior, vol. 11 n. 1, 2021, 23-35. https://doi.org/10.14276/2285-0430.2904 24 ostensible physical encounters, as in the hospitality, transport, service providers, music, and entertainment sectors. the key to becoming resilient in such a challenging environment is to adapt five qualities resolve, resilience, return, reimagination, and reform to four strategic areas recovering revenue, rebuilding operations, rethinking the organization, and accelerating the adoption of digital solutions while adapting marketing strategies and reorganizing the organization (accenture, 2020). only 15% of ceos worldwide declared feeling after the first months of the pandemic, which is consistent with declining corporate performance in the first quarter of 2020 and a severe negative impact on the global economy (afshar jahanshahi et al., 2018). one of the ways to deal with these issues is to be more agile. models with a consumer theme; however, adopting more competitive and cost-effective production methods, as well as more efficient and cost-effective supply chains, remains the first step in recovering sales before and after the pandemic (taherinia et al., 2021). the increasing development of information and communication technology has created a wide impact on business processes (eizi et al., 2013). the world economy took shortness of breath with the coronavirus outbreak. according to the wall street journal on march 1, 2020, the coronavirus is different, and almost no company is safe. businesses are affected by numerous external invoices. but none had as quickly affected supply and demand in many industries as much as the coronavirus. the supply chain of many major companies in the world has been in trouble and has negatively affected businesses (bartsch et al., 2020). looking at the world’s english-language newspapers, it can be said that many businesses around the world have lost their previous market due to the fear of the spread of the coronavirus. it may be said that the tourism industry in the world and educational services that need to be attended, such as free schools, health tourism, horeca (hotel/restaurant/cafe) international trade have seen the most damage from corona. however, some experts around the world believe that online businesses and e-commerce have experienced the least negative impact compared to other industries (obrenovic et al., 2020; altman, 2020). 1.2 coronavirus and the possibility of a global economic crisis given the widespread impact of corona on the world economy and businesses around the world, there is a possibility of another economic crisis, such as the 2007-2008 financial crisis in the world. this paper, with a general view on definitions and principles of internet marketing and sales and e-commerce, their advantages and disadvantages, seeks to push companies and institutions to use this type of marketing and business. the results of this study indicate that in the competitive era and critical conditions (cronulla), today this type of marketing and trade as a strategic factor and competitive advantage, has helped most of the companies in sales growth and increasing the share of a domestic and foreign market, and if these companies use this type of technology with the principles outlined in the article, it will be seen a high saving of time and cost as well as improving the status of companies in coronavirus conditions (boles et al., 2017). 2. the situation of foreign technology businesses during the coronavirus in contrast to the sharp decline in the value of stocks in the petrochemical and industrial sectors, technology companies have experienced a narrower decline in market value at the beginning and with the initial shock of the corona crisis, and some companies such as amazon and netflix have been on the growth path. the corona virus crisis with the closure of factories in china has caused a devastating impact on the production and supply chain of many sectors in different countries around the world. given china’s key role in global supply chains, it can be predicted 25 that the decline in production in china will soon harm businesses around the world (brynjolfsson, 2020). in this regard, the french government has called on companies to reconsider their overdependence on china regarding raw materials and parts. supply chain disruptions have also led to problems with smartphone sales. huawei, as the largest smartphone manufacturer in china and one of the largest in the world, has been directly affected by the problems caused by the spread of the coronavirus (bailey & breslin, 2020). the survey of online traffic in different areas also shows that the amount of buying and selling in many industries such as sports equipment, home appliances, luxury goods, and tourism has decreased and as a result, the reduction of online banking and insurance transactions has also caused. in contrast, the volume of an online supermarket and retail purchases has increased along with the amount of supply and demand for media and communication services in many regions of the world (stiglitz, 2014). amazon, for example, has announced that it is hiring 100,000 recruits in the u.s. alone. the company’s employee wages are also set to increase in europe and the rest of the world. in this regard, online food sales and daily food delivery programs have been growing in china. according to carrefour retail, vegetable delivery has grown by 600% compared to last year. the recovery of profits from the covid-19 pandemic must be focused on reconstruction activities. it's also a must when contemplating modern supply chains, skus that are more reliable and cost-effective, and production methods (liang & cheah 2020). long-distance overseas manufacturers are supported by supply chine, who are hampered in their home countries by different constraints or are reliant on a difficult international shipping sector (verma & gustafsson 2020). the covidthe series, as well as the timing and size of disturbance propagation (i.e., the ripple effect). as a result, firms are increasingly modifying their supply chains through considerations such as localization, complexity elimination, and dual procurement. use of artificial intelligence (ai) and big data for more efficient supply chain platforms; inclusion of tax optimization into the existing financial analysis; use of the cost-toserve predictor as the foundational efficiency metric; modeling scenarios are all necessary new methods for the effective reconstruction of operations before and after the covid-19 pandemic (shakirov, 2016; dore et al., 2020). 4. rethinking the organization lessons gained from businesses operating in a covid-19-affected economy from march to august 2020, show disparities dictated first and foremost by their workers' ability to operate remotely or not. businesses, where remote work was not available on a broad scale, reported considerably higher job losses and anticipated sales reductions (bazgosha et al., 2012). during the first three months of the pandemic, half of the american workforce turned to remote working, while 41% of canadian workers became ideal for remote working. as a result of this evolution, new work and operational techniques have emerged, some of which have proven to be successful and therefore can be maintained in the future. managers in remote teams, on the other hand, have discovered a host of difficulties in coordinating workers who work from home, including coordination problems, the fear of 24/7 reporting and burnout, a lack of personal contact, isolation, and poor health behaviors (. zhang et al., 2020b; hakkak et al., 2014; chen et al., 2020; asadollahi et al., 2011). joband relationoriented leadership action, according to access to the portal is the key-element to favor productive work environment at a distance, so organizational cultures already benefiting from this style of a boss had an advantage during the covid-19 pandemic. their research, which was focused on data gathered from employees of financial institutions in germany in april 26 may 2020, showed that in tumultuous times like the current one, both facilitating and managing leadership behavior is critical. task-oriented action and giving subordinates control and assistance are examples of unique management approaches. the covid-19 pandemic showed, more than ever, the importance of preparing businesses to transition from strict preparation to simultaneous improvisation at all levels of the enterprise. as a result, it is not enough to have a good organizational culture to withstand a pandemic; it must also be resilient, which is consistent with previous studies on the importance of having both aligned and adaptive organizational cultures for long-term resilience (sadeghi et al., 2013; jahanshahi et al., 2020). hiring and promoting resilient and adaptable people who are capable of being calm in difficult and turbulent times; continuous communication by examples of how the organization is adhering to its cultural values by new practices; and leveraging the organizational culture through adopting. the last point is in line with results from a survey of executives from 39 indian companies, local businesses, and mnc subsidiaries (fong et al., 2020) which provided evidence on an unprecedented change in corporate cultures towards a shared goal (either the customer or the employee), making it easier for managers to communicate and take swift decisions and individuals and third parties from the corporate community were impacted the most as the situation was at its worst (vendors, partners, etc.). such an approach could, in an ideal world, be the direct result of a form of social value formation triggered by the pandemic's context by ratten, which is evident at the legislative, organizational, and individual levels. 4. accelerating digitalization the definition of resilience is not new, but its application in the context of the covid-19 pandemic has some unique characteristics. the rapid acceleration of digitalization is one of them, even for companies that were not tech-savvy before the pandemic. many companies' key response to the pandemic was to quickly implement digital solutions, which paid off because they were able to quickly transition from physical to remote working while being as effective as possible under the circumstances. as a result, most businesses are accelerating their digital transformation, according to statista's survey of international digital decision-makers (gallacher & hossain, 2020). as a result, considering the challenges posed by the covid-19 pandemic, companies are interested in improving employee digital experiences, as reported by 52 percent of chief information officers (cios) worldwide surveyed by statista, which is expected to be reflected in an increase in investments in digital products and solutions of about 10.4 percent in 2020. digitalization, described as "the development of new business models and processes that take advantage of digital opportunities", is more than just using digital tools. based on their prior experience and orientation toward innovation and technology, some businesses were only forced to implement digital solutions during the pandemic. around the same time, other businesses that had already succeeded in their digitalization showed that they were prepared to deal with the covid-19s new way of doing business (kantar, 2020). the effect of the covid19 pandemic on digitalization adoption is expected to result in a revival of old e-commerce models, as well as a major increase in digital collaboration platforms, remote job arrangements, digitization of customer care, the transition to e-commerce, greater use of self-service, digital networks allowing contactless distribution options, use of online and on-demand platforms, and outsourced it are some of the digital trends posed by the covid-19 pandemic that are considered future realities (mkor, 2020). 27 5. coronavirus develops ai-based services studies by the ict research institute also show that the development of services based on new technologies such as ai chat robots, robots, anti-fever glasses, and disinfectant drones, and care and remote medicine are also the consequences of the coronavirus crisis in technology businesses (moezzi et al., 2012; hakkak et al., 2013; jahanshahi et al., 2019; khaksar et al., 2010a). relying on the development of these services and businesses, china’s ict sector, which declined by 10 percent at the beginning of 2020, is projected to grow by 5.5 percent at the end of 2020 (pwc, 2020a). alibaba trading, for example, has entered one of the largest ecommerce platforms in china relying on its communication and information infrastructure in the field of health care. the company has launched drug delivery services for people who need medication to treat chronic diseases. alibaba trading, for example, has entered one of the largest e-commerce platforms in china relying on its communication and information infrastructure in the field of health care. the company has launched drug delivery services for people who need medication to treat chronic diseases. china’s largest search engine, bedu has also already implemented an online consulting platform for any medical questions and for free (kmpg, 2020). the company has also produced an artificial intelligence model to identify people who do not have protective masks. three reasons why coronavirus is not disrupting china’s economy is as following: it is estimated that the negative economic impacts of the new coronavirus are limited. the effect on china’s economic growth in 2020 is likely to be very low, with only 0.1 percent of its gdp low. china’s stock market has fallen in recent days after months of rising, with global markets looking on. there are already concerns about the impact of the disease’s pervasiveness on china’s economy and the growth of the world economy. are these concerns true? the coronavirus is expected to infect more people in the second and third weeks of february, causing more deaths, it is estimated that the negative economic impacts of the new coronavirus are limited. the effect on china’s economic growth in 2020 is likely to be very low, with only 0.1 percent of its gdp low. china’s stock market has fallen in recent days after months of rising, with global markets looking on. there are already concerns about the impact of the disease’s pervasiveness on china’s economy and the growth of the world economy. are these concerns true? the coronavirus is expected to infect more people in the second and third weeks of february, causing more deaths, but chinese authorities and the world health organization are expected to bring the virus under control by early april. according to this scenario, it is estimated that the negative economic impacts of the virus are limited. its effect on china’s economic growth in 2020 is likely to be very low, with only 0.1 percent of its gdp low. the impact in the first quarter of 2020 will be huge, perhaps reducing economic growth by one percent on an annual while this decline will be offset by the continuation of the year, and the impact on the world’s gdp growth will be even lower. this forecast is reminiscent of the experience of the sars crisis in 2003. a big decline in china’s gdp growth was offset in the second quarter of that year in the following two seasons. while the annual growth rate in 2003 was around some fear that the timing of the new virus will keep many people away from shops, restaurants, and travel spaces at the start of a week-long chinese new year celebration and school closures, worsening economic conditions. figure 1, shows covid-19 disease phases around the world taken on 2020. also, figure 2 indicates the impact of covid-19 on hubei, china released on 2020 (pwc, 2020b). the crisis created by the coronavirus is a story with an uncertain ending. it's saddening people's lives, and companies are trying to protect their employees, address business challenges and risks, and also, reducing the prevalence of this disease in any way they can is a serious task. you can also get the latest information about the coronavirus from the centers for disease 28 control and prevention; such as the european union, the us centers for disease control and prevention, the world health organization, and the outbreak information provided by johns hopkins university for updates. figure 1 – critical indicators of the impact of covid-19 (feb. 28, 2020). phases around the world figure 2 – critical indicators of the impact of covid-19 (feb. 28, 2020). impact on hubei 29 6. three important factors limit the effect of the virus first, unlike the sars outbreak, china is currently in the age of internet commerce, which means many customers make their purchases online. the decline in in-person purchases to avoid the virus is likely to be offset by an increase in online purchases. many of the travels that have been canceled today will surely be replaced in the future, as their budgets have been set aside. many factories had planned their production halt due to the chinese new year holidays, so the timing of the outbreak would prevent their unwanted closures. many government centers and schools are also on vacation, which has nothing to do with the outbreak. second, all reports suggest that the new coronavirus is not as deadly as sars, even if it is transmitted faster. chinese authorities are equally faster at controlling the virus than at the time of the sars outbreak. authorities have increased the chances of faster containment of the disease by taking drastic measures to quarantine real and potential patients. the decline in economic production in these three months will also be offset by increased activity in the continuation of the year. third, we do not know if china’s trade negotiators knew about the deterioration of the new virus when the first phase of the trade deal with the united states was signed on january 15, but in any case, the timing of the deal was in china’s favor. as imports of face masks and medical supplies from the u.s. and other regions increase, china can simultaneously deal with the crisis and keep its promise to import more. 7. the best sales and strategy in times of crisis and coronavirus let's explore a business together. suppose you own a supermarket and your customers are minimized due to the spread of the coronavirus. in such a situation, you definitely do not have the necessary infrastructure to sell food online, or you may not even have the necessary knowledge, but you can leave a free courier for your neighborhood customers so that they can register their order without leaving home. receive at home. keep in mind that this can initially increase your costs and those of your business, but the payback period is very short and your costs may be reimbursed within a week. 7.1 what strategies should we use in times of virus crisis? just as we have a crisis in life, we are not immune to a crisis in business. as a business owner, if you have the ability to manage the crisis caused by the covid-19 virus, you can easily make your business a success. the existence of business is basically tied to natural and unnatural crises. it is safe to say that businesses experience a variety of crises throughout their life cycle; crises such as running out of liquidity, loss of technical team, cancellation of contracts, nonfulfillment of investor promises, and more. now, despite the corona crisis in business and the involvement of the general, business managers must pay attention to the fact that they can provide their services to better services for all people in the community (nawaser, 2015). we all know that commuting these days can increase the number of carriers of the disease in addition to high stress, so the first solution you need to implement in your business is to provide your services online or by phone. in a way that the need for the presence of customers and audiences is kept to a minimum (mcginn, 2020). 7.2. avoid making thoughtless decisions one of the problems that many start-ups often experience is the excitement of making decisions and the haste in making thoughtless decisions. as someone who has a direct impact 30 on your business, you should be aware that immediate decisions can ruin your business in a short period of time (gharleghi et al., 2018; khaksar et al., 2010b; hakkak et al., 2016). but with the knowledge and understanding of the existing conditions of this disease, it can save you from fast and thoughtless thoughts and consequently immediate wrong decisions, and instead replace it with thinking, understanding, and commitment to solving the problem. commitment comes first in life, and leaders who make calm decisions in crisis situations usually have strong crisis management and can be better managers for businesses because they are able to think before they get excited. make a deeper understanding of the crisis ahead and make a wiser and more principled decision (prasad et al., 2020; jahanshahi et al., 2011; hashemzadeh et al., 2011). now the move could be to equip your business, or train your troops, or change your product line, or maybe take the opportunity to advertise and work on your business branding. this move can make your business faster. engrave as a leading and successful business in the minds of the audience. in fact, i mean this faster move, in a way, it can be a better and more principled decision in how to provide services, or it can be related to the right strategy in relation to other customers. this will help you to overcome the corona crisis in business safely. 8. marketing response the global impact of the covid-19 pandemics has been profound. the need for protection, as well as the lockdown time enforced in many counties, compelled them to shop online (shen et al., 2020). during the lockdown, it was teenagers one of the first to aspire toward online shopping. in the short term, this move will result in increased online competition, more nuanced online marketing strategies, and more differentiation between online sellers. the online experience may become even more important in terms of establishing choice and loyalty. there is no time for extensive consumer surveys and the preparation, treatment, and connection of new offers (both online but also touch-free where offline relationships are operating). it's probably more necessary than ever to build relationships with them when attending to their special needs and demonstrating empathy (papanikolaou et al., 2020; khaksar et al., 2011). the pandemic has given consumers the ability and time to reflect on the basic sense of consumption and the effect of their consumption not only on themselves but also on others, culture, as well as the environment, not least for the short term. before the pandemic, customers in the developed world took it for granted that their basic needs, such as food and shelter, could be met quickly thanks to the wide range of goods and services available. during the covid19 pandemic, consumers' attitudes shifted toward purchasing more essentials, indicating that they were more cautious. customers tend to cut needless costs in difficult times like pandemics, which is understandable given declining incomes and increased uncertainties. marketers should also keep in mind that during the pandemic, all in-home media consumption increased. the activity with the biggest increase during the lockdown at least was culture, news, and hobbies. new brands were trusted by 50% of customers. online shopping, conscientious consumption, fitness literacy, and local shopping are only a few of the market trends that have intensified. many of the newly acquired purchase habits are likely to persist after the pandemic: contactless payment, in-app purchasing, home delivery, social media shopping, chatbot, virtual consultation, etc. the pandemic covid-19 gives companies a tremendous opportunity to change towards more genuine and genuine corporate social responsibility (csr) and help solve the global challenges of society and the environment. 31 9. future discussion in the first seven months of the 2020 pandemic, it was provided literature evidence regarding the effect of the covid-19 pandemic on the industry. there are limitations due to the semistructured approach to reporting, but the factors found to rely on a framework of the most critical elements that determine interpretation responses after the pandemic crisis. agile resilience, companies have to work in five main areas today: sales recovery, industry redefinition, organizational rethink, digitalization acceleration, and marketing strategies adaptation. so much emphasis should be placed on evaluating the effect on covid-19 in future comments about development, performance, teamwork (even from a distance), and cooperation. current research has suggested also that social contract as a consequence of the collective meaning decided by the pandemic has become an aim for organizations and governments. but it is anticipated that the revision of self-reporting and corporate goals would re-emphasize the norm at medium and long-term in challenging and prolonged times of economic slowdown and intensified competition. figure 3 represents the covid-19 impact on chinese consumer’s confidence. figure 3 − covid-19 impact on chinese consumer’s confidence 10. conclusion despite the new restrictions imposed in many countries around the world affected by the second wave of coronavirus outbreaks, the rate of decline in the volume of the world economy and next year’s economic growth rate is lower than the figures announced in its september report. its forecasts show that one-third of china’s world economic growth will originate next year, but economic growth in the european union and the united states will be lower than their contribution to the global economy. the organization for economic co-ordination and development noted in its report that given the difficulties of vaccinating the entire world population, the ambiguity about how long 32 the vaccine will take effect, and the possibility of continuing some restrictions on controlling the spread of the virus; “the future of the world economy is still very vague”. despite the injection of significant economic incentives and hopes of reviving the world economy next year, one must accept the fact that the coronavirus crisis has damaged the economic fabric of many countries. future discussions should focus more on measuring the impact of covid-19 on innovation, efficiency, teamwork (even if at distance), and on collaboration. current researches suggest an orientation towards common good as a purpose of brands and organizations as a result of the collective sense determined by the pandemic, but it is to be surveyed on the medium and long term in difficult and prolonged times marked by economic slowdowns and increased competition, refocus on the self and 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(2020) “new perspectives from technology adoption in senior cohousing facilities”, the tqm journal, vol. 32, n. 4, pp. pp. 761-777. doi 10.1108/tqm-10-2019-0250. https://www.koreascience.or.kr/article/jako202127335618025.page https://www.koreascience.or.kr/article/jako202127335618025.page https://www.koreascience.or.kr/article/jako202127335618025.page 1.2 coronavirus and the possibility of a global economic crisis 2. the situation of foreign technology businesses during the coronavirus 4. rethinking the organization 4. accelerating digitalization 5. coronavirus develops ai-based services 6. three important factors limit the effect of the virus 7. the best sales and strategy in times of crisis and coronavirus 7.1 what strategies should we use in times of virus crisis? 7.2. avoid making thoughtless decisions 8. marketing response 9. future discussion 10. conclusion references d:\prof\ijeb nr. 1\final_ijeb.pdf ���������� � � �� ����� �� ������������ � � ��������� �� ������� ������������� �� ���� ��� ������������ ���� �� ��������� ��� ���������� ��������� ��� � ����� �� ! 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to the management of economic organizations. kahneman (2002, pp. 449–450) stated that there are "two generic modes of cognitive function: an intuitive mode in which judgments and decisions are made automatically and rapidly, and a controller mode, which is deliberate and slower" and "focused on errors of intuition". rational choice theory (for a review see: oppenheimer, 2008 and sugden, 1991) seems unresponsive to interpreting reality, since it is unrealistic to think that the decision maker is able to consider and understand the large number of factors that can influence the final result of the decision (march, 1994). entrepreneurs or managers make decisions that will meet expectations rather than optimize choices. decisions depend on the level of information and follow heuristics, or "shortcuts of thought" (cuervo-cavurra, narula and un, 2015) which reduce decision-making costs. however, heuristics are associated with biases. although heuristics can be useful for dealing with complex decisions, they can lead to serious and systematic errors (guercini, 2012; guercini et al., 2015). limited rationality and the recognition of heuristic-and-biases mechanisms had a relevant influence on the entrepreneurial behavior literature (simon and houghton, 2000; haley and stumpf, 1989; schwenk, 1984). recently, the presence of heuristics has also been recognized by international business scholars, who have emphasized how heuristics based on cognitive mechanisms can be involved during the decisions of entrepreneurs/managers to initiate an internationalization process (bingham, eisenhardt and furr, 2007, musso and francioni, 2013; musso, 2020). this issue of the international journal of economic behavior, in addition to topics related to the economic behavior, contains a special section based on a selection of contributions presented at the workshop on decision making process in international context, held in urbino on february 27, 2020. the first article from rod erfani and jack berger focuses on the determinants of inward foreign direct investment (fdi) in asian countries. the second article, written by waidi adeniyi akingbade, studies the relationship between service differentiation strategy (sds) and organizational performance of enterprises. the findings show that companies using sds recorded higher performances and market share. the article from annalisa sentuti, gail denisse chamochumbi diaz, and francesca maria cesaroni examines the relationship between board composition and family firms’ performance. the article suggests that a higher presence of nonfamily managers has a less positive effect on first-generation family firms than in later generations of firms. the last article of the regular issue is from israel s. akinadewo, who presents a study on disputations of tax audit assessments on internally generated revenue sources in nigeria. the special section on decision making process in international context starts with an article from luciano pilotti and alessandra micheletti. the authors put in light the relationship between strategy and organization facing the growing global complexity. organization can be seen as “part” of strategy, as a dynamic counterweight process of action able to improve managers to take decisions. mirian palmeira and elder semprebon analyze the case of economies after catastrophes, 2 and they propose a marketing-based model for recovery. clara benevolo, lara penco and teresina torre deepen the knowledge of entrepreneurial decision-making about global strategies, and they present a conceptual framework useful for supporting entrepreneurial decisions. in her article, bettina binder focuses on women’s presence in european companies’ boards, and how this presence affects decisions and performances. aldo bellagamba proposes a study on the drivers of accelerated internationalization strategies of manufacturers belonging to industrial districts. finally, simone guercini, matilde milanesi and andrea runfola present a literature review on foreign market entry decision-making. the article adopts a systematic approach to investigate the state of research on the topic, as well as the main theoretical approaches on decision-making processes for entering foreign markets. references 1. bingham, c.b., eisenhardt, k.m., furr, n.r. (2007). what makes a process a capability? heuristics, strategy, and effective capture of opportunities. strategic entrepreneurship journal, 1(1-2), 27-47. 2. cuervo-cazurra, a., narula, r., & un, c.a. (2015). internationalization motives: sell more, buy better, upgrade and escape. multinational business review, 23(1), 25 35. 3. guercini, s. (2012). new approaches to heuristic processes and entrepreneurial cognition of the market. journal of research in marketing and entrepreneurship, 14(2), 199-213. 4. guercini, s., la rocca, a., runfola, a., & snehota, i. (2015). heuristics in customer-supplier interaction. industrial marketing management, 48, 26–37. 5. haley, u.c., & stumpf, s.a. (1989). cognitive trails in strategic decision-making: linking theories of personalities and cognitions. journal of management studies, 26(5), 477-497. 6. kahneman, d. (2002). maps of bounded rationality: a perspective on intuitive judgment and choice. in t. frangsmyr (ed.), les prix nobel: the nobel prizes. stockholm: nobel foundation. 7. march, j.g. (1994). a primer on decision making: how decisions happen (vol. new york, ny). new york, ny: the free press. 8. musso f., francioni b. (2013), "the decision-making process in international business strategies. factors of influence on small and medium enterprises", international journal of applied behavioural economics (ijabe), vol. 2, no. 2, april-june 2013, pp. 1-22. 9. musso f. (2020). rationality, heuristics and biases in strategic decisions, in musso f. (ed.), strategic decision-making in international context. urbino university press, urbino, pp. 717. 10. oppenheimer, j.a. (2008). rational choice theory. the sage encyclopedia of political theory. london, sage publications. 11. schwenk, c.r. (1984). cognitive simplification processes in strategic decision-making. strategic management journal, 5(2), 111-128. 12. simon, m., & houghton, s.m. (2000). cognitive biases, risk perception, and venture formation: how individuals decide to start companies. journal of business venturing, 15(2), 113-134. 13. sugden, r. (1991). rational choice: a survey of contributions from economics and philosophy. the economic journal, 101(407), 751-785. 14. musso f. (2011), "small retailing, town centres and inland territories. an “extended town centre management” perspective", public administration & regional studies, 3rd year, n. 2 (6), galati university press, pp. 37-58. fabio musso editor-in-chief d:\prof\ijeb nr. 1\final_ijeb.pdf ������������ � ���� �������� ������ �� ��� �� ����� ������������������� 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� � �� �� ���� � �� � ���� � � � � ���� � �� �� ���� � �� �� �� � 109 retail and gamification for a new customer experience in omnichannel environment* mario risso niccolò cusano university, italy andrea paesano niccolò cusano university, italy received: july 8, 2021 accepted: december 7, 2021 online published: december 30, 2021 abstract the purpose of gamification is to foster the interest of the players/users and increase their involvement or direct certain behaviors. specifically, it is a set of activities and processes to solve problems using or applying elements related to the game. this paper aims to explore the use of gamification to improve the customer experience in the retail field. this study is based on a qualitative approach with a literature review of the highly-influential articles on web of science and scopus in business and management areas, referencing marketing experts. it also contains a case study on gamification. in italy and in the republic of san marino, the company uci cinemas has implemented a promotional strategy for the sale of tickets for the film fantastic beats: the crimes of grindelwald. this promotional strategy is based on the combination of omnichannel retail and gamification. keywords: retail, gamification, promotion, customer experience, omnichannel. 1. introduction the retail sector is in constant turmoil, characterized by a profound transformation linked to digitalization processes. these changes have affected multiple areas of the retail sector with the integration of stores with e-commerce through the implementation of omnichannel strategies and tools (jocevski et al., 2019; alexander & blazquez cano, 2020; hübner et al., 2021). the pandemic has accelerated the digitalization process, with the introduction of new technologies * mario risso is author of § 1; andrea pisano is author of § 2, 3, 4, 5. international journal of economic behavior, vol. 11 n. 1, 2021, 109-128. https://doi.org/ 10.14276/2285-0430.3238 110 (pantano & vannucci, 2019) affecting both consumer behaviors and retail business strategies and tools (cakir et al., 2021; fortuna et al.; 2021). in particular, digital innovation is used as a lever to recover the social and emotional component of the purchase, even in the store (hagberg et al., 2016; quach et al., 2020; shi et al., 2020). in this framework, the development of digital games – as a retail marketing tool – is constantly growing (üstündağ, 2020). the phenomenon of digital innovation in retail through digital gaming tools is still unexplored and deserves specific attention. the paper starts with the analysis of the phenomenon of gamification, followed by a description of the evolution of gamification in the world under section 2. section 3 presents a concrete case study on gamification in the retail service sector and concludes with some considerations on the role of gamification in retailing. 2. what is gamification? the word "gamification" was coined in 2002 by nick pelling, a computer programmer and game developer (pelling, 2011). the concept of "gamification" became famous in february 2010 during the "d.i.c.e. summit" ("design innovate communicate entertain") in las vegas. during this meeting, jesse schell made a session called “design outside the box”. he talks about an apocalyptic future in which gaming will go beyond the traditional boundaries of a console or pc to enter every moment inside human life. each of us will become part of a great game where actions are tracked and rewarded with special points and bonuses (viola, 2011). during his speech he said: “you will wake up in the morning and while you are washing your toothbrush will be equipped with a sensor capable of perceiving if you are brushing your teeth correctly. well done! 10 points for brushing your teeth ... you have to do it for at least three minutes and if you do it ... there is a bonus for you! " (petruzzi, 2017). in his speech he does not use the word "gamification" even though he outlines the phenomenon and its rules. according to some scholars, gamification is: “the use of game design elements in nongame contexts” (deterding et al, 2011). this definition of gamification was developed in 2011 and is still used internationally. another definition of gamification is: “the process of using game thinking and game dynamics to engage audiences and solve problems” (zichermann and cunningham, 2011). gamification has similarities with the theory of "nudges". these are elements that guide individual choices and behaviors without the use of orders and preserve the freedom of choice, like a "polite push" (thaler and sustein, 2008). gamification can be usefully used as a means of re-channeling undesirable consumer behavior (insley and nunan, 2014). this method sometimes fails in terms of engagement and can even harm employees and the work environment. goals and rewards associated with play systems can be perceived negatively by employees, as a method for managers to control their performance. these findings are consistent with the negative effects of rewards and progress tracking associated with playful environments (eisingerich et al., 2019). the negative effects that reduce the effectiveness of the game are also due to the use of money. indeed, according to (bauer et al., 2020) monetary rewards used to incentivize game participation diminish these effects. gamification loses its positive effects if games are combined with monetary rewards, as consumers no longer play games to derive inherent enjoyment, but rather the extrinsic motivation of receiving a discount. instead, playing a shopping-related game without monetary participation incentive positively influences three relational outcomes: customer satisfaction, 111 loyalty and positive wom intentions. this because games enhance consumers’ enjoyment of the overall shopping experience. gamification can have ethical effects. some scholars argue that professionals and designers should be cautious about the use of gamification practices. this is because it could involve an unfair advantage of workers (exploitation), infringes any involved workers or customers autonomy (manipulation), an intentionally or unintentionally harms workers and other involved parties (yang et al., 2017). this has a negative effect on the moral character of involved parties (kim and werbach, 2016). the game concerns the needs of self-expression, the desire to set new goals, new challenges and overcome them. it allows to create involvement, motivation, loyalty to achieve goals that are difficult to achieve with other tools. in order to be developed, games need rules and boundaries. there are four key elements from the definitions of gamification (mcgonigal, 2011): • gamification is an activity that involves doing something • gamification uses game design and techniques borrowed from games • it is applied in non-game contexts • it is used to motivate people to achieve some goals identify goals and success criteria is fundamental, because people are driven by an interest or a pleasure (prensky, 2007). for this reason, is fundamental understanding who are users and what motivates them. like any project and marketing plan, it is necessary to identify who are the target customers. each profile could have different reasons and needs to satisfy. subsequently it is necessary understand which are the right levers to move to incentivize them. gamification is an excellent supporter when users already have an underlying motivation to follow a certain action. to motivate people usually it can be used the "epic meaning". this can be compared to the vision and mission used by a company to define their long-term strategic goals. this means making people feel part of a higher project. for example, carrying out a specific activity not only to improve the team goals but also help others stakeholder. for this reason, it is necessary to define some kpi (key performance indicator). the rules are the obligations that make any game exciting, interesting and challenging. choosing the right mechanics is very important. they have to combined to obtain the best experience of gaming, not only according to the strategic goals but also to motivate the customers. gamification acts on the human psyche. within a game design it is necessary to use different mechanics (petruzzi, 2017; maestri et al, 2018). the most famous are: • points/credits: they are the immediate reward for the player's actions. • levels: they are a system to insert progressive goals, in order to influence the player's motivation. • badges / achievements: the badges set off the achievement of a goal, increase the sense of the challenge and typify the player's profile. • rank: they are a method to organize users' performance. the comparison among people generates a sense of competition, foster interest and increase the time spent in the game. • challenges: they are obstacles which the player must overcome to earn points, badges and level up. • virtual assets: they are goods that have value for the player within the virtual world of the game but also in the real world. when talking of gamification, there are some prejudice, clichés and common places. a common mistake is to consider gamification as a generalist attempt to transform serious 112 contexts into playful ones. when they talk about games need to make some clarifications. deterding et al. (2011) have developed a matrix between the concepts of: gamification, serious game, toys, playful design (fig. 1). in the matrix is shown the differences among gamification and other types of games. gamification is using mechanics of game design in non-game contexts to achieve a specific goal (e.g. motivate and involve). serious games are 100% games. for example, apple uses the "progress bars" and challenges between friends inside the apple watch to measure physical activity. in this case we are talking about gamification because the movement section of the apple watch is not a game. a "serious" game is a whole and complete game. for example, "wii fit" (a videogame of nintendo) is aimed at exercising at home. the term "serious" has been used to indicate serious contexts, other than mere entertainment. they can be used in many different fields like health, marketing, social and non-profit issues, education and school, corporate and human resources. when talking of gamification, there are some prejudice, clichés and common places. the relationship between consumers and “games” is somewhat more complex than has been suggested by those promoting gamification (insley and nunan, 2014). if the strategy is reduced only to inserting points or badges, without a precise objective, the result is poor, weak and users will leave the game. if this happens, we are talking about of "pointsification" or "badgeification" degenerations of gamification. gamification does not mean adding points and rankings. points, badges and leaderboards are some gamification mechanics but these are not enough to motivate people (petruzzi, 2017). a common mistake is to consider gamification as a generalist attempt to transform serious contexts into playful ones. gamification does not work miracles. if there is not a personal motivation, people will not find anything kind of gaming to convince themselves. figure 1 − gamification between game and play source: (deterding et al, 2011) for instance, serious games have been used for years in the health sector. doctors can train in simulated environments that do no harm to patients. there are games that facilitate the treatment of certain diseases. some researchers thought of a way to reduce pain without using anesthetics and saw that it can be done using a serious game. gamification exists in a large 113 number of different fields like retail, media, consumer goods, healthcare and so on. it is used as means to educate employees in all types of industry, create customer engagement to brands and businesses, and even nudge people to change their behavior (wünderlich et al., 2020). the game that was developed by the university of washington and some researchers to reduce the pain of hospital burns (hoffman, 2004). the boundary between gaming and serious game is not always defined and clear. to understand if we are talking about gamification or serious game it becomes essential to know the reasons of players and the creator's goals. the intentions of the players in some cases are able to influence the concept of entertainment. toys are not games because they have no goals or objectives and are made to play together (prensky, 2007). while "playful design" is the application of some elements of unstructured play not game. obviously, in some cases the boundary lines between one quadrant and another one can be subtle and subjective (deterding et al, 2011). gamification design is a process focuses on human motivation. this process is called "human centered design". this term was coined by mike cooley in 1982 his book "architect or bee?". according to iso 9241-210: 2019: “human-centered design is an approach to interactive systems development that aims to make systems usable and useful by focusing on the users, their needs and requirements, and by applying human factors/ergonomics, and usability knowledge and techniques. this approach enhances effectiveness and efficiency, improves human well-being, user satisfaction, accessibility and sustainability; and counteracts possible adverse effects of use on human health, safety and performance” (obp, 2019). most systems are focused on function designed to get the job done quickly. within the process the human variable is underestimated, for this, "human-centered design" allows to improve the potentialities of the human factor inside a process, thus optimizing motivation and commitment. the guru and pioneer of gamification yu-kai chou elaborated 8 core drivers standard in his framework "octalysis" (fig. 2), to indicate different types of motivation (chou, 2015). these motivational elements define and explain the user's involvement, they help to classify game motivations in relation to the needs and desires of a hypothetical user / player. figure 2 − octalysis framework source: chou (2015) 114 the eight core drivers are: • epic meaning and calling: the "epic" sense is the desire to participate in something higher or to help at the creation of a collective good. people decide to pursue a goal, a mission. for centuries, populations, philosophers, political and spiritual leaders have believed that the best way to give meaning to existence is to connect daily actions with something greater (mcgonigal, 2011). the epic meaning can be collaborating with other people to achieve common goals, for instance “wikipedia”. • accomplishment and development: people need motivation so they create challenges and goals of increasing complexity. the need to improve and overcome one's limits. for example, points, credits, badges, rankings, progress bars are all techniques that meet this need. • empowerment of creativity and feedback: self-expression indicates that innate tendency that leads man to experiment, to customize, to try different creative combinations to obtain different results, for example lego bricks or within a video game the custom-tailoring of avatars. the need to express oneself is linked to the need of receive positive feedback. • ownership and possession: each person has an innate instinct of ownership, a natural desire to possess something. people usually have a hard giving up something they have built or conquered, even if the thing they own is only virtual. • social influence and relatedness: this means that our life is influenced by the social pressure that pushes us to do or not to do a certain action. factors can be the need for acceptance in the community, reciprocity, status and so on. cooperative and competitive mechanics within a social system are also found inside a social game; the sense of "community" characterizes many activities, including gamification. • scarcity and impatience: the concept of scarcity is very ancient. already the ancient greeks spoke of scarcity with the myth of pandora. more a resource is scarce more the good takes on value and people do everything to get it. for instance, if in marketing strategy is possible to convey the feeling that a product or service is limited, potential buyers will try to not miss the opportunity, moved by the fear or anxiety. mechanisms such as the countdown, rely on the time scarcity factor. another gamification technique based on scarcity is the "appointment" that is specific predetermined moments in which the game system offers the possibility of seizing a potential advantage, think for example at "black friday". • unpredictability and curiosity: this motivational factor is based on psychological and medical concepts. for instance, gambling games such as prize contests, draws, bets and lotteries. however, such motivation can lead to negative consequences, people risk developing a real gambling addiction. game designers use this core drive through bonuses or "easter eggs" game elements that the developers hide in the game letting the user discover them generating a surprise and a “wow effect” (kotler et al, 2017). • avoidance and loss: fear of loss is an innate instinct of mankind when one wants to avoid losing something or to avoid negative events. applied to game mechanics an example is negative reinforcements or malus. if they do not a certain action, a negative event happens or one have to lose something. 115 all the core drives of “octalysis” framework act on the brain influencing behaviors (fig. 3). figure 3 different motivations within the octalysis framework source: adapted from chou (2015) the framework can be analyzed from different perspectives of analysis. the first level of analysis is shown in the figure n.14 where the core drives on the left side are "extrinsic motivations" like logic and rational calculation, while those on the right side are "intrinsic motivations" based on creative thinking, self-expression and social aspects. gamification influences the human mind not only in a positive way but also in a negative way (think of gambling). the upper "core drives" are defined as "white hat" (good / positive) while the lower part of the framework is based on negative "black hat" (bad / negative) motivators (chou, 2015). the human factor within the framework is fundamental. the gaming industry was the first to adopt "human-focused design". a game is not an easy activity, it requires commitment, time, and sometimes a money outlay. however, millions of people every day spend part of their day doing this activity (petruzzi, 2017). the 8 motivational factors do not remain fixed but change with the user's motivation, the mechanics used and the flow of time represented by the "customer journey". there are also further levels of analysis, for example the second level is based on the player's journey (fig.4). 116 figure 4 − customer journey source: chou (2015) during the journey, it is necessary monitoring the interaction between user and product. if the product attracts people at the start of the game, the engagement doesn't necessarily stay the same all the time until the end. scholar chou has elaborated 4 phases of the game experience (chou, 2015): • discovery: the player discovers and learns for the first time the product or service offered by the company. this happens for example with the creation of an account, the choice of the type of profile and access to the service. • onboarding: in this phase it is necessary to help the player to become familiar with the game rules, options and mechanisms. gamers want to get started quickly and want to have fun. for instance, one can use a video or an interactive tutorial. the onboarding process must inspire the user to start the game with enthusiasm and motivation. this phase ends when users are fully equipped and ready to embark on the journey on their own. • scaffolding: in this phase the players use all the rules and notions they have learned during onboarding. players return regularly and daily to perform desired actions and try to achieve as many milestones as possible. • endgame: this phase happens when the players accomplish all the objectives or the time available is over (such as the end of a competition or contest). if game designers don't make a good endgame, people will get bored easily and they will leave the game. the player’s journey is “the customer journey” in the field of gamification. the customer journey can be described as the path which a consumer proceeds interacting with the various contact points of the brand. the customer journey is represented as a succession of phases. the historical model is represented by the "4 as": aware, attitude, act, act again. this model was developed by rucker as an evolution of the "aida" model (attention, interest, desire, action) formulated by elias st. elmo lewis. however, in the digital age the community and social networks carry out a strong influence from the earliest stages of the journey. for this reason, the customer journey must be described with a new model represented by 5 a: aware, appeal, ask, act, advocate. throughout the course of the customer journey, businesses can use creativity to improve customer interactions. from the customer's point of view there are three levels of interaction. the first is "enjoyment" and this happens when companies receive feedback from their customers. companies can also offer pleasant "experience" in addition to products and services. they will improve customer interactions by diversifying the service modes between in-store and online experiences. the companies reach the highest level 117 producing "engagement". to transform a shopper who buys a product for the first time into a loyal supporter, a series of customer engagement activities are required. there are three techniques that can increase engagement and these are the use of mobile apps, the application of "crm" (customer relationship management) and the use of gamification. gamification is a very useful tool for improving engagement. it is based on the human desire to achieve goals and to have one's successes recognized. some customers are motivated by rewards, others by a sense of self-fulfillment. gamification is a way to collect customer data. big data analysis allows you to identify trends in customer behavior, useful for marketing automation, for example in the personalization of sales and cross selling. the firms personalize products and services by offering a complete customer experience (kotler et al, 2017). the journey is a more or less conscious path that people begin when decide to become buyers of a good or service, from the first contact to the final phase (kotler and stigliano, 2018). in the case study the journey is represented by a “treasure hunt” and ends with the conclusion of the competition. a third level of analysis takes place by building a matrix where in the x-axis there is the user's journey, while on the y-axis the types of players (fig. 5). figure 5 − third level matrix source: chou (2015) the types of players were classified by the scholar bartle who identified the taxonomy of player types in four different personalities. initially the classification described players of multiplayer online games, while now it also refers to players of single-player video games. the 118 typologies proposed by bartle are a starting point for creating gamified systems. these are (bartle, 1996; zichermann and cunningham, 2011): • achiever: this type of user aims to collect levels, equipment or any other form of progression within the game. • explorer: this type of user spends more time in the game, discovering new features, creating customized levels and generally demonstrating their knowledge of all the secrets of the game experience. • socializers: they are those who play above all for the social aspect, interpreting the game as a tool for socialization, perhaps to have only a return of image by creating a network of contacts. • killers: this type of user aspires to their own supremacy on the opponent. the killer confronts other players to assert himself, they are not interested in being hated or feared, but only aims to excel in direct confrontation with others. 3. gamification in the world according to technavio research report, global gamification market to accelerate at 27% cagr and register $ 17.56 billion growth during 2020-2024 (fig. 6). figure 6 − global gamification market source: https://www.businesswire.com/news/home/20201204005520/en/global-gamification-market-toaccelerate-at-27-cagr-and-register-17.56-billion-growth-during-2020-2024-technavio another report from verified market research states that business gamification market was valued at usd 7.17 billion in 2019 and is projected to reach usd 33.33 billion by 2027 (fig.7). 119 figure 7 − global business gamification market source: https://www.verifiedmarketresearch.com/product/businessgamification-market a further report (techsci research, 2019) says that the global gamification market was valued at $6.8 billion in 2018 and is projected to grow at an impressive cagr of 32% to reach $40 billion by 2024. this is due to demand growth for customer experience enrichment and improved engagement of employees. gamification refers to the integration of game mechanics within business process, website, or marketing campaign. increasing number of mobile devices is positively influencing the growth of the market. social media platforms are contributing to the growth of gamification market as they allow users to share their experiences (techsci research, 2019). according to the report, the gamification market is expanding to various regions including asia-pacific, north america, europe, south america, the middle east and africa. north america and europe are the leaders in the global gamification market. major players operating in the global gamification market include microsoft corporation, sap se, salesforce.com, inc. leveleleven llc and bunchball inc. furthermore, gamification is a useful tool for increasing customer engagement; especially regarding loyalty programs and customer communities (kotler et al, 2017). there are many reasons for implementing gamification in the marketing strategy: • involvement: currently people are constantly influenced by input of mass media. for this reason, among the various scarce resources available, the new "oil" is becoming time (not just data). • motivation: a gamification project is based on the study of psychological factors capable of motivating users throughout the customer journey. this type of analysis allows to categorize the target customer in the marketing strategy. • loyalty: it can be expressed in various ways. from the traditional "loyalty card" in which points are collected to obtain rewards, to the modern forms like the use of technology and digital channels. • learning experience: complex products or services require an initial learning moment by users. gamification can be a useful tool to facilitate the "onboarding" step. • data collection: every action made by users is tracked and monitored. gamification can entertain users and at the same time generate a series of behavioral and profiling data to be used in marketing and r&d. 120 gamification does not only concern relations between the company and the final consumer but also relations with employees. gamification makes it possible to rethink the work experience as a means to improve the well-being of employees. this leads to better performance and better customer service, thereby increasing the company's overall competitive advantage and revenue (hammedi et al., 2021). one of the words that is often associated with gamification is loyalty. according to a (kim and ahn, 2017) rewards could weaken intrinsic motivation to use a retail loyalty program. organizations are discovering that gaming can be a useful tool in many different ways. not only for customer loyalty, but also for users and employees, generating a sense of belonging to the company. for example, point collections in supermarkets are primal loyalty applications through mechanisms such as points and rewards, loyalty cards have been used extensively in the retail business over the last 20 years (ennis, 2015). today, internet technology, social networks and technologies based on mobile marketing offer new possibilities. the applications offered are numerous and varied depending on customer target, good and service offered by the company (petruzzi, 2017). gamification is also used for sustainable goals, reward-based game design elements including points, badges and other rewards contribute to enhancing sustainable behavior outcomes (mulcahy et al., 2021). 4. gamification in retail services: the uci cinemas case study the case consists of a new form of customer involvement in retail of cinema sector services. the topics about this strategy are represented by gamification in the retail sector, new methods of promotion and communication based on the fusion of virtual online and offline stores and collaborations among heterogeneous companies with the use of omnichannel retail. according to fernandes (2018), the online channel is a valid channel, and the in-store retailers needs to rethink the inclusion of an omnichannel solution to solve the in-store versus online shopping retail system. in this case study, it is appropriate to talk about interactive marketing because the case study is based on a "treasure hunt" which falls within the widely known theme of "customer experience", i.e. a sum of total interactions that a consumer makes throughout the entire process of purchase (rayport and jaworski, 2001). omnichannel allows a synergy between various channels, physical and virtual, creating a fluid and effective customer experience (kotler et al, 2017). the term "omni channel" is a particular approach by retailers. this approach recognizes that people interact with many touchpoints throughout the buying process. it is about creating an integrated and seamless experience for customers as they interact with the organization. for instance, a shopper at various stages in the process may interact with the retailer via email, a store branch, a call center, a kiosk/atm, mobile app and/or online channel (ennis, 2015). in addition, we can also speak of retail 4.0 due to the use of mobile marketing. the use of smart technologies is increasingly catching the attention of researchers and practitioners, especially in retailing contexts. for instance, poncin et al. (2017) examine the impact of two gamification mechanics, challenge and fantasy, on customer experience. gamification through continued engagement intention is positively associated with brand engagement (högberg et al., 2019). playability, design aesthetics, goal clarity, incentive provision and symbolic benefits were drivers of consumer–brand engagement, which in turn generated purchase intention, app continuance intention and brand loyalty (tseng et al., 2021). in particular, the case study is based on the use of qr code technology combined with data management through cookies and click baiting strategies. cookies are fragments of data stored on a user's computer when connecting to a specific site. this allows us to reconstruct user 121 behavior, preferences and improve navigation with "suggestions". the exchange of information allows to send customized information. from this point of view, the omnichannel strategy makes it possible to place the use of the service offered above technology. the goal is to use a holistic approach recognizing the uniqueness of customer (kotler and stigliano, 2018). retail in service sector is characterized by four distinctive elements, the so-called "4 i": intangibility, inconsistency, inseparability and inventory (kerin et al, 2014). the services are intangible because they cannot be seen before deciding to purchase them, they are a performance for consumers, so their evaluation is very difficult a priori. the heterogeneity is due to the difficulty of deciding how to promote a service because the human factor is relevant. the quality of a service changes according to the type of consumer, desires and the time available. inseparability consists in the level of interaction and involvement between the consumer and the service offered. their perishable nature is due to their immateriality and therefore the impossibility of maintaining them over time. in this case study the “gamification” technique is used through a prize competition to promote the sales of tickets for the film “fantastic beasts the crimes of grindelwald”. the competition, thanks to the method of participation, allows for a playful experience in line with the company's mission. the case study concerns the company uci italia s.p.a, which through the delegated firm wepromo s.r.l. implemented a marketing mix strategy based on gamification and omnichannel retail, in the italian territory and in the republic of san marino. the goal of the strategy was to promote the sale of tickets for the film "fantastic beasts: the crimes of grindelwald". the film is part of © “wizardind world”, a limited liability company (llc) created as a joint venture between pottermore ltd and warner bros. the company is part of a franchise owned by british writer © jk rowling for editorial and theatrical rights, and © warner bros. entertainment inc. for film market rights. the franchise originated from writer rowling's harry potter ™ series of novels. the firm uci italia s.p.a. to promote the sale of tickets for the film: "fantastic beasts: the crimes of grindelwald" "has set up with the help of partner companies, a prize competition called" win magical prizes with uci cinemas and fantastic beasts: the crimes of grindelwald ". this contest lasted from 31 october 2018 to 2 december 2018 with the final prize draw by 18 january 2019. the company has implemented a marketing mix strategy focusing on the "promotion" of the marketing mix. the competition was designed using the dynamics and mechanics of gamification. in addition to buying the ticket, the customer can decide to participate in a "treasure hunt". the game mode was designed using the retail omnichannel by connecting physical and virtual channels thanks to the collaboration of partner companies (fig.8). according to (jami pour et al., 2021), few studies have empirically examined how gamification influences customer experience by considering the mediating role of brand engagement in the online retailing context. in this case study the element of the brand plays a very important role, because the treasure hunt was designed using characters linked to the harry potter franchising. in addition, some mechanics, based on the wow effect (such as the "lumos" spell) allow you to make the customer's journey even more engaging. 122 figure 8 − partner companies source: screenshot of video advertising several associated parties and a delegated party were involved. specifically, these companies have hidden posters / banners relating to the game within their sites and physical stores. the customer/player begins this treasure hunt by looking for the advertising icons of the film (fig. 9) within the uci cinemas, the numerous partner sites and in the brick and mortar coverstore stores. figure 9 an example of game banner source: banner made by the promoter of the contest by clicking on these icons for the first time via smartphone or qr code in participating real stores, the user registers on the website "www.combattiloscurita.ucicinemas.it" providing their personal data requested. in this way begin the treasure hunt which, as explained in the regulation, is aimed at identifying a maximum of 5 characters from the film: "fantastic beasts: the crimes of grindelwald". at this stage of the customer's journey, the technology of cookies and click baiting comes into play. the advertising icons are not fixed on a predefined page, but must be searched by clicking the various windows of the sites even without any correlation. the treasure hunt also lasts several days, as the player can find the character's icon on a partner site where there was no trace in the past few days. depending on the number of characters found, the customer has access to a predetermined list of various prizes. the final prize is a "kaplan study holiday" in england. to participate in the awarding of prizes, participants must 123 reveal the identities of 5 characters in the film by first reading a short biography of the character and then answering a question of elementary difficulty inherent in the text read (fig.10). figure 10 − clues about the specific character source: https://www.kaplaninternational.com/it/blog/scopri-chi-e-letae-vinci-con-animali-fantastici-i-crimini-di-grindelwald after reading with clues from the life of the character from the film, players must associate the image with the correct description. in addition to the awarding of the various prizes provided for in the competition, the game also includes intermediate milestones such as the awarding of rewards. players who manage to find all 5 mystery characters receive a special email "wow effect" (fig.11). figure 11 − email received from a player source: promoter of the contest in detail, those who deliver the completed e-mail printed to the tills of a uci cinema (during the period from 15 to 25 november), will receive the film poster for free (fig.12). 124 figure 12 − special prize source: promoter of the competition the playful experience does not end with the search for the characters, in fact by purchasing the film ticket at a uci cinema, the customer has the possibility to access the internal rooms prepared with some "special" posters provided with qr code. qr codes unlock the spell "lumos" (fig.13) (term linked to the fantasy world of the film) double the chances of winning by appearing twice on the extraction database. figure 13 “lumos” spell source: promoter of the contest 5. concluding remarks the goal of a gamification strategy is to create "engagement". the real player wants to immerse themselves in the game, following the rules. the main reward is the game itself. each player needs to know when they have achieved a goal or how close to achieving its. a game must have feedback because it provides the motivation to keep playing. to correctly implement gamification within the marketing strategy, it is necessary to collect and analyze feedback to understand if the actions taken are correct or have to be changed and improved. the methods of collecting feedback change according to the project but they can be divided into two types: 125 quantitative and qualitative. quantitative feedbacks are statistical and structured data. they can be also the kpis decided at the beginning of the marketing plan. these must be used as a parameter to analyze the effectiveness of the implemented system. quantitative feedbacks are normally collected and measured by online tools such as google analytics, hotjar and could relate to the click rate on a given button, the time spent on a given page, the number of shares or likes of a post, the percentage of people opening an email and so on. qualitative feedbacks collect information that attempts to describe a topic rather than measure it. they are used to understand the reasons, viewpoints and motivations behind a certain action. one of the easiest ways to collect qualitative feedback is to ask questions via online surveys, one-to-one live or remote interviews, or how the customers react to the gamification experience. quantitative feedback helps to understand if the project is working while the qualitative ones will be able to tell why it is working. gamification follows the pull logic based on player involvement. the player decides to accept the objective, the rules and the feedback system. gamification within retail companies makes it possible to overcome obsolete and ineffective organizational models. it allows the creation of interactive, engaging and self-directed learning environments in which stakeholder is not just a passive recipient of orders and notions. by exploiting the symbiotic relationship that exists between play and learning, gamification can become an ally to stimulate the continuous improvement of all stakeholders in their relationships with the reference organization. through gamification, the retail company can establish a direct contact not only with customers but also with employees (internal stakeholders). through the implementation of game design, stakeholders can become "ambassadors" of the company in the specific and general environment. it must be clarified that gamification is not a panacea, which can be used "one best way" in any context to make a product or service a winner. there is not a tested formula but infinite applications with different methods to be discovered. gamification helps people to improve their involvement through fun in daily activities. all in the name of innovation and play. it can help people to be better workers. for this, it should not be used as a trend or a passing fashion but a real "cultural revolution" to be used systemically in the life of the company. references 1. alexander, b., & blazquez cano, m. 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(2010), “the social responsibility of retailers and small and medium suppliers in international supply chains”, finanza, marketing e produzione, n. 3, pp. 32-61. 1. introduction 2. what is gamification? 3. gamification in the world 4. gamification in retail services: the uci cinemas case study 5. concluding remarks references d:\prof\ijeb nr. 1\final_ijeb.pdf ���������� �� ������������������������������������������������ ����������������� ������������� ������������������������������������ ����!�������� ����������"������ ����#������$�%��������� ���������&�������������� ����������� ������� ��������������������'���������� ������"���(��������������������� �$�%��������!���������� �������� ������������ ��������!�������'�������!������!������������������� �������������)����� ����������������� ����������������������� �������� &!� ����������������������"����� ����������������������������$�%��� ����� ���!������� ������� ���������������"�����!�������������!� �������!�� ��������������(��������� 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+)#<�r!.>��#$%�#%�&$00";"+'�($z� !����3+��&"%�. 1�@� �!#;* �a$. %�0�$��0"�!" +)#<�+�.!#"+��j�3����,3� �.++"00��a ��e�-�$.��" ��d ��� �� �c "�!" +)#<'�b+�#���#*"��$ ��%�"!.>��#$%�0�>)�%;"q�r!#�$ r+�0"��" d � "�!" +)#<��%!�2�%�;"*"%��#%�r%;#%"" #%;���g� -"v� �%��s ��� h� �t��������h�6�8���n8��uo������'�k�+v#00�=.#0!#%;��<< $�>) �y"z�[$ v'�a$)%�/#0"1�e�-$%+��b%> [.v0��? ��34f4� �2�%�;" #�0�0"�!" +)#<'�k� "g#"z�$���)"$ 1��%!� "+"� >) �a$. %�0�$��2�%�;"*"%���3�����3i�f4 n�>>� $��a ��� 3� �������6o���8n�����o6�̂��:���������]�i��8����6o�:������h������:����:m����8n��o�����v�/�+)#%;�$%���&'�k*" #>�%�@+1>)$0$;#>�0�k++$>#��#$% �� 27 country of origin, products from different countries and cultural backgrounds in the cosmetic industry: a literature review raffaele cecere university of campania luigi vanvitelli, italy francesco izzo university of campania luigi vanvitelli, italy michele terraferma university of naples parthenope, italy received: december 14, 2021 accepted: march 2, 2022 online published: march 20, 2022 abstract this article explores the research domain of the impact of country of origin (coo) in the cosmetics industry in relation to products from different countries and cultural backgrounds. this study aims to provide a relevant and comprehensive organization of the research around this topic, offering an original, reliable and practically useful resource. in this way, a systematic literature review was conducted. twenty documents published between 1997 and 2020 were analyzed and classified into three research themes. specifically, the three themes are: coo and purchase behaviour related to cosmetic products (theme a), coo and country perception in relation to cosmetic products (theme b), coo and marketing strategies for cosmetics companies (theme c). for each of the themes, emerging content and the potential for future research was highlighted. the findings of this paper have value not only for cross-cultural management and marketing scholars, but also for managers of cosmetics companies who plan to use the country of origin and the country image to communicate the company brand. the analysis is original and shows that this is an under-researched topic that offers important insights for future research and implications for managers who intend to consider the coo in business and marketing strategies. keywords: country of origin; country image; culture; countries; cross-cultural management. international journal of economic behavior, vol. 12 n. 1, 2022, 27-44. https://doi.org/ 10.14276/2285-0430.3194 28 1. introduction the country of origin (coo) has its roots at the end of the first world war, with a different meaning than the one that today is part of our common imagination: the "made in" label was in fact compulsorily placed on products coming from defeated countries, such as germany, to mark them as products to be avoided (munjal, 2014). the concept of coo was studies for the first time in economic terms since 1965, when schooler (1965) empirically demonstrated that identical products were perceived differently in relation to their country of origin. nowadays, in an increasingly connected and globalized world where consumers can purchase products from all over the globe, the coo has significant importance. in particular, it represents not only the image, reputation and stereotypes that businessmen and consumers attribute to the products of a given country (nagashima, 1970), but also the set of beliefs that consumers have about the countries themselves (strutton et al., 1995; roth & romeo, 1992; kotler & gertner, 2002). in addition, the coo is considered as an extrinsic feature along with the brand and therefore can act as an additional assurance during the purchase process of a product with which one is unfamiliar (josiassen & harzing, 2008). this phenomenon, which is triggered by the importance of the coo, is also classified as the halo effect (han, 1989). on the other hand, as consumers become more familiar with a country's products, the country image may become a construct that summarizes consumers' beliefs about product attributes, which inevitably affects their attitudes towards the brands associated with those products (han, 1989). however, the phenomenon related to coo involves very often some categories of products and not all products from the same country. for example, japanese wine producers have a harder time gaining credibility in the market than camera and television manufacturers from the same country. similarly, german cars, sporting goods and computers designed in the united states (hamzaoui & merunka, 2006) are perceived positively by consumers compared to others from other countries. in this vein, the purchasing process of consumers turns out to be influenced by country-product associations that are in turn the result of the information that consumers have about the country of origin, as in the case of shoes made in italy and perfumes made in france (kalicharan, 2014). moreover, with regard to italian products, those related to the agri-food, clothing and home furnishings industries are perceived worldwide as synonymous with quality linked to the high creative content of the industrial process, which validates the term "italian style". in this regard, de nisco and mainolfi (2016) showed that foreign perception of italy and italian products is linked to the image of the cultural heritage of the italian country brand and has a significant interaction with some cultural attributes (such as culinary tradition, aesthetics and art) and with the main product categories of the so-called italian ‘bello e ben fatto’ (such as food, leather goods, design and home furnishings). in addition, italian excellence in some industries has generated the phenomenon of ‘italian sounding’ (francioni & albanesi, 2017), which consists in the use of words (i.e. recipe names and person's names and surnames) and images (i.e. the flag or geographical references such as italian locations or monuments) evocative of italy, in order to promote and market products that are actually not made in italy. francioni and albanesi (2017) demonstrated with a sample of german consumers, that italian sounding damages the perception of ‘made in italy’, since very often consumers do not pay much attention to the label during purchase. some scholars (maheswaran, 1994; gürhan-canli & maheswaran, 2000) have examined the coo phenomenon according to its cognitive aspect, evaluating the 29 conditions under which consumers are more likely to use coo in their decision-making process. in these cases, it was found that when consumers are faced with choosing a product, they very often tend to minimize the effort to process information (maheswaran, 1994) and for this reason they use coo as a heuristic to quickly make a judgment and evaluate a product based on the degree of certainty (or uncertainty) they have regarding the quality of the product (maheswaran, 1994; gürhan-canli & maheswaran, 2000). on the other hand, other scholars (klein et al., 1998; chen et al., 2014; septianto et al., 2020) have analysed coo according to the emotional aspect. for example, klein and colleagues (1998) showed that chinese consumers are unlikely to purchase japanese products because of the memory of japanese occupation on their territory. from an emotional perspective, it follows that the positive emotions an individual has about a country will affect a product from that country in a positive way, and conversely, negative emotions will affect a product from that country in a negative way (chen et al., 2014). however, contrary to this claim, septianto and colleagues (2020) showed that in cases where the coo has a less favourable image, emotions have a greater influence on consumer purchase behaviour, highlighting the moderating effect of the coo in matching country and product-related emotions. in light of these elements, this paper aims to study the importance of the concept of coo related to cosmetic products and understand how its perception changes not only depending on the cultural context in which the study takes place, but also in relation to the coo of the products under consideration. therefore, a review of all existing literature related to studies that have linked the concept of coos to cosmetic products and have addressed the topic from an economic and cross-cultural perspective was conducted. moreover, in the literature there was no review of the literature related to coo dedicated to the cosmetics sector, therefore the originality of this study goes to fill this gap by analysing the phenomenon from a cross-cultural point of view. the literature review follows a fully systematic and replicable process involving research, inductive analysis, and organization of previous studies based on recurring findings and cultural contexts of reference. thus, the following research question guides the study: rq. how has the impact of coo in the cosmetics industry been studied in relation to products from different countries and cultural backgrounds? since coo is often considered a synonym for country image (ci) (yagci, 2001), they are also considered in this review in this way, although they are actually mean different things. effectively, ci represents the set of descriptive, inferential, and informational beliefs that people have about a particular country (martin & eroglu, 1993) and this occurs in relation to mental representations of people, products, culture, and national symbols (verlegh & steenkamp, 1999), combined with other factors such as economic and political maturity, historical events and relationships, technological virtuosity (bannister & saunders, 1978), and environmental issues (allred et al., 2000). this paper inventories the entire domain of coo related to cosmetics to provide comprehensive, relevant, and organized research support. several studies were reviewed, inductively synthesized, and classified in relation to their findings and cultural reference contexts, while also attempting to identify major research themes. finally, this study adopts a cross cultural approach in order to open a discussion regarding the phenomena, issues, inconsistencies and intermediate debates on which new research can be conducted, facilitating the sharing and 30 reusing of meaningful information in relation to different cultural contexts. the next part of the study presents the research method including its scope and analytical procedures. this is followed by our findings, including observations of the literature and areas for future investigation. this leads to a more general discussion and conclusions of the work combined with a future research agenda. 2. methodology to ensure a comprehensive state of the art about the concept of country of origin in the cosmetics industry and to ensure replicability for future research, the process of systematic literature review was followed. in fact, systematic literature reviews aim to provide a reliable and scientific overview of ongoing research on a specific topic and provide guidance for future research (petticrew & roberts, 2008). furthermore, the purpose of systematic literature reviews is to identify, evaluate, and synthesize all relevant studies using a transparent and replicable process to answer a particular research question (tranfield et al., 2003). to comply with principles such as transparency, clarity, focus, accessibility, and synthesis, a search protocol was followed and based on it, the criteria for searching, including, and excluding papers were established. the first step of the review was to define a search protocol compliant with the research aim to review articles dealing with the impact of coo in the cosmetics industry in relation to products from different countries and cultural contexts. eligible studies for this review could refer to both the concept of coo and ci related to cosmetic products in different cultural contexts from both an economic and cross-cultural perspective. during the search, the terminology country of origin image (coi) also emerged: it too was considered suitable for our review. thus, the first inclusion criterion was to find and analyze studies in the literature that linked the concept of coo (or ci and equivalent terminologies) to cosmetic products in different cultural contexts from both an economic and cross-cultural perspective. in addition, the second inclusion criterion required that the research had been open to collect both empirical studies, conceptual studies, and reviews. in addition, a third inclusion criterion was that articles published in peer-reviewed journals were included in a priority way because these articles are considered more reliable due to the double-blind review process they undergo before being published (podsakoff et al. 2005). moreover, a fourth inclusion criterion, stated that both high-impact and low-impact journals were considered, as long as the articles belonging to them met the other inclusion criteria. finally, under the fifth inclusion criterion, books, book chapters, and working papers were considered and allowed as exceptions if they were strongly in line with the other inclusion criteria. in contrast, papers that did not deal with the concept of coo, or ci, related to cosmetic products in different cultural contexts according to perspectives other than economic and cross-cultural were excluded. furthermore, papers that did not consider coo and ci as the central topic of the work were also excluded. finally, periodicals, conference proceedings were also excluded. inclusion and exclusion criteria are also provided in the table below (table 1). subsequently, the research took place in the second step. specifically, the search for papers was done by first entering the keywords (table 1) into the ebsco, scopus and google scholar search engines without limiting the search to a specific time period and by searching through the titles and abstracts of the content. in addition, a manual search for relevant articles was conducted through the reference lists of relevant articles found in previous steps. moreover, the same keywords were manually 31 entered on the journal search engines in order to identify additional studies that might have escaped the automatic search of the previously mentioned databases. finally, 20 papers (19 from peer-reviewed journals and one book chapter) were identified for inclusion in the final database for our analysis. table 1 – methodological procedures for search, selection, inclusion and exclusion inclusion criteria 1. papers that linked the concept of coo (or ci and equivalent terminologies) to cosmetic products in different cultural contexts from both an economic and cross-cultural perspective; 2. empirical and conceptual and review; 3. peer-reviewed journal articles preferentially; 4. both high-impact journals and lower-impact journals; 5. exceptions for books, book chapters and working papers if they were strongly in line with the other inclusion criteria. exclusion criteria 1. papers that did not consider coo as a central topic of the paper; 2. periodicals and conference proceedings. research method stage i 1. admission criteria for general keyword search using scopus, ebsco, and google scholar; 2. initial focus on: a) citation and abstract, and b) title. 3. key words: • country of origin and cosmetic • country image and cosmetic • country of origin and perfume • country image and perfume • country of origin and skincare • country image and skincare search method stage ii 1. manual search of relevant articles through the reference lists of relevant articles found in the previous stages; 2. manual search in search engines of the journals of the studies previously identified; 1. include and evaluate articles deemed suitable for the search criteria. final sample for analysis n= 20 (nineteen papers from peer-reviewed journals and one book chapter) source: author’s elaboration 3. results subsequently, a microsoft excel spreadsheet was used for content coding and comparison. in addition, the methodology of the studies, the samples used for the research, and the countries in which the studies were conducted, the country of origin, or the reference image country were identified. next, the various contributions were analyzed by identifying not only the value of culture in the various reference contexts in which they take place, but also the main research themes. 32 an initial analysis of the existing literature shows that the scope of the research ranges from 1997 to 2020. in terms of the methodology adopted, eighteen of them are quantitative studies and only three are qualitative. finally, three research themes were identified and are reported below. they are: coo and purchasing behavior related to cosmetic products, coo and country perception related to cosmetic products, coo and marketing strategies for cosmetics companies. this information is summarized in table 2. table 2 – summary table of studies clustered by theme theme a: coo, ci and purchase of cosmetic products study country of study country of origin sample methodology zbib et al., 2021 lebanon france and china 300 lebanese female consumers quantitative. structured questionnaires. one-way anova, multinomial logistic regression, single and multiple regression analysis and chi-square tests ishak et al., 2019 bangi selangor (malaysia ) not specified 150 female consumers from four quantitative. self-administered questionnaire, descriptive, t-test and correlation analyses higher education institutions moslehpour et al., 2017 taiwan korea 437 taiwanese people quantitative. mean, median, standard deviation and other descriptive statistics. exploratory factor analysis (efa), confirmatory factor analysis (cfa), cronbach's alpha, kaiser-meyet-olkin (kmo), bartlett‟s test measure, structural equation modeling (sem) tjoe and kim, 2016 indonesia korea 227 indonesian consumers quantitative. online surveys. principal component analysis (pca), multiple regression and process analysis zbib et al., 2010 lebanon pantene (ksa, france and usa), sunsilk (egypt, turkey and france), palmolive (lebanon, usa and france) 332 consumers of shampoo quantitative. demographic variables; one-way anova tests marcoux et al., 1997 poland poland and western countries 265 polish university students quantitative. univariate analysis of the scores of preference and stepwise multiple regression analysis. azuizkulov , 2013 malaysia not specified 227 students from universiti utara malaysia quantitative. exploratory factor analysis, correlation analysis, regression analysis montanari et al., 2018 brazil ralph lauren (usa), chanel (france), hugo boss (germany) 329 students quantitative. questionnaire. 1-5 likert scale, descriptive analysis, kruskalwallis tests, non-parametric tests (mann-whitney test) hsu et al., 2017 taiwan not specified 300 respondents quantitative. paper-based questionnaire, structural equation modelling, hierarchical moderated regression 33 jin et al., 2020 usa and china korea 491 consumers ages 20 and quantitative. structural equation modeling older jin et al., 2019 usa, france, china, vietnam korea 900 consumers aged 20 or older quantitative. multiple regression analyses. jin et al., 2019 usa and china korea 250 consumers ages 20 and older quantitative. structural equation modeling xiao et al., 2016 beijing and shanghai (china) korea 255 customers quantitative. survey, descriptive statistics, hierarchical regression analysis rezvani et al., 2013 malaysia malaysia 196 customers quantitative. survey, descriptive data analysis theme b: coo, ci and country perceptions study country of study country of origin sample methodology baran, 2018 poland finland, france, germany, israel, italy, norway, poland, spain, sweden, switzerland, united kingdom, united states web panel of 1012 respondents quantitative. descriptive statistics. pilelienèa and šontaitèpetkevičien èb, 2014 lithuania lithuania, italy, france, germany, poland, russia, china 1262 respondents quantitative. questionnaire, 1-7 likert scale, mean, n, standard deviation cheah et al., 2020 australia italy, australia, south korea and china 200 undergraduate business students quantitative. survey, anova tests theme c: coo, ci and marketing strategies for cosmetic companies study country of study country of origin sample methodology suter et al, 2018 brazil brazil and brazil production with france origin two companies: natura cosméticos (brazil domestic company) vs l'occitane au brésil (franceowned) qualitative. multiple case study method, semi-structured interviews sutter et al., 2015 brazil brazil natura cosméticos s.a. qualitative. case study analysis, semistructured interviews rebufet et al., 2015 not specified france, usa, china, panama, spain 7 professionals from french cosmetics companiesoperatin g internationally qualitative. multiple case study method, semi-structured interviews source: authors’ elaboration 34 3.1 theme a: coo and purchase behaviour related to cosmetic products the first theme includes studies that have used coo (or ci) to explain consumer purchase behaviour. in particular, zbib and colleagues (2021), with a sample of 300 lebanese women, showed that taking into account cosmetic products from france and china, the level of involvement that female consumers have towards a given product constitutes an exogenous variable that influences the level of importance of coo in the purchase of cosmetics and in particular skin care products. they also showed that for products from france, coo information search and change in the perception after trying the product are correlated due to the presence of a halo effect related to french products. furthermore, they found that coo information search and change in the perception are not correlated when it comes to chinese products since lebanese consumers did not change their perception towards the products after discovering their chinese origin (zbib et al., 2021). however, for low involvement product categories such as shampoo, it has been shown that country of origin is not one of the key attributes influencing lebanese consumer choice (zbib et al., 2021). this was demonstrated in lebanon with a sample of 332 shampoo consumers from brands and countries of origin such as pantene (ksa, france and usa), sunsilk (egypt, turkey and france) and palmolive (lebanon, usa and france) (zbib et al., 2010). furthermore, taking as reference companies and their countries of origin such as chanel and france, hugo boss and germany and ralph lauren and usa, it was shown that, for a sample of 329 brazilian students, country of origin has little importance in the purchase of luxury branded perfumes. in this case, price and brand had been considered the factors that most influence the choice (montanari et al., 2018). in particular, the study showed that only for chanel the value of country of origin was higher, probably because the brand name communicates the country of origin (montanari et al., 2018). furthermore, hsu and colleagues (2017) demonstrated with a sample of 300 respondents in taiwan, that perceptions of coo moderate the links between attitude, subjective norm, perceived behavioural control and purchase intention of green skincare products. specifically, the relationship between the variables appears to be stronger at high levels of coo perception and weaker at low levels of coo perception (hsu et al., 2017). in addition, ishak and colleagues (2019), on a sample of 150 malaysian high school women, showed that purchasing cosmetic products is part of the ‘limited decision-making process’ and specifically, in the purchasing process, country of origin obtained a mean value of 3.91 on a likert scale 1-7 (ishak et al., 2019). moreover, also in malaysia, with a sample of 227 university students, it was shown that not only country of origin is strongly correlated with both purchase behaviour and brand reputation, but also has a positive influence on brand loyalty when referring to cosmetic products (azuizkulov, 2013). moreover, tjoe and kim (2016), in their study made a distinction between country of origin image and country image, considering the former as the country of manufacturer's products or brand is associated with its home country (samiee, 1994) and the latter as the set of people's beliefs, images, ideas and impressions about a certain country (kotler et al., 2002). in particular, they demonstrated, with a sample of 227 respondents, that country of origin image (and not country image) significantly influenced consumers' purchase intention towards korean products in indonesia. moreover, this study also juxtaposes the concept of coo with that of ethnocentrism, as did marcoux and colleagues (1997) who, with a sample of 265 polish university 35 students, showed that patriotism is a dimension of ethnocentrism that leads consumers to prefer polish products, while preference toward western products is related to the demonstration of social status. in addition, another study conducted in malaysia with a sample of 196 consumers showed that patriotism has a strong influence on malaysian consumers' intention to purchase cosmetic products made in malaysia (rezvani et al., 2013). moreover, moslehpour and colleagues (2017), by analyzing the key factors influencing the repurchase intention of korean cosmetic products by 437 taiwanese consumers, showed that coo significantly influences both word-of-mouth and product repurchase behaviour. in addition, also regarding korean products, using a sample of 491 american and chinese consumers aged 20 and older, jin and colleagues (2020) showed that product-specific country image, also referred to as micro country image had a positive influence on quality ratings of korean cosmetics in contrast to overall country image (macro country image) and prototypical brand image (e.g. samsung). however, the same authors (jin et al., 2019) examined the impact of korea's macro and micro image and the level of materialism of global consumers on the quality evaluation of korean cosmetics, a sample of 900 consumers aged 20 or older from the usa, france, china, and vietnam. they showed that only in the usa and france was the effect of macro and micro country image on quality evaluation significant, while the impact of micro country image was strong in all four countries. furthermore, the same authors (jin et al., 2019) showed with a sample of 250 consumers ages 20 and older, that for the evaluation of the quality of cosmetic products, the positive impact of the macro country image is not valuable, while the pathway related to the cultural phenomenon of the korean wave is significant. also related to knowledge spillovers, xiao and colleagues (2016), with a sample of 255 chinese consumers, stated that cinema, theater and the internet represent sources that have increased knowledge regarding korean cosmetics. they also verified that the general ci and general product ci of korea have a positive influence on the electronic word-ofmouth (e-wom) and purchase intention of korean cosmetics (xiao et al., 2016). from these studies, we can see that the coo in some cultural contexts and for some product categories is particularly important in relation to consumer purchasing behaviour, while in others its influence is less. in particular, we notice that cosmetics made in france and korea are those which have the greatest influence on the purchasing process of consumers in lebanon, china and taiwan. from a cultural point of view, this phenomenon can be traced back to the concept of mianzi (literally, face) which represents one of the main personality characteristics of the chinese people and other east asian peoples (yang, 1994; wong & ahuvia, 1998). according to this cultural characteristic, east asians tend to own and purchase goods that allow them to achieve a certain social status on which they base their prestige (yang, 1994), build their reputation (wong & ahuvia, 1998), and the way they are accepted by others (hwang, 1987) by publicly displaying their wealth and willingness to be fashionable. moreover, particularly for china, these reasons meet explanations in its cultural evolution that started after the death of mao tse tung and the historic entry into the global economy in 1978, which had consequences on the consumption of products and emulation of foreign lifestyles by the chinese people. foreign brands carry a symbolic meaning of modernity and prestige associated with modern and worldly lifestyles (zhou & hui, 2003) that meet the desire, particularly of chinese women, to give birth to the long-suppressed desire to wear fashionable clothes and 36 cosmetics (barnes, 2009; hopkins, 2007). moreover, the phenomenon of ethnocentrism pushes consumers to prefer products from their own country as in the case of poland, where, from a cultural perspective, national pride and entity influence people's attitudes and consumer purchasing behaviour (huddleston et al., 2001; kubacki & skinner, 2006; siemieniako et al., 2011). however, for both product categories with less involvement, such as shampoo, and some perfumes, country of origin is not one of the key attributes that influence consumer choice in some cultural contexts such as lebanon and brazil, confirming that from a cultural perspective, country of origin takes on different meanings in relation to the product, cultural context, and country appeal. finally, related to this result, in this theme we can see that culture plays an important role in consumer preferences and purchase process in different countries. 3.2 theme b: coo and country perception in relation to cosmetic products the second theme encompasses studies that have linked coo concepts to consumers' perceptions of a given country. a study by baran (2018) conducted in poland and based on a web panel of 1012 polish internet users, showed that more than 30% respondents when thinking about features such as safety of using and low price of a cosmetic product refer to poland. when they refer to the naturalness of cosmetic products, they refer not only to poland, but also to finland. when instead they think of prestige, they associate this characteristic with cosmetic products from france. they also associate france with high prices, along with the united kingdom, switzerland and the usa. however, with smaller percentages, high quality of ingredients (24.5%) and effectiveness (24.9%) are associated with germany, pleasure of using (18.6%) with france, mediocrity (27.7%) with israel and innovativeness (18.0%) with united states of america (baran, 2018). in addition, another study conducted in lithuania with a sample of 1262 cosmetic consumers identified three groups of country-of-origin based on their attractiveness. specifically, france and germany were classified as attractive country-of-origin, italy and lithuania as neutral country-of-origin and finally russia, poland and china as unattractive country-of-origin (pilelienèa et al, 2014). finally, cheah and colleagues (2020), with a sample of 200 undergraduate business students in a large university in australia, showed that regarding australian, italian, korean, and chinese-branded perfumes, no country-of-origin of these perfumes is a means of achieving status. however, among the various perfumes, australian perfumes have been considered reliable and belonging to the emerging markets of their industry (cheah et al., 2020). regarding this second theme, we can note that with regard to the perceptions of the various countries, french origin has its attractiveness in the cosmetic industry. moreover, a form of patriotism also emerges in studies belonging to this second theme when we consider that polish consumers perceive cosmetics from poland as safe to use and when australian consumers consider perfumes made in australia as reliable and up-to-date. from a cultural point of view, regarding the ethnocentrism of polish consumers the same reflections indicated in the previous theme are valid, while that found in australian consumers confirms the results of previous studies in which it is shown that they tend to purchase local products with high frequency, especially if they belong to categories of high symbolic impact, as cosmetics are (strizhakova & coulter, 2015). 37 3.3 theme c: coo and marketing strategies for cosmetic companies the third theme refers to the marketing strategies adopted across firms to show the coo. in particular, a study conducted in brazil with a sample of two companies, a brazil domestic company (natura cosméticos) and a france-owned company (l'occitane au brésil) identified six tools that companies can use to communicate brand values using the concept of country image associated with the country of origin (suter et al., 2018). specifically, the six tools refer to the country's natural resource properties, cultural resources (e.g., related to lifestyles), employee training on the importance of the country image for the brand, textual elements referring to the country (such as language and typical expressions), visual elements (e.g., images of the country, flag, landscapes and typical symbols, use of the country's name on staff uniforms) and sensory experiences (e.g. listening to country music on the website and in stores, in-store scents and essences, and packaging that evokes the country by touch). another study refers to the country-of-origin image using the brazilian company natura cosméticos as a sample as well (sutter et al., 2015). the study shows that the company leverages the country-of-origin image when implementing its international differentiation strategy. population, economy and politics, sports and arts, nature and lifestyle are the five elements that represent brazil's image and natura makes use of different nuances. in particular, the company chooses to base its strategy on themes related to nature, relationships and the friendliness of the country and the brazilian people while avoiding stereotypes such as soccer, sensuality, samba and the beach (sutter et al., 2015). finally, a further study with a sample of seven professionals representing french cosmetics companies that operate internationally (france, usa, china, panama and spain), showed that the country of origin is communicated through labels, symbols, commercial discourse and strategies that emphasize the french origin of the products, which represents a real added value (rebufet et al., 2015). in addition, the study points out that communication based on these elements is more widely used by small and medium-sized businesses than larger ones. this is because small and medium-sized companies use logos that contain graphic elements evoking france (for example, a stylized eiffel tower) more freely than larger companies with an international character, which are often limited to displaying only a few elements such as the name of the city under the brand name (rebufet et al., 2015). from this third theme it emerges that coo communication represents a valid item in the marketing strategies not only of large multinational companies, but also of small companies that want to open up paths in international markets. 4. conclusions this study aims to provide a comprehensive view regarding the impact of coo in the cosmetics industry in relation to products from different countries and cultural contexts through a systematic literature review. we can see that it is a topic not very studied, but for our analysis twenty studies were collected and classified into three themes: coo and purchase behavior related to cosmetic products (theme a), coo and country perception in relation to cosmetic products (theme b), coo and marketing strategies for cosmetics companies(theme c). 38 among the main results, it emerges that coo has a higher value when attributed to cosmetic products with higher emotional value, such as perfumes (kalicharan, 2014; montanari et al., 2018; cheah et al., 2020), and a lower value for cosmetic products with lower emotional value, such as shampoo (zbib et al., 2010). furthermore, we can see that cosmetic products from france and korea have great appeal in many cultural contexts and that in some cultures patriotism often leads consumers to prefer products from their own country (as in poland). this means that the coo is linked to the culture of a people, its history and its traditions that affect the purchasing behaviour of consumers. as a matter of fact, consumers choose the products they want both on the basis of the product's characteristics, such as quality and price, and on the basis of its symbolic value. the former is the case of polish consumers who base their purchases more on the perceived quality than on the origin of the product. however, the strong ethnocentrism belonging to their culture pushes them towards quality products made in their country (huddleston et al., 2001). the second is the case of chinese and other east asian consumers, who tend to prefer foreign products with a strong symbolic value, such as french brand cosmetics, in order to feel more integrated into society (wong & ahuvia, 1998). it also emerges that coo communication is a viable marketing strategy for companies from countries with strong cosmetic traditions. since the results of this study show how culture influences consumption choices in relation to the origin of products, they are of value not only to scholars of cross-cultural management and marketing, but also to managers of cosmetics companieswho intend to use the country of origin and the image of the country to communicate the company brand. however, our review also has limitations. first, this study is limited to analyzing peerreviewed journal articles in a preferential manner, with the exception of only one book chapter that is strongly aligned with other research criteria. in addition, all selected studies were in english. therefore, it would be interesting for other authors to conduct a review including other studies, for example submitted to conferences and written in languages other than english. however, although our study is based on a replicable research protocol it is appropriate for other researchers to evaluate a random sample of the coded articles to verify their validity (ryan & bernard, 2003). despite these limitations, the originality of this study fills a gap in the literature related to coo and the cosmetics industry by also analyzing the phenomenon integrating a cross cultural perspective. in addition, our study points to multiple opportunities for future research without claiming to be exhaustive. regarding theme a, for further future studies it would be interesting to study the influence of patriotism in other cultural contexts such as italy (or other western european countries) and also how the ‘made in’ influences the purchasing process of foreign consumers in relation to cosmetic products. further quantitative studies could consider the frequency and willingness to purchase products from one's home country by measuring patriotism through specific variables and questionnaires (schatz et al., 1999; davidov, 2009). in this way, patriotism could be used as a mediator between the perception of coo and the actual purchase of products by the end consumer. on the other hand, with regard to theme b, it would be interesting to discover how, contrary to the studies examined, french consumers perceive cosmetic products from other countries. in this case, both qualitative studies could help to explore the phenomenon more, 39 and quantitative studies could confirm hypotheses by using the coo of cosmetic products as a moderator or mediator for some psychological variables, such as materialism (richins & dawson, 1992; griffin et al., 2004; kilbourne et al., 2005) and face (ho, 1976; hwang, 1987; markus & kitayama, 1991; liao & wang, 2009). studies of this kind could play on the role of the perception of a given country (such as france for its elegance and italy for its ‘italian style’) plays when considering a given product category, cosmetics in our case, and purchase choices. moreover, regarding theme c, it would be interesting to conduct a qualitative study both for a korean company and for smes in other countries where small entrepreneurship is strongly present, such as italy. furthermore, it would be interesting to conduct quantitative studies on samples of multiple companies to build theoretical models related to coo communication in different countries. these theoretical models could contain objective variables to explain different marketing strategies related to coo, such as storytelling and sales staff expertise in the process of communicating and selling products within stores. finally, further studies could investigate the misuse of the coo, as in the case of ‘italian sounding’ (francioni & albanesi, 2017) associated with cosmetic products. in this way, the negative effect it might have in the long term with respect to the perception of certain products in both richer and poorer countries or, simply in different cultural contexts could be assessed. in fact, studies of this kind could not only give further explanations to the ethical problems related to this unfair phenomenon, but also shed light on the cultural differences in different countries. in addition, further studies could address the emotional component related to coo (septianto et al., 2020) by analyzing the moderating effect of coo in situations where consumer purchasing behaviour is analyzed with reference to cosmetics from high and low appeal countries. finally, from a practical point of view, this study also offers important insights for managers of cosmetics companieswho want to develop international trade by using the coo as a tool on which to base a communication strategy, both on the side of promotion and sales in their physical stores. in this vein, an integrated marketing strategy could be useful to effectively communicate the coo through symbols that remind the culture of the specific country. nevertheless, it is advisable to communicate the elements of the coo in a dynamic and proactive way, in line with the demands of new markets. very often, companies tend to use coo-related artifacts in a passive manner, for example by using 'made in' lettering and images such as the flag. although these elements have the ability to inform about the origin of the product, they have low informational power towards customers in young and dynamic markets (checchinato et al., 2013). for companies engaged in selling products in new foreign markets that want to leverage the coo, it is important to actively explain the value and characteristics of their country. in this sense, when basing communication on the coo, brand image should not be neglected, but a type of communication capable of integrating both aspects should be implemented. in addition, the tool of storytelling could help to proactively communicate the value of the coo by linking it to products and the brand. furthermore, it would be important to leverage the store windows, the internal environment of the stores and the sales staff, which play an important role in attracting consumers to come in and be accompanied in their shopping experience. in this sense, greater involvement of sales staff in telling the product story based on the coo's assurances and, at the same time, the brand would help to entertain the customer and positively 40 influence the buying behaviour. moreover, the tool of storytelling could help to proactively communicate the value of the coo by linking it to products and the brand. furthermore, it would be important to leverage the store windows, the internal environment of the stores and the sales staff, which play an important role in attracting consumers to come 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(2010), “the social responsibility of retailers and small and medium suppliers in international supply chains”, finanza, marketing e produzione, n. 3, pp. 32-61. 1. introduction 2. methodology 3. results 3.1 theme a: coo and purchase behaviour related to cosmetic products 3.2 theme b: coo and country perception in relation to cosmetic products 3.3 theme c: coo and marketing strategies for cosmetic companies 4. conclusions references 45 factors affecting couples’ interactions during covid-19 in sri lanka thesara jayawardane university of moratuwa, sri lanka vathsala wickramasinghe university of moratuwa, sri lanka received: december 7, 2021 accepted: march 5, 2022 online published: april 14, 2022 abstract covid-19 has made a substantial and irreversible impact on almost all areas of countries around the world and sri lanka is no exception. with the restrictions vested upon public as a result of covid-19 disease, more and more couples claim to have a decrease in their relationship happiness and interaction. further research in this would ensure to reduce the damage the pandemic would have on couples. hence, the objectives of this study were to investigate motivational factors affecting couples’ interactions, to investigate stress factors affecting couples’ interactions, to investigate the level of couples’ interactions, to investigate resources available for spouses and to analyse whether resource availability, moderates the relationship between motivational factors/stressors and the level of couples’ interactions. data was collected from over 300 participants of a convenience sample using an online survey. the couples were adults of 25 years or older, residing in the western province of sri lanka. statistical analysis was performed to identify moderator effect of resource availability on the level of couples’ interactions. in conclusion the study emphasised that motivational factors such as family approval and social prestige and stressors such as financial strain and occupational status contribute towards the interaction of couples and they are moderated by resources available to these couples such as cultural beliefs and availability of family support respectively. the study concludes with recommendations of ways to overcome the issues brought upon by covid-19 on couples’ interaction. keywords: interaction of spouses; motivation factors; stressors; covid-19; sri lanka. international journal of economic behavior, vol. 12 n. 1, 2022, 45-61. https://doi.org/ 10.14276/2285-0430.3347 46 1. introduction covid-19 or the corona virus disease has become one of the most dangerous pandemics in the century causing a vast amount of deaths globally. many countries are fighting the disease with active vaccine programs and, sri lanka has been named as one of the most efficient countries in fighting covid-19 with the efficient vaccination program. even with the lengthy lockdown periods enforced by the sri lankan government, the virus has become more dangerous with evolving variants of the covid-19 being discovered regularly. the impact the pandemic and the lockdown has brought upon couples cannot be ignored as the disruption of daily activities and the isolation at home causes many couples to interact differently to their normal behaviors. at the beginning of the pandemic all parties were concerned mainly of battling the disease and reducing death rates where no consideration was given for harmony at home fronts or couple interactions. with couples being isolated for lengthy periods of times due to the lockdowns and working from home arrangements, the daily interactions start requiring further attention. it is indeed important to understand the factors that motivate positive interactions between couples and the negative stressors which repudiate their interactions in order to understand the level of interaction and their mental well-being. according to pietromonac and overall (2020, p.3) “external stressors related to the pandemic will likely increase interpersonal conflict within relationships, the extent of which may be moderated by pre-existing relationship quality and satisfaction; characteristics; and vulnerabilities”. many couples depend upon each other for mental support during the pandemic as mortalities and financial difficulties are caused by covid-19. many stressors such as uncertainties, occupational threats, duties arising from external family members and children would create a negative impact on the level couples interact with each other. similarly having community and family approval with social prestige and cultural beliefs would motivate couples to interact positively with each other. thus, the aim of this research is to investigate the factors that motivate and cause stressors for the level of interaction among sri lankan couples during the covid-19 lockdown. with the intention of investigating that, the below objectives were derived. 2. objectives • to investigate motivational factors affecting couples’ interactions. • to investigate stress factors affecting couples’ interactions. • to investigate the level of couples’ interactions. • to investigate resources available for spouses. • to analyze whether resource availability, moderates the relationship between motivational factors/stressors and the level of couples’ interactions. this article draws from relevant literature across similar topics to identify how the motivational factors and stress factors affect couples’ interactions, the various resources available for these spouses and the way these recourses moderate the interaction between the couples. the conceptual framework was created based up on models of various human behavior and methods these families would function. 47 3. literature review 3.1 level of couples’ interaction with the objective of determining the factors that affect the interactions of couples, this literature review will inspect previous studies that have been conducted on this area. couples interaction determines the success of their marriage and the satisfaction in the relationship. khalatbari et.al (2013) identifies marital satisfaction found through couple’s interaction as a key factor in determining the assessing happiness and stability in a successful marriage”. zainah et.al (2012) speaks of how the interaction of couples can be beneficial and detrimental to the success of a marriage. farahmand et al (2014) points out that the level of interaction between couples contribute to the quality of their relationship. copen et. al. (2012) mentions that to keep a stable marriage and a solid relationship couples must identify factors that bring significant marital satisfaction when they interact. many studies have conducted on marriage satisfaction on couples but, the effect of covid-19 has on the level of interaction among couples have not been identified, especially for asian or sri lankan couples. covid-19 has made a significant impact on all couples irrespective of their geographical where about and, the level they interact will determine the satisfaction and future of their relationship. during a crisis environment such as the current pandemic, conflicts among couples will be inevitable. many researchers have agreed that couples with harmonious interaction between each other demonstrate marital success. (ellison, burdette, wilcox, & 2010; mahoney, 2010). thus, couples’ interactions should bring a meaning of life to cultivate matrimonial harmony (mohammad, 2010). in the following sections variables of motivational factors, stress factors and resources available for spouses are reviewed in relation to the interaction of couples and propose our hypotheses of the study. the conceptual model developed for the study is shown in figure 1. figure 1 − conceptual model motivators level of couples’ interaction resources available for spouses stressors 48 3.2 motivational factors billingsley et al. (2005, p. 7), identified nine themes “love, sex, relationship permanence, compatibility in personality, common interests, decision-making, intimacy, communication, and religion” that are motivators of couples’ interaction which brings marital satisfaction. according to hawkins (1968, p.2) “marital satisfaction is a sense of happiness, satisfaction, and joy experienced by the husband or wife when they consider all aspects of their marriage”. kamaly et. al. (2014) states that couples’ interaction is motivated by physical and psychological requirements and, properly motivated interaction will lead to satisfactory relationships. rahmani (2011) states that factors such as interpersonal, psychological, interaction, spiritual-religious, and sexual factors also motivate couples’ interaction. according to zainah et. al (2012) a key motivational factor on couples’ interaction can be seen as demographic factor which includes couple’s education, age of marriage age, age gap between the couple, length of marriage. zanjani et.al (2014) adds more to this list with factors such as the economic situation of the couple, employability of the couple and the number of children. when the age is considered it was identified by yazdanpanah et.al (2015) that older the couple is, the more motivated they are to interact with each other compared to younger couples who resented the isolation and social distancing. sayadpour (2005) has also pointed out how having a good income, possessing a good education and satisfied employment can motivate couples to interact more positively. karimi et.al. (2010) brings out the importance of having good interpersonal connections and understanding among couples. maghsoodi et. al (2011) tallies it with psychological attributes such as forgiveness and support for each other which he claims as motivators for couples’ interactions. pourmarzi et.al (2013) further reiterates how motivational factors affect couples’ interactions and identifies them as good listening skills, better conflict resolving abilities and proper discussion methods. abbaszadeh et.al. (2011) has proved that having common religious beliefs and cultural factors motivate couples’ interactions more. negligence in sexual desires has caused many rifts among couples’ interactions and according to sahabi et. al. (2012) having a good sexual relationship is a positive motivational factor for couples’ interaction.4 based on the above reviewed literature, it is hypothesized: h1: motivational factors influence couples’ interaction. 3.3 stress factors cohan et al., (2009, p.514) states that “during a flu outbreak, about 10–30% of the general public reported major fears of contracting the disease”. it is a well-known fact that covid19 has brought numerous stressors on couples’ interaction which has a negative effect on their relationships. american psychological association (2020) has done a recent study on the stressors caused by covid-19 pandemic and they claim that “many individuals in the united states are experiencing heightened levels of stress as a result of the pandemic”. such stressors seem to affect the interaction of couples all around the world. “covid-19 type of pandemic related stressors on couples makes it hard to know which impacts may 49 be time limited and which will be longer term” (karney et al., 2005, p.27). according to neff & karney (2004, p. 143) “external stressors can spill over to affect the quality of couples’ interactions and perceptions of the relationship and partner”. in these environments’ partners may feel isolated in their relationship with the minimal interaction taking place between them. one of the key stress factors many couples faced with covid19 pandemic was the fear of your loved ones getting infected or worse, their death. another cause for the stress among couples was the uncertainty of the end of the pandemic. a study by de sousa et al., (2013) has found that couples showed low interaction when there is gender preference in children expressed by either of the spouses. many couples claimed it to cause stress and also claimed to interact less when alcohol abuse exists in the household which again was a stress causing factor. according to khezri et al., (2020) lack of support from partners act as a stressor which negates the interaction between couples especially during the lockdown period of covid-19. it is certainly worthwhile to identify the stressors that affect the interaction of couples during the covid-19 to identify how they would react in a similar scenario in future compared to how they normally interact. based on the above reviewed literature, it is hypothesized: h2: stress factors influences couples’ interactions. 3.4 resources available for spouses government lockdowns which took place as a covid-19 control measure brought no choice for couples but to stay at home for lengthy periods of time. most daily routines were disrupted and everyone except essential workers had to work from home. if a family member is diagnosed with the covid-19, the situation became stressful with strict medical, quarantine and health guidelines to follow. this was a significant disruption to the daily routine of families all around the world. doom & cicchetti, (2018, p.1446) states that “the extent to which this severe adversity will impact couples will largely depend on other related factors in their lives”. these other related factors can be identified as various resources that are available for the couples when they are interacting during the covid19. some resources may motivate their interaction while other resources would increase stress factors. a significant resource that motivates couples’ interaction during covid-19 can be identified as cultural beliefs the couple hold. with the isolation taking place with covid19 lockdown many couples have given more importance to their cultural beliefs and made time for interaction with each other as a couple and a family. the religious and cultural values have contributed to this motivation for these couples to interact more. fraenkel & cho (2020, p.859) states that “it has also provided a chance for families to reconsider the ratio of togetherness and autonomy going forward”. sri lankan culture encourages couples to always stand by each other through sickness and health. this cultural belief extends to all the relatives of the other spouse too. with the covid-19 infections and the threat of death couples are more and more motivated to interact with each other to resolve these health and social issues arising. with the new normal way of living covid-19 pandemic has brought, many families have the children studying at home using online methods while parents work from home. the new routines have created more interaction among couples and the cultural beliefs of supporting the children and spouse plays a major role in motivating these interactions. fraenkel (2019) points out the importance of cultural values 50 couples hold which motivates the level of their interaction, especially during a time like the covid-19 pandemic. walsh (2009) has mentioned how the cultural values held by a person may affect the interaction of their spouse positively. based on the above reviewed literature, it is hypothesized: h3: resources available for spouses moderates the relationship between motivational factors and the couples’ interactions. many couples find that one of the reasons that influence stressors in their interactions can be seen as the family support they receive. lockdowns taking place in the country with travel sanctions within districts cause close relatives to stay away from couples. as a result, the normal support that was extended may not be provided. working from home while taking care of the children would be an added burden for most couples and family support would have been an excellent resource to cope with this. lack of such support would certainly increase the stress and as a result mitigate the interactions between the couple. in a research done on asian couples by ho (1987) identified that one of the main causes of stress among couples was having unnecessary influence from relatives. even though the extended family considered it as offering support, the couples claimed it as a stress factor which, influence their own interaction and harmony. thus, not having family support may also negate the stressors for some couples during covid-19. in most asian countries including sri lanka women are employed and frequently child care is provided by the extended family, especially the mother-in-law (freedman et al., 1994). the conflicts with regards to the upbringing of children between the extended family and couples cause stress which leads to their distance from each other (chien, 1996). hence the unavailability of such family supports and minding the child bearing by the couple themselves might reduce the stress factor and encourage more interaction among couples during covid-19 lockdown. based on the above reviewed literature, it is hypothesised: h4: resources available for spouses moderates the relationship between stress factors and the couples’ interactions. with the above literature review, it can be seen that the resources available for couples that affect their interactions on motivational factors and stressors during covid-19 includes family resources and cultural beliefs. 4. method as per the discussion done above many motivational factors and stress factors affect the couples’ interaction during covid-19 pandemic and, resources such as cultural beliefs and family support play a significant role in affecting those factors. 51 4.1 measures to measure the motivational factors which affect couples’ interaction, a 03-item measure was used, which can be seen in appendix 1. these measures were taken using the questionnaire by deguglielmo (1973), named ‘the inventory of marital adjustment: the development of an instrument for measuring financial adjustment, style of life and interpersonal relationships’. these items were on a five-point likert scale ranging from always (1) to never (5). to measure the stress factors which affect couples’ interaction, 09-item measure was used, which is shown in appendix 2. five (05) of these measures were taken using the questionnaire by hansen (1978), named ‘marital adjustment, idealization, and conventionalization’. four (04) of the measures were from a questionnaire created by the author. these items are on a four-point likert-type scale ranging from always-agree (4) to disagree frequently (1). to measure the resources available for spouses, 11-item measure was used, which are shown in appendix 3. these measures were taken using the questionnaire by deguglielmo (1973), named ‘the development of an instrument for measuring financial adjustment’. these items were on a five-point likert scale ranging from always (1) to never (5). to measure the level of interaction of couples, 14-item measure was used, which are shown in appendix 4. these measures were taken using the questionnaire by haynes (1992), named ‘the marital satisfaction questionnaire for older persons, psychological assessment’. these items were on a five-point likert scale ranging from always (1) to never (5). 4.2 population and sample the total population of sri lanka is 21.41 million people and out of which 43% falls in to the ages 25-54 years old and 54-60 years old of the population is 6% (worldpopulationreview.com 14/08/21). taking that into account the total number of 2560 years old in sri lanka is 10 million. the total population in the western province is 1.9 million and the total 25-60 years old adds up to 959,131. obtaining a 95% confidence level with only a 5% chance of the sample results differing from the true population average, confidence interval of the margin of error is calculated by 1/√n. here n is considered as the number of participants or sample size (niles, 2006). therefore, the survey done with 300 participants justifies the total population of the study. 4.3 participants the 301 participants were adult males and females of age 25-60 residing in the western province. the participants took 26 minutes on average to finish the survey questionnaire. english, which is one of the national languages of sri lanka, was used in the survey questionnaire. initial introduction was given to the respondents and an in-depth explanation was followed prior to them taking the survey. all respondent participated voluntarily and their identity was kept anonymous. 52 4.4 method of data collection the duration of the survey collection was 12th march to 12th june 2021. this was a period sri lankan government had imposed a partial lockdown. during this period travel restrictions were in place and majority worked form home. schools and universities were fully closed and children of all ages were restricted to home. questionnaire was uploaded on google forms and the 25-60-year-old adult respondents were identified. their consent was obtained from an initial email and the link to the google form was shared afterwards. 4.5 method of data analysis validity and reliability of the measures were evaluated. principal component factor analysis was conducted using spss software. factor analysis yielded one factor each for motivators and stressors. factor analysis yielded two factors for resources available for spouses; these were named as cultural beliefs and family resources. factor analysis yielded one factor for couples’ interactions. the fit measures were given in table 1. results of these factor analysis were shown in appendix 1 to 4. moderation analysis was conducted using process program developed by hayes (2013). indirect effects were assessed based on 5,000 bootstrapped samples using bias-corrected 95% confidence intervals (ci) for the size and significance of the effects. table 1 − fit measures cronbach’s alpha explained variation eigenvalue ave construct reliability motivators .869 79.317 2.379 .793 .920 stressors .958 74.735 6.726 .748 .964 couples’ interactions .973 77.299 9.276 .773 .976 resources available for spouses: .931 77.921 family resources .947 47.619 6.563 2.008 .946 cultural pressure .914 30.303 .714 .749 .923 5. results since resources available for spouses yielded two factors, we analyzed four separate models. the results of these models are as follows. results relating to motivators and couples’ interactions moderated by family resources are shown in table 2. as shown in table 2, the effect of motivators (iv) on couples’ interactions is not significant (p > .05). the effect of family resources (m) on couples’ interactions is significant (b = -.7997, p < .001). the effect of interaction on couples’ level of interactions is also significant (b = .1573, p < .01). relationships between motivators (iv) and couples’ interactions are significant for all low (b = .2752, p < .05), average (b = .3815, p < .001), and high (b = .4879, p < .001) values of family resources (m). overall, 53 family resources (m) moderates the relationship between motivators (iv) and couples’ interactions. figure 2 shows this relationship figuratively. table 2 − motivators and couples’ interactions moderated by family resources couple’s interactions (dv) b(se) motivators (iv) -.0821 (.2036) family resources (m) -.7997 (.1749)*** interaction (ivxm) .1573 (.0511)** r2 .0785 f (df1, df2) 8.4051 (3,295) *** ∆r2 .0295 ∆f(df1, df2) 9.4803 (1,295)** conditional effects: -sd mean +sd family resources (m) 2.2714 2.9479 3.6244 effect (t) .2752 (2.2097)* .3815 (3.3493)*** .4879 (4.3064)*** notes: unstandardized regression coefficients are reported; standard errors = se. bootstrap sample size = 5000. *p < .05, **p < .01, ***p < .001 (two-tailed). figure 2 − moderation graphmotivators and couples’ interactions moderated by family resources analysis showed that motivators and couples’ interactions are not moderated by culture pressure. further, the results showed that stressors and couples’ interactions are not moderated by family resources. results relating to stressors and couples’ interactions 2,3 2,5 2,7 2,9 3,1 3,3 3,5 low med high in te ra ct io n motivators res 1 high med low 54 moderated by culture pressure are shown in table 3. as shown in table 3, the effect of stressors (iv) on couples’ interactions is not significant (p > .05). the effect of culture pressure (m) on couples’ interactions is significant (b = -.4129, p < .05). the effect of interaction on couples’ level of interactions is also significant (b = .1202, p < .05). relationships between stressors (iv) and couples’ interactions are significant for all low (b = .4823, p < .001), average (b = .5600, p < .001), and high (b = .6378, p < .001) values of culture pressure (m). overall, culture pressure (m) moderates the relationship between stressors (iv) and couples’ interactions. figure 3 shows this relationship figuratively. table 3 − stressors and couples’ interactions moderated by culture pressure couples’ interactions (dv) b(se) stressors (iv) .1852 (.1793) culture pressure (m) -.4129 (.1805)* interaction (ivxm) .1202 (.0486)* r2 .2490 f (df1, df2) 32.7061 (3, 295)*** ∆r2 .0155 ∆f(df1, df2) 6.1050 (1, 295)* conditional effects: -sd mean +sd culture pressure (m) 2.4717 3.1186 3.7655 effect (t) .4823 (5.0442)*** .5600 (6.3033)*** .6378 (6.8669)*** notes: unstandardized regression coefficients are reported; standard errors = se. bootstrap sample size = 5000. *p < .05, ***p < .001 (two-tailed). figure 3 − moderation graphstressors and couples’ interactions moderated by culture pressure 2,5 2,6 2,7 2,8 2,9 3 3,1 3,2 3,3 3,4 3,5 low med high in te ra ct io n stressors res 2 high med low cultural pressure 55 6. discussion of results this research examined how motivational factors and stressors affect couples’ interaction during the lockdown periods which took place in sri lanka due to covid-19 pandemic. the results observed how the resources available for couples such as family support and their cultural beliefs moderated the interaction. the findings of the research and these results will be a valuable addition to the literature on future pandemic studies. according to a study on rahmani et.al (2011) motivational factors which influenced couples’ interaction included their personality factors such as understanding of each other and maturity, economic factors as well as compatibility factors such as love and sexual fulfilment. in the current research it was reaffirmed when the couples agreed that the factors which motivate their interaction included demographic factors, personal factors, psychological factors and sexual factors. in this research it was identified that demographic factors is an important influencer in motivating couples interaction. a study done by wagheiy et.al (2009) on couples reaffirms this in a similar manner. the findings of this study reaffirm a study of abbaszadeh et.al (2008) where it is identified how couples are motivated to interact with each other when factors such as communication and intimacy are present. a study done by holt-lunstad et al. (2020) identifies the stressors which cause a rift in couples’ interaction. sterle et.al. (2018) has also identified how stressors can affect couples’ interaction. the findings of this research also identified such stressors which limit couples’ interaction which includes uncertainty, fear of your loved ones getting infected and not knowing the end result of the pandemic. the research reaffirmed the findings of mikulincer & shaver (2007) and pietromonaco & overall (2020) which prove that cultural beliefs held by couples motivate their interaction and strengthen it during pandemic scenarios. the research found how the cultural beliefs motivated the couples’ interaction and the similar findings were seen in a study done by mortazavi et.al (2014). according to that study the cultural beliefs included the belief of forgiving and forgetting, understanding each other and attachment held for the societal recognition. this was similar to the factors expressed by the research participants. a study done by wilson (2011) identified how couples’ interaction level depends up on support factors extended by the cultural beliefs. another study by ritu et.al (2012) affirmed that cultural support as well as, family support plays two major roles in couples’ interaction. a large portion of the participants confirmed that not having family support caused stressors in their interaction during covid-19. the findings of bodenmann (2005) and falconier et al. (2015) reaffirms that couples with larger family support systems are more comfortable in coping with stressful situations. a similar study done by balzarini et al., (2020) on stressors during covid-19 illness verifies that stressors increase with the lack of family support. in this research it was established that family support will play a huge role in minimizing stressors and if not available it increases the stressors. thus, this research outcome affirms that the motivational factors and stressors which affect a couples’ interaction are moderated by cultural beliefs and family support. 7. conclusion covid-19 has added unforgettable memories and experiences which will be remembered throughout the lifetime of everyone who went through the pandemic. apart from the global 56 crisis it brought up on economies and many industries the impact caused on couples or marital spouses is certainly not insignificant. the research was conducted on married couples in sri lanka who were locked down for periods of time due to government regulations during covid-19 outbreak. the main objectives of the research include investigating motivational factors and stress factors affecting a couples interactions, investigating the resources available for spouses and analyzing whether such resources such as cultural beliefs and family support, would moderate the relationship between motivational factors/stressors and the level of couples’ interactions. a conceptual model was developed and variables such as motivational factors, stressors and resources available for spouses were reviewed in relation to the couples’ interaction. the data found in the research further identified that factors such as education, age of marriage, length of marriage, economic situation, employability, number of children, good income, good listening skills, better conflict resolving abilities and good sexual relationship act as motivational factors in the level of couples’ interaction. similarly, stressors such as fear of your loved ones getting infected or their death, uncertainty of the end of the pandemic, lack of support from partner also play a role in affecting the level of couples’ interaction during covid-19. they were further affirmed in comparison to the literature review. with the analysis of literature review it was identified that the resources available for couples’ interaction that affect their motivational factors and stressors during covid-19 includes cultural beliefs and family support. four hypotheses were established which were h1: motivational factors influence the couples’ interaction, h2: stress factors influences the couples’ interactions, h3: resources available for spouses moderates the relationship between motivational factors and the couples’ interactions and h4: resources available for spouses moderates the relationship between stress factors and the couples’ interactions. the data collection was conducted by an online survey from over 300 participants. the questionnaire collected data from adults of the age 25 – 60 residing in the western province. factor analysis yielded one factor each for motivators and stressors. factor analysis yielded two factors for resources available for spouses; these were named as cultural beliefs and family resources. factor analysis yielded one factor for couples’ interactions. results relating to the motivational factors and couples’ interaction moderated by cultural beliefs conclude that cultural belies moderates, the relationship between motivational factors and level of couples’ interaction. results relating to the stressors and couples’ interaction moderated by family support conclude that support extended by families moderate, the relationship between stress factors and level of couples’ interaction. covid-19 has brought various unknowns to the lives of people. identifying the issues faced by marital couples during the pandemic and understanding factors that influence their level of interaction during an extreme scenario like the pandemic would most certainly be beneficial for studies on couples and their behaviors as well as for making recommendations for future. 8. recommendations this study recommends that future research focuses on policy decisions which affect couples that can be implemented or amended during extensive lockdown periods. policies which restrict families being together and hold them apart for lengthy periods of time 57 should have more empathetic considerations. travel restrictions imposed by locally and internationally halt, interactions between couples who live apart. the effects of relationships and couples’ interactions should be given due consideration by future policy makers. many interactions of couples require actual presence of the other person and not simple virtual interactions. as the study identified, having extended family support affects the stressors of couples’ interaction. thus, modes of communication must be found for families to extend their support for these couples. couples' who are older and geographically isolated require more such family support in order to engage with their interactions. this study has outlined how covid-19 has impacted couples’ interactions and the motivational factors and stressors that contribute to it. many areas of sri lanka including the economy, education and health sector has suffered a significant damage due to the pandemic but identifying the impact on relationships and behaviors of couples may assist in future rectifications. this can be seen as an opportunity to educate couples on behaviors to adopt and habits to refrain from, if and when a similar crisis takes place. this study makes the following recommendations to couples with regards to couples’ interaction during covid-19. − make yourself a priority. before taking care of your spouse and children one must ensure the safety, health and well-being of ones’ self. this includes physical as well as mental wellness. − arrange an individual working space. even if both are working, couples must try to find their own working area at home which is not disturbed with noises and other distractions. − make plans for the household chores. divide and share the work between the couple. − be grateful for what you have and appreciate each other and the things you are blessed with. − be cheerful and happy. encourage and practice humor and compassion with each other. − communicate effectively. whether it is an issue or a simple chore, good interaction includes clear communication without having to guess what other person thinks. − keep in touch with the rest of the world. isolation physically should not stop from being in touch virtually with friends and families which will encourage remaining sociable. − minimize social media. being virtually connected to the world should have limits and being addicted to social media platforms or games should be avoided. − find together time. even during watching television or listening to radio, make time for couple interaction. daily allocate a time for the talking and fun. − maintain a routine. even during lockdown, the time to wake up and going to bed should be consistent and following a routine time table will ease daily duties and chores. − make future plans. giving priority to the family and relationship and discussing about the future will encourage better interaction. − start new hobbies. finding time to allocate for personal growth and leisure activities would benefit couples. 58 − schedule house maintenance. gardening, painting, repairing the house together will be an excellent way for couples to unite during lockdown. 9. limitations and future research as in all researches this study has its’ limitations too. the participants were mainly females even if the researches tried to obtain equal participation. language was another limitation as the survey was limited to adults who are versatile in english with online facility. this survey was carried out during a partial lockdown period. thus, many took part in the survey while eagerly waiting for the country to open up. also the sample can be seen limited in representing every married couple in sri lanka. therefore, future research can be conducted with a larger and diverse sample. the same sample and findings can be used for a qualitative research as well. future researchers are encouraged to identify the policies that affected the couples in their interactions due to covid-19. more studies can be done to find the ways the couples overcame the stressors and how they increased their motivational factors to assist in their interactions. references 1. abbaszadeh m, behi m, darbandi m, yousefi m. and jamlzadeh f. 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(2010), “ouverture de ‘canali di marketing e mercati globali’”, symphonya: emerging issues in management, n. 1, pp 1-6. issn: 1593-0300, eissn: 1593-0319, doi: 10.4468/2010.1.01ouverture. 1. introduction 2. objectives 3. literature review 3.1 level of couples’ interaction 3.2 motivational factors 3.3 stress factors 3.4 resources available for spouses 4. method 4.1 measures 4.2 population and sample 4.3 participants 4.4 method of data collection 4.5 method of data analysis 5. results 6. discussion of results 7. conclusion 8. recommendations 9. limitations and future research references 5 analysis of psychological contracts and discretionary behavior in nigerian academics: the role of academics staff union of universities mustapha olanrewaju aliyu university of ilorin, nigeria ambali taiwo toyin university of ilorin, nigeria. received: december 30, 2021 accepted: february 19, 2022 online published: march 3, 2022 abstract in the history of tertiary education in nigeria, there had been incessant strikes to draw the government’s attention to a range of problems that have continued to hinder the education sector. despite the various phases of industrial action, embarked on by the academic staff union of universities (asuu), this action has not been able to bring a permanent solution to its demand. as a result, the study examines the analysis of psychological contracts in nigerian academics: the role of academics’ staff union of universities. the study was anchored on social contract theory to explain how every human competes with each other for the resources they desire. in-depth interview (idi) was employed to collect qualitative data from two management staff members (from the registry unit) and two members of the academic staff union (from the asuu leadership). thematic analysis was used to transcribe, identify, and analyze the data collected from idi. the qualitative findings revealed that university academics were dissatisfied with their working conditions, underfunding, shortages of facilities and equipment, and, most importantly, the quality of service, which had resulted in multiple industrial unrests, brain-drain, and plans to transfer high-skilled academics to other universities. the study found that the breach of psychological contracts (bpc) affected academics in a variety of ways, with a preference for organisational citizenship behaviour (ocb) and deviant workplace behaviour (dwb). unfortunately, the proclivity for dwb surpassed the proclivity for ocb. it was recommended that building psychological linkages between organizational and staff goals should help universities integrate employee behavior. international journal of economic behavior, vol. 12 n. 1, 2022, 5-25. https://doi.org/ 10.14276/2285-0430.3236 6 keywords: psychological contracts, citizenship behavior, deviant behavior, asuu. 1. introduction the creation, diffusion, and application of knowledge are one of the university's main roles. this improves other essential teaching and research duties, as well as determining national and worldwide ranking. however, breach of psychological contracts (bpc) may occur when an employee perceives that their employer has failed to live up to its obligations. unfortunately, the employer is not likely to see such a bpc since the employer has the power to ensure that employees do what they are expected to do at the right time. this is why many existing studies pay more attention to the consequences of bpc on the employees rather than the employers. meanwhile, the common bpc in nigerian universities is broadly categorized into three (3), namely, the welfare of members, poor condition of service and arbitrariness of administration. for instance, the welfare of members is linked with poor and inconsistent payment of salaries and allowances. similarly, the poor service conditions include poor work settings (working environment, laboratories, classrooms, long hours of work), fringe benefits (office space, internet, office furniture, computer, cabinets, printer, etc.). other recent bpc issues are the non-payment of earned academic allowances (eaa) arrears, coercing academics into the integrated personnel payroll information system (ippis), which not long ago led to striking in the university environment across nigeria. these have severe implications for both employees and the organization because when a bpc occurs, employees may tend to have more thoughts of revenge, and the performance of an organization is more likely to be negatively affected. moreover, the isolation of federal universities in the north-central is credible because those universities in the north-central have attracted attention for a decade due to violations of bpcs. for instance, at the university of ilorin, where the administration sacked academics arbitrarily, their actions have triggered litigation that caused government fortunes in prosecution and judgment debt granted to illegally sacked staff. there was a case of misconduct against an erstwhile vice-chancellor (vc) at the university of abuja, which ended up in an indictment of the university administration in the white paper and the case was alleged as being suppressed to date. the media was recently awashed with pictures and stories of staff at the federal university, lokoja proclaiming the obituary of the immediate past vc over her bpc while in office. similarly, the exercise to the appointment of a substantive vc of the university of jos has been put on hold following protests by some candidates who cited anomalies of bpc. in the succeeding years after the formation of the academics staff union of universities (asuu), there has been a proliferation of federal universities in nigeria, with today’s figure standing at 43. despite the establishment of many universities, most of the lecturers operate within an unconducive environment where there is limited office space with up to three lecturers sharing a small office. the learning environment is compromised by over-congested classrooms, infrastructural inadequacy, poor academic standards, inadequate monitoring and poor inspection by regulatory agencies, poorly equipped laboratories, equipment, among others. however, in the history of tertiary education in nigeria, there had been incessant strikes to draw the government’s attention to a range of problems that have continued to hinder the education sector. since the union's inception, the union has undergone series of 7 industrial actions that amount to several strike actions apart from the internal strikes by the various chapters of the union. however, despite the various phases of industrial action, embarked on by the asuu, this action has not been able to bring a permanent solution to its demand. the government on the other hand purported asuu to be ungrateful and insatiable, adding that academics are so high in demand for one thing or the others coupled with involvement in deviant behaviors such as sexual harassment, among others. in view of the focus and context of the previous studies (anzam, 2016; aliyu, akinwale & shadare, 2020), some gaps exist for future studies to be undertaken, because studies such as have worked on the related topic. yet, there were dearth of studies on bpc focus on the federal universities from dimensions of organizational citizenship behavior (ocb) towards the academics (ocb-a); ocb towards the university (ocb-u) (baharuddina, ruzainy, asyraf, omara, & ismail, 2017). similarly, deviant workplace behavior (dwb) towards the academics (dwb-a); dwb towards the university (dwbu) (pickford & genevieve, 2016). in addition, previous studies revealed a need for more scientific studies on the types of discretionary behavior exhibited mainly by academics when psychological contracts are breached (aliyu, 2021). the study investigates the psychological contract, its breaches and implications for nigerian universities, considering the contemporary problems bedeviling universities in nigeria. therefore, it is imperative to scientifically investigate analyses the psychological contracts in nigerian academics in order to expand the frontiers of knowledge on discretionary behaviour and psychological contracts in nigeria. 2. literature review psychological contracts are becoming increasingly important in describing the relationship between employees and the organizations and employees’ performance. in contrast, a psychological contract is built on trust and represents that employees believe that the organizations can fulfil their obligations and commitments. argyris (1960) introduced the term psychological contract to present the importance of implicit mutual expectations between employees and organizations (anzam, 2016; maguire, 2016). the psychological contract idea was defined by argyris (1960) as the employer and employee expectations and mutual duties of the work relationship. many academics produced alternative ideas on the contractual arrangement between employee and employer after argyris' formulation (blackman & benson, 2012; bolino, turnley, lester & bloodgood, 2012). rousseau (1989) was later acknowledged with a new approach to psychological contract theory (dialoke & nwakamma, 2016; rousseau & tijoriwala, 1998). rousseau (1989) expands on the core idea. rousseau (1989) emphasized the psychological contract's unilateral nature as a personal conviction about the terms and circumstances of a reciprocal exchange agreement between the focused person and another party. the psychological contract is a set of unwritten ideas held by both the employee and the organization about what each should give and what each is required to deliver in the exchange relationship that exists between them (anzam, 2016; adom & hussein, 2017; rousseau, 1989, 1995). in his exploration of the word, rousseau (1995) described it as a reciprocal responsibility based on verbal and implicit agreements. it stands for psychological contract, a social psychological concept that anticipates how individual workers would understand 8 their work experiences and expectations (anzam, 2016; atkinson, 2007; avey et al., 2009). the contract outlines perceptual limits that exist outside and beyond any structured legal instrument or work contract (mathijs, 2009). this promotes both conceptual and empirical inquiries into how and where employment relationships thrive and become commonplace, as well as how and why they collapse, particularly in situations and places when one or both parties appear to have betrayed trust (atkinson, 2007). breach of psychological contract occurs when an organization or employee fails to fulfill one or more of the psychological contract's duties. it largely accounts for what the employee believes to be a violated promise. pcb referred to an employer's violation and perceived breach in this study. the actual abdication of the exchange agreement by the employer is referred to as an employer's breach. a perceived breach, on the other hand, is the cognitive judgement that a key promise has not been kept. 2.1 features and forms of psychological contract rousseau (1989) emphasized the psychological contract's three fundamental characteristics: subjective, conditional, and reciprocal. to begin with, psychological contracts are subjective since they are founded on people's opinions or views about how they want to trade money. the acts or reactions of third parties can be used to infer implicit commitments made by organizations or personnel (mazur, 2018; najjar, shamasi & almandeel, 2019). second, psychological contracts are conditional because they are based on exchanges in which one party's fulfillment of promissory commitments is conditioned on the fulfillment of other parties' duties. third, psychological contracts are reciprocal because they entail shared ideas about the relationship's mutual duties. each party's views affect its contributions to the other, and each party's subsequent contributions can either strengthen or destroy the other party's ideas about reciprocal exchange (coyle-shapiro & kessler, 2002; maria-lavinia, 2011). literature revealed four major forms of psychological contract, namely; as transactional, relational, balanced and transitional (tekleab & taylor, 2005; yang & chao, 2016). a) transactional contract: when an employment relationship is for a brief or limited period of time, the transactional contract is present. it is largely focused on the exchange of work for money, with a defined definition of duties and obligations and minimal engagement in the organization. this means that the employee is only required to execute a specific set of tasks and only as much as the company requests. according to rousseau (2001; 2003), an employee is only bound to do a defined or limited set of responsibilities for which they are compensated. on the other side, the employer is devoted to providing employees with only limited engagement in the organization, little or no training or other forms of employee development, and short-term employment. an employee who is only committed to working for a short period of time has no commitment to stay with the company. b) relational contract: long-term work relationships based on mutual trust and loyalty give rise to the relational contract. seniority is the primary source of career advancement and pay, whereas other bonuses and awards are only tangentially linked to job performance (subramanian, 2017). relational into stability (employee is bound to stay with the business and do what is necessary to maintain a job) was defined by rousseau (2001; 2003). an employer is dedicated to providing steady 9 salaries and long-term employment) or loyalty (employees are required to put the company's interests first and to support and be a good corporate citizen). in addition, the employer cares for its employees' and their families' well-being). c) balanced contract: a balanced psychological contract is a dynamic and openended employment agreement that is predicated on the employer's commercial success as well as the employee's ability to build skill sets and possibilities for career progression depending on skills and performance. rousseau (2001; 2003) divided the balanced contract into external employability (i.e., the employee is required to develop marketable skills, while the employer is committed to improving the employment prospects of its employees in both the external and internal labor markets), and internal advancement (i.e., career advancement within an internal labor market). an employee has a responsibility to improve abilities that are appreciated by their present company. while an employer is committed to providing employees with opportunities for career advancement within the company, dynamic performance (i.e., the employee is required to successfully complete new and more demanding goals that may change frequently in the future to help the company become and remain competitive) is also important. an employer, on the other hand, is dedicated to encouraging continual learning and assisting employees in achieving these various objectives). d) transitional contract: it's a mental condition that reflects the effects of organizational change and transitions that are incompatible with previously established work arrangements. this is simply a moment of transition between two psychological contract conditions. here, the individual has doubts about the organization's motives and is concerned about his or her job security and advancement. the company may also have doubts about the employee's motivations and hide crucial information from them. the employee is unsure about his future responsibilities to the company. the company may also refuse to provide the employee with job security. if this psychological contract is not maintained, the employee may continue to receive confusing signals from the organization and grow unsure if his contributions will result in enough reward (avey, avolio, crossley & luthans, 2009). transitional was classified into distrust in the literature (bankole & ajagun, 2014) (i.e. employee believes he received contradictory and confused signals from the corporation about its aims and mistrusts it.) the employer has concealed critical information from the employee and has a negative attitude toward its employees.) uncertainty (coyle-shapiro & kessler, 2012) (i.e. the employee is unsure about the nature of their responsibilities to the company). employee uncertainty (epitropaki, 2015) (i.e. employee expects to receive fewer returns from their contributions to the firm than in the past; anticipates continuing declines in the future) and erosion (epitropaki, 2015) (i.e. employee expects to receive fewer returns from their contributions to the firm than in the past; anticipates continuing declines in the future). as a result, a business may make adjustments that lower employee salaries and benefits, lowering the quality of work-life in comparison to past years). 10 2.2 social contract theory the social contract theory was originally pioneered by hobbes (1651). he begins by stating that everyone is fundamentally equal in strength and intelligence. nobody is so clever or strong that they can't be outwitted or vanquished by someone else (or maybe a few others). as a result, everyone believes that he is capable of obtaining everything he desires. furthermore, people always behave in their own best interests. as a result, every human competes with each other for the resources they desire. as a result, the ‘state of nature’ was coined by the social contract theory to explain men's initial state. man created a social compact to escape the state of nature (abdulazeez, waidi, & hameed, 2019). the argument went on to say that in their natural form (before government), humans would be constantly at odds with one another, with everyone vying and battling for resources that aren't plentiful enough for everyone to have all they want. this is man’s natural condition, in which individuals live in "constant fear and threat of violent death," and existence is "solitary, impoverished, ugly, brutish, and brief." hobbes states that humans are essentially selfish and that if there are no rules to constrain them, they would do whatever they need to survive. in a similar vein, john locke (1632-1704) and jean-jacques rousseau (1712-1778) developed hobbes's previous social contract theory, suggesting that the need for social order and certain inherent limits may offer a natural basis for morality. while there may be enormous incentives for social anarchy in the absence of an objective (and maybe supernatural) source of morality, the incentive is built into the social system by the mere fact that we live with one another. naturally, there is a need to agree to treat each other with fundamental respect and to adhere to some basic standards. based on their respective conceptions, these three social contract theorists contend that humans existed or would have survived without the state and its apparatuses. as a result, social contract theories propose the possibility of two living forms before and after the state's inception, according to gauba (2003). the following questions arise as a result of this voluntary agreement of all people who make up the state: (1) what was the situation like before there was a state? (2) if the state was created on an agreement, what were the terms of its formation? (3) between the creator and the creature in issue, who has the upper hand? although the first point involves the state of nature, the second and third points address the conditions of the contract and the character of sovereignty, according to hobbes, locke, and rousseau's responses. a prisoner a betrays the other prisoner, as shown in figure 1. instead of serving a year in jail, prisoner a will be released if prisoner b keeps silent (for remaining silent). if prisoner b betrays prisoner a, however, prisoner a will only be sentenced to 5 years rather than 10 years if he keeps silent. in any case, it is beneficial for prisoner a to betray prisoner b. the same is true for prisoner b. overall, while the social contract theory has been useful in explaining the nature of government and conceptualizing democratic values in modern state systems, it has been subjected to some criticism. the legality of the social contract notion is also questioned. it is argued that a legally sound contract presupposes the presence of some authority and the sanction of that authority before the contract is entered into. according to him, the belief that men lived in a "state of nature" before deciding to create political institutions based on a mutual agreement to produce order and security is false. as a result, the cultural shift is thought to have been from one status to another. thus, in early civilization, an individual's rank was decided by his or her participation in a social group. customs regulated man's life 11 at various levels of grouping: family, clan, tribe, and so on. law, sovereignty, and political institutions were claimed to have emerged slowly and gradually through this process, rather than as a result of a freely contracting individual's agreement. figure 1 − illustration of the social contract theory source: sharma & garg (2017) 2.3 empirical review findings from the study conducted by baharuddina et al. (2017) showed a positive relationship between psychological breach contract and employee intention to quit indicated that people tend to quit if they perceived that their organization do not fulfil their promises and obligation. meanwhile, psychological contract fulfilment was found to be negatively correlated with intention to quit, suggesting that when employer fulfilled their promises and obligation, employee intention to quit is low. it was concluded that the telecommunication company needs to pay intention in their employment relationship with their employees especially concerning the commitment as well as obligation. using transactional psychological contract, relational psychological contract and perceived supervisor support on organizational citizenship behavior of hospitality employees in south korea by liu, cho and seo (2018). a descriptive research design was used with a self-administered questionnaire distributed across 350 employees working in international hotel chains in south korea. findings from a study conducted by liu et al. (2018) revealed relational psychological contracts did not affect hospitality employees’ ocb either; thus, was rejected and the results of the study showed that when hospitality employees in south korea perceive greater supervisor support, they would demonstrate more organizational citizenship behavior. findings from oyelakin and agu (2017) revealed that the effect of community on the relational psychological contract was 0.016 thus, the effect is small. the effect of community on employee turnover intention was 0.019. inner life on the relational psychological contract was estimated at 0.075. inner life on employee turnover intention has 0.021. meaningful work has the highest effect of 1.032 on relational psychological contracts, while meaningful work does not affect employees’ turnover intention. it was concluded that creating an atmosphere of spirituality in the workplace and having an employee’s positive attitude to work is critical to encourage employees to stay in an organization. 12 3. conceptual framework of the study and hypotheses development the conceptual framework in figure 2 shows a hypothetical relationship between db among academics and bpc by the federal universities as influenced by academics’ sociodemographic characteristics such as gender, age, marital status, educational qualification, work experience and designation. figure 2 − conceptual framework of the study breach of psychological contracts by fu • poor funding • poor working conditions • inadequate infrastructure • neglect of collective agreements • delay in promotions • arbitrary decisions sociodemographic characteristics • membership of asuu • gender • age • marital status • educational qualification • work experience • designation discretionary behavior among academics • deviant workplace behavior • organizational citizenship behaviour deviant workplace behavior • high predisposition • low predisposition social exchange theory • exchange • reciprocity • target responses expectancy theory • expectancy • instrumentality • valence theory of planned behavior • attitude toward the behavior • perceived behavioral control • subjective norms equity theory • inputs • outputs • perceived inequity • responses to inequity organizational citizenship behavior • high predisposition • low predisposition • political deviance • production deviance • property deviance • personal aggression • altruism • courtesy • civic virtue • sportsmanship • conscientiousness 13 consequently, academics irrespective of their socioeconomic status expect improvement in what bothers on bpc elements such as poor funding, inadequate infrastructure, neglect of collective agreements, delay in promotions, arbitrary decisions, among others. however, their awareness of participation in, and level of benefit from collective agreements can be largely determined by their sociodemographic characteristics. the framework further demonstrates that the bpc may influence academics’ db such as ocb and dwb. for instance, when an individual becomes employed in a university, many paper contracts are signed where both the employee and the institution develop expectations of each other. however, if academics feel their inputs are greater than the outputs, they may seek to reduce the inequity by determining their equitable return after comparing their inputs and outcomes with those of their colleagues; and distorting inputs and outcomes in their minds. as a result, when academics perceived inequity from their employer, they may respond to inequity by engaging in dwb and vice versa. finally, when academics experience unfavorable treatment from their employer, they may reciprocate by engaging in dwb. similarly, when academics experience favorable treatment from their employer, they may respond by upholding ocb. meanwhile, tpb was conceptually independent antecedents leading to the behavioral intention from the attitude toward the behavior, perceived behavioral control and subjective norms. this measures the degree to which academics have a negative/positive evaluation of their performance. each of these variables might have more or less weight depending on how academic staff perceived the bpc by the federal universities. meanwhile, the framework proposes that the predisposition for behavioral outcomes could be high or low depending on the values and perceptions from person to person at different times and places. hypotheses development: h01: perceived breach of psychological contracts by federal universities is not associated with deviant workplace behavior among academics in nigeria. h02: perceived breach of psychological contracts by federal universities is not correlated with organizational citizenship behavior among academics in nigeria. 4. data and methods the relevant information was elicited directly from the target population throughout the federal universities in north-central nigeria using a descriptive survey approach. the participants in this study are academics from all of nigeria's federal universities in the north-central region. north-central nigeria had seven federal universities as of 2018. (nuc, 2018). because they are owned, sponsored, and governed by the federal government, federal universities were chosen for this study because they are anticipated to give a fair and truthful assessment of their operations' plans. the qualitative data was created with the goal of acquiring primary data for the research. for this study, the in-depth interview (idi) was employed to collect qualitative data. these two ways are deemed acceptable since they will aid in the provision of in-depth information, expertise, and unique insight into the subject under consideration (jaclyn, 14 richard & ann, 2010). twenty-eight (28) in-depth interviews were done to investigate the individual meanings associated with discretionary behavior. this means that from each federal university in northcentral nigeria, two management staff members (from the registry unit) and two members of the academic staff union (from the asuu leadership) were picked. the choice was made based on the researcher's preferences (saunders, lewis & thornhill, 2003). asuu's registry units and leadership supplied details on the nature of federal university breaches of psychological contracts that led to professors' discretionary behavior. the interactions were recorded with the aid of a tape recorder. the in-depth interviews give room for flexibility and provide an opportunity to probe deeper into some aspects, which the questionnaire might not cover. questions for idi were the same for each respondent and was directly linked to study objectives. in-depth interviews were used to collect qualitative data (idi). the aims of the study were conveyed to the respondents during the interview. the purpose of the first half of the interview was to build rapport and encourage people to engage. the responders were also guaranteed secrecy and anonymity by the researcher. this instilled faith in their ability to respond to inquiries. the interview lasted at least one hour and took place at the respondents' offices. the interview subjects were enabled conversationally, allowing respondents to speak freely about whatever they wanted. to minimize data loss, all interview sessions were recorded on audio recordings while notes were collected. in addition, thematic analysis was used to transcribe, identify, and analyze the data collected from idi. this was done manually, using fisher's (2004) four-stage process: (a) data collection: before starting work on a new day, the researcher's thoughts and observations, audiotape redirection, and transcription for the previous day were gathered. (b) data reduction: to decrease error, the data were sorted and organized. the data was coded and analyzed thematically. (c) data presentation: data was presented following the study goals and concerns relating to academics' discretionary behavior. (d) results: presented the results of the qualitative data analysis. 5. results this section presents the result derived from the qualitative data obtained from the in-depth interview (idi), which was transcribed and analysed through thematic analysis. this was done in four stages, namely; assembling of data, coding, sorting and organisation of data to reduce errors. the following report of the thematic analysis was done based on responses obtained from 14 academics’ representatives (asuu leadership) and 14 management staff. the majority of respondents interviewed were holders of phd degrees with a few among them being holders of msc, mba, among others. this includes membership of the academics’ union (asuu leadership) and management staff with a minimum of 5 years and above. the respondents show great excitement and interest in participating in the study, thus accomplishing many challenges, and affirm that not beyond what one can uphold with time. however, the study revealed that the respondents were not satisfied with the poor working condition and the quality of education to students; thus, they crave excellently to work as an academic in federal universities, nigeria. while some feel fortunate and happy to work, others complained the jobs are very tasking and that the workload is too much. five themes emerged from the interview conducted with sub-themes under each of them articulated below. 15 5.1 perceived responses on the interpretation of bpc in federal universities “i feel happier when i am teaching at university. it is a great experience for me. well, i feel fulfilled and grateful; thus, i don’t either see it as a privilege rather than what i have been destined to do. however, i can check out if i see any other better offer”. asuu members this, however, means that informal arrangements, mutual beliefs, common ground and perception of the employer-employee relationship are not met. therefore, perceived some elements of breach of psychological contracts, which may lead to absenteeism, reduced productivity and in some cases, turnover intention. the theme further emerged from the interviews was that of a shift toward fair returns, such as employees performing adequate responsibilities that are predicated on self-monitoring behavior. some respondents articulated that; “they have adequate responsibilities with little return. when asked what are the main responsibilities of academics in the university where they are currently working? .......” “my responsibility is not far from research and teaching. majorly, the job of an academic is teaching, the issue of researching has vied for promotion, but teaching is the main responsibility of academic staff. the teaching of knowledge, research, report of research should help, government, industry etc. and community service. teach and guide students, counselling, marking of scripts. impacting knowledge and providing a solution to societies problem through the conduct of research. teaching (lecturing), research and community services. academic like me is expected to teach, carry out acceptable research as well as community services”. asuu members this directly implies that fairness is a significant part of the psychological contract, bound up in equity theory “returns for responsibilities of good services and fairness”. this implies that employees need to perceive that they are being treated fairly to sustain a healthy psychological contract. furthermore, this resonates with a shift from fair rewards for good work. this, however, may have a direct influence on discretionary behavior. “i am a registry staff, and administrative precisely, i coordinate the affairs of mostly academic staff of the university. my work is more of administrative, other assignment given to me by registrar or vc”. also, “coordinating and organizing the administrative records, taking the registration and graduating function of the university were the roles played in some cases attaching to the assistant faculty office and secretary to any faculty boards in academic-related matters”. management staff the above statement is shown that there are distinct roles played by the administrators, but mostly shoulder on the affairs of academics in the universities. this means that a psychological contract creates opportunities for an organizational chart that clearly defines lines of authority and responsibility that matched the performance settings and goals of individuals. meanwhile, every function should be monitored by a specific individual in the 16 scheme of responsibilities among academics of federal universities in north-central nigeria. 5.2 predisposing factors affecting discretionary behavior among academics sub-theme: lack of spacious offices one of the participants from asuu standpoint claimed that: “it is very hard because i cannot seat longer than expected because my office choked me”. this means that the respondent envisaged the lack of spacious offices and congestion, leading to suffocation and boredom services among academic staff and the need to expand the offices of academics in nigerian universities. sub-theme: lack of teaching and research facilities other participants (asuu) articulated that: “sometimes, i feel dissatisfied with the routine jobs, taking the same course every time without any opportunity for review. it is an arduous task; it’s never an easy job to prepare for classes, conduct acceptable research and other peculiar issues. it is very hard working under intense pressure with a little teaching and researching aids”. from the excerpt above, it means mounting pressure on academics to teach and conduct research without providing them with teaching and research aids leading to job dissatisfaction and posing a great challenge to psychological contracts between employersemployees relations. sub-theme: poor infrastructural facilities “carrying out my responsibilities is easy when necessary facilities and conditions are in place, thus very tedious due to overload and short notice of deadlines”. asuu members. when asked the participants on the state of facilities or infrastructure for teaching in the university, the response given was that: “the issue of facilities and infrastructure is grossly inadequate. this is one of the problems in nigerian federal universities, and there are no adequate facilities for infrastructure for teaching, most of our lecture halls are not adequate, likewise the theatres. this poses great challenges and the need for support in terms of recruitment and career development to give students what they need.” asuu members. sub-theme: lack of learning facilities while management staff said that: “library equipment and public address system, modern-day electronics and other e-learning facilities are moderate but not adequately provided, though, the institutions are trying their best but much needed to be done on necessary infrastructure for effective teaching in most universities”. 17 one of asuu correspondents lamented that: “of the major problem is an erratic power supply and off and on internet facilities that is why most of my work is done at home”. this implies that researching without e-learning facilities prohibit many academics from co-written articles in both local and foreign outlets. this has a great effect on the efficiency and productivity of academics of federal universities in north-central, nigeria. sub-theme: inadequate research grants and aids another set of respondents (asuu) revealed that: “i don’t know of other private universities in nigeria, but the majority of academics published an article with their money. so, no provision or no adequate provision for research grant”. this means inadequate grants for research among academics may be hindered them to do their job well because difficult situations and financial circumstances that may affect productivity aren’t seen by the management staff as a breach of the psychological contract. sub-theme: poor working conditions participant 8 from asuu members indicated that: “we are only encouraged to engage in community service but no provision of adequate facilities and grants to that effect, if i am, must be sincere with you. academic usually encouraged to engage in community service but not enough time to do it. there are no adequate facilities at all. if were ranked between teaching, research and community service, attention usually low on community service because of no anything to community service……”. 5.3 review of causes of incessant strike in nigerian universities sub-theme: excessive social and welfare demand “there is social requirements of average employees and the employer, on the other hand, trying to maximize profit. academics across the length and breadth of nigeria have been baffled with demand from management and government of all levels. quite long ago. the issue of labour union management is an everyday routine because the union will continue to make one demand or others. there are a lot of instances, specifically on welfare matters and other rights of members seemingly deny or delay”. management staff “it's usual occurrence to have such disagreement between unions and management. it is an ongoing process every time because unions always have one demand or the others which are not implemented. therefore, conflict in federal universities cannot be ignored. the main idea is the provision of working conditions and other welfare matters. the issue of conflict in the university is a 18 long story that does not end easily; hence, its usual affairs. usually, academic members have one or two things on demand. if those demands are not met, so the issue”. management staff while responses of asuu members on the conflicts/issues raised were: “academic earnings and a lot of many issues. this, however, was triggered by the way management does manipulate the academics and confused the union leaders to their tune. this includes the abandonment of the 2009 agreement”. “yes, in 2017, when the vc of the university was in serious trouble with the nonacademic of the university. asuu has been on the issue with fg since the failure to honor the 2009 agreement which they willingly signed with asuu. presently, there is an ongoing conflict between union members and the nigerian government over non-challan attitude in handling union matters”. “failure on the part of the government to implement the agreement signed with asuu members usually cause conflicts. this occurs when management or government do not pay the academics their check-off dues as at when due, poor wages and late payment of salaries usually demoralize workers. this is one of the reasons for industrial frequently staged by the unions”. from the excerpt of the interview above, it is clear that breach of psychological contract raised many issues which are positively or negatively affecting academics of federal universities. addressing the issues by the federal government and many of the conflicts positively give rise to ocb, and when the implementation of demands is abortive or negative, it can lead to dwb. as participant 13 rightly attributed these issues and conflicts to poor career development, lack of motivation and a competitive learning environment. other were lack of regular management and employee meetings, as well as poor communication. sub-theme: lack of trust and goodwill failure to do what is required in a psychological contract leads to the violation of psychological contracts because there is no mutual fulfilment of a promise or whatsoever. if trust and goodwill are ignored, the possibility to develop intention in what is worth doing in duties and obligations may be far from reach. trust is what they have done, but cannot be trusted in what they have not done. in an employment relationship, the employer wanted to spend less to gain more at the expense of employees but with the union, all things being equal. this was bolstered in responses from some asuu members: “the truth is that management and even the federal government cannot be trusted when it comes to fulfilling promises made to academics. we do not trust them a bit. we don’t trust the university management as well. no trust exists even at 40% on average based to some extent of those currently at the helm of affair in this university cannot trust anyone when it comes to fulfilling a promise”. 19 in response to asuu members, some management staff lamented that: “of course, the allocation attributed to university is very small, so, it may be difficult to keep up to the promise of academics”. “no, academics are not lacking anything, and all promises made to them have been fulfilled.” sub-theme: poor implementation of mou; moa participant 7 from a management staff standpoint revealed that: “though, management always try to give competitive reward to our staff to at least keep them on the job. well, in my institution, rewards policies are formulated but not consistently implemented by changing needs, attributed the failure from the federal government to respond to their demands”. this directly implies that there is a breach of trust and promise which eventually regenerate into discretionary behavior among academics”. 5.4 responses on the expectation to the fulfillment of psychological contract sub-theme: expectation in administrative of visionary leadership roles it is an administrative role to contribute by responding to people demands and effectively promoting the organizational culture of the academic environment and correcting any dwb that can lead to a breach of psychological contract in academic settings. one of the respondents opined that: “i expected an environment to make me grow and excel and contribute my quota efficiently. a well-organized environment. thought was going to be a smooth environment for academic growth……..., and to reach the peak of my career and get fulfilled as at when due with the ability to a visionary leader for people working around me, have an impact in people’s life…”. management staff participant 9 from an academic standpoint opined that; “i expected to progress faster with adequate facilities. i was expected an enabling environment, power supply, printer, internet facility, among other social amenities. my expectations were high both in terms of income and working conditions”. sub-theme: training and development participant 5 opined that: “the greatest emphasis for change in this institution should be on training and development of academic members. this will make a lot of difference. yet, the inadequacy in the facilities were factors expected to change the breach of psychological contract”. 20 one of the respondents were of the views that: “they feel consideration should be given to the factors relating to staff conveniences such as proximity of postal services, transport, recreation, sports facilities though the reality was very different, conditions of service was not adhered to by the employer and my expectation here not been met. well, i have a growing, demand change, yet, i want to continue to influence people’s life.” participant 8 from the management standpoint opined that: “the institution should have different packages for staff development which followed the approved standard by nuc which will encourage the people in academic to engage themselves in training and development”. others were of the views that there should be a change in promotion schemes of the universities; sub-theme: expect change in promotion schemes participant 9 from the management standpoint said that; “to my knowledge, the criteria for promoting academic are in tandem with international standard and any academic who is fit for promotion got it without stress. strictly by ap&c format. the criteria for promoting academic staff is something that distributes and the process is communicated, opened and transparent where all academics are aware of”. the rate is relatively good and equitable. one of the respondents further said that; “to the best of my knowledge, (university name held) promotion is one of the open operate affairs where all academic has the information, and the selection is based on approved criteria. the criteria are usually determined by the university’s promotion committee. the guideline is usually communicated among academic staff every year to give room for the qualified members to apply”. this means it is expected that the upward reassignment of individuals in academics should be looked into, accompanied by increased responsibilities, enhanced status and usually with increased income, though not always so in the university system it needs to be changed. the change and expectation of promotion schemes must provide for uniformity in promotional schemes in the university system. this will make justice to the ratios of internal promotions to external recruitment that should be the same at various levels in all departments. if this ratio is differing greatly from one department to another discretionary behavior may be seriously impaired the morale and commitment of staff. therefore, a sound promotion scheme must be able to tell the employee in advance what avenues for advancement exist. this should be open and communicate effectively. 21 5.5 union’ roles in fulfilling the psychological contract of academics the interview also explored the union’ roles in bridging the gaps between the breach of psychological contract by the federal universities and discretionary behavior among academics in federal universities. it was found that enabling working environment, redesign job responsibilities, job security/protection, administration of collective bargain, timely review of salary, allowances and benefits, provision of healthcare facilities, giving competitive rewards, grants and aids, increasing funds allocation to universities and provision of good working conditions. sub-theme: acknowledging the role of asuu while participants acknowledge the role of the union, thus inadequate when compared with other universities. “without union members, there wouldn’t be any remarkable academic environment in the universities in nigeria. hence, management must note that challenging, interesting, enlarged and enriched jobs should be assigned to workers, and these should be commensurate with their status according to the ladder of responsibility”. while majorities acknowledged the role of the union thus some few respondents said: “union has little or no impacts in solving problems in a federal university in nigeria. their role has been unsatisfactory, and the union leaders are not reliable, they should be trusted”. thus, it is advocated that the employer-employee relationship is only possible through union and it’s only through the fulfilment of asuu’s demand is the measure at which an incessant strike can be curbed. 6. discussion of findings based on the interview conducted for the asuu members and management staff, the following findings were reached. it was evident that bpc by the federal universities in north-central nigeria influences academics’ discretionary behavior, though the degrees vary. for instance, responses from asuu members showed that there is some perceived breach of psychological contracts, which might have led to disagreement, reduced productivity and in some cases, turnover intention. mounting pressure on academics to teach and conduct research without providing them with teaching and research aids lead to job dissatisfaction. the issue of facilities and infrastructure is grossly inadequate, and there are no adequate facilities for infrastructure for teaching, most of our lecture halls are not adequate, likewise the theatres. this finding was in tandem with study of anyim, obisi and aliyu (2018) who found analyzed deviant workplace behavior in nigeria. findings on the causes of conflict in federal universities, asuu members lamented that failure on the part of the government to implement the agreement signed with asuu members usually cause conflicts. this occurs when management or government does not pay the academic due as at when due, poor wages and late payment of salaries usually 22 demoralize workers. thereby management staff, on the other hand, said, the issue of conflict in the university is a long story that does not end easily, hence, its usual affairs. usually, academic members have one or two things on demand. this was also in consistent with the outcomes from yang & chao (2016) that conflict matter is positive, give rise to ocb, and when the implementation of demands is abortive or negative can lead to dwb. as attributed to the issue of conflicts to poor career development, lack of motivation and competitive learning environment. on the issue of promotion, the qualitative report revealed that the upward reassignment of individuals in academics should be looked into, accompanied by increased responsibilities, enhanced status and usually with increased income, though not always so in the university system, therefore, it needs to be changed. the change and expectation of promotion schemes must provide for uniformity in promotional schemes in the university system. because it was reported by subramanian (2017); sharma & garg (2017) that the ratios of internal promotions to external recruitment that should be the same at various levels in all departments. if this ratio is differing greatly from one department to another, certain behavior may seriously impair the commitment of academics. while asking for the role of asuu in fulfilling the psychological contract of academics, it was found that if government provides the enabling working environment, job security/protection, administration of collective bargain, timely review of salary, allowances and benefits, provision of healthcare facilities, giving competitive rewards, grants and aids, increasing funds allocation to universities and provision of good working conditions have been the watchword of asuu. because abdulazeez et al. (2019); liu, cho and seo (2018) believed that if academics are well-paid and compensated, this, in turn, will satisfy them psychologically and improve their performance on the job. while management must evaluate substandard welfare packages and compensation structures, all employees were taken along through proper channels of communication and feedback, especially when there was discretionary deviant behavior due to work discontent, according to an excerpt from the idi. the qualitative findings revealed that university academics were dissatisfied with their working conditions, underfunding, shortages of facilities and equipment, and, most importantly, the quality of service, which had resulted in multiple industrial unrests, brain-drain, and plans to transfer high-skilled academics to other universities. 7. conclusion and recommendations the study found that the bpc affected academics in a variety of ways, with a preference for ocb and dwb. unfortunately, the proclivity for dwb surpassed the proclivity for ocb. when a university breaks its commitments or fails to do what it should for academics, many academics may retaliate by engaging in deviant behavior such as misusing official cars, the internet, failing to attend statutory meetings, sexual harassment, and plagiarism, among other things. when the university fails to keep its promises to academics, the results show that some academics may be more likely to engage in organizational citizenship behaviors such as promoting the university's image, assisting colleagues in resolving issues, working longer days, being punctual, and showing tolerance, among others. the study, therefore, recommends that building psychological linkages between organizational and staff goals should help universities integrate employee behavior. so, the academics 23 who uphold ocb despite the perceived bpc should be encouraged to sustain their good behavior. 7.1 managerial implications and limitations the practical implication is aimed at establishing effective incentive systems that have the potential to improve tertiary institutions’ satisfaction and productivity. particularly, because a provision of adequate funding serves as a stimulating factor and predictor for organizational citizenship behavior towards academics (ocb-a), i.e. satisfaction among academics and organizational citizenship behavior towards university (ocb-u) productivity. meanwhile, the theoretical implication shouldered on infrastructural should be targeted at enhancing poor working environments to mitigate against deviant workplace behavior in the universities. however, if it is not taken into consideration, it could lead to the pronouncement of deviant workplace behavior towards academics (dwb-a), i.e. job dissatisfaction, quit intention, and deviant workplace behavior towards university (dwbu), i.e. low productivity. from this study, that the dimensions of bpc are not much pronounced on ocb unlike the dwb, which means there should be further research to expand knowledge in the relationship between bpc and ocb in a similar organization using qualitative techniques for more clarity on the adopted theory in this study. references 1. abdulazeez, a.l.; waidi, a.a. & hameed, o.o. 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(2020). 3rs of sustainability values for retailing customers as factors of influence on consumer behavior. in f. musso, & e. druica (eds.), handbook of research on retailing techniques for optimal consumer engagement and experiences (pp. 421-444). hershey, pa: igi global. doi:10.4018/978-1-7998-1412-2.ch019. 1. introduction 2. literature review 2.1 features and forms of psychological contract 2.2 social contract theory 2.3 empirical review 3. conceptual framework of the study and hypotheses development 4. data and methods 5. results 5.1 perceived responses on the interpretation of bpc in federal universities 5.2 predisposing factors affecting discretionary behavior among academics sub-theme: lack of spacious offices 5.3 review of causes of incessant strike in nigerian universities 5.4 responses on the expectation to the fulfillment of psychological contract 5.5 union’ roles in fulfilling the psychological contract of academics 6. discussion of findings 7. conclusion and recommendations 7.1 managerial implications and limitations references 57 poverty and unemployment in nigeria: the case for advancement of technical vocational education and training (tvet) joseph o. jiboku olabisi onabanjo university, nigeria peace a. jiboku olabisi onabanjo university, nigeria adeyemi o. babasanya olabisi onabanjo university, nigeria received: march 7, 2021 accepted: december 8, 2021 online published: december 14, 2021 abstract one of the main reasons for increasing levels of poverty and unemployment in nigeria is the lack of skilled human capital. thus, nigeria has remained slow in its development trajectory not only because of lack of technology but also due to the fact that the country’s large population does not possess relevant skills required for development in a fast globalising world. despite successive governments’ programmes towards ameliorating the conditions of the citizens by reducing poverty and unemployment, the rising cases reveal that much still needs to be done. there is therefore need for more studies aimed at proffering meaningful suggestions for informing policies to address these problems in nigeria. this is imperative because of the country’s growing population and also the consequences of poverty and unemployment for peace, security, stability and development of nigeria. this paper furthers the discourse on strengthening technical vocational education and training (tvet) as strategy for addressing the issues of poverty and unemployment in nigeria. its argument is anchored on the human capital theory of gary s. becker. the objective of the paper is to examine the connection between tvet, human capital and skills development; and to highlight the challenges and prospects of tvet in nigeria’s skills development agenda. keywords: democracy; development; human capital; skills; skills development; technical and vocational education and training (tvet). jel codes: e24, f64, f68. international journal of economic behavior, vol. 11 n. 1, 2021, 57-77. https://doi.org/10.14276/2285-0430.2878 58 1. introduction nigeria is endowed with vast natural and material resources, yet the country has been described as the poverty capital of the world with an estimated population of 87 million people in extreme poverty (see, demuren, 2018; iheonu and urama, 2019). the increasing level of poverty shows that the issue of poverty reduction has remained a challenge in nigeria despite the policies of successive governments (figure 1). figure 1– nigeria’s poverty level – 2018 source: atlas/data world poverty clock on another note, nigeria has an estimated population of 206,786,196 million people in 2020 (worldmeters.info/world-population/nigeria-population/). its population could trigger industrial production and also provide a large workforce for economic development if a large percentage were ‘appropriately skilled’. however, the country lags behind in economic and social progress (figure 2). for instance, despite being the country with africa’s biggest economy, “nigeria’s human development index for 2018 was 0.534 which put the country in the low development category – positioning it at 158 out of the 189 countries and territories” (undp, 2019: 2). education for all has remained elusive despite annual budgetary allocations (leke et al, 2014). healthcare facilities are out of reach of the majority (au/aprm, 2009: 274318; obokoh, 2019); housing is a far cry from the desire of many (au/aprm, 2009: 274-318; emiedafe, 2015); food is yet on the table of all (usaid, 2020), and as figure 2 shows, unemployment is rising (national bureau of statistics, 2020). 59 figure 2 – unemployment in nigeria source: tradingeconomics.com/national bureau of statistics, nigeria, 2020. the authors observe that while the large population of china and india have made these countries to become emerging markets and their skills have become advantageous and are being exported all over the world (cong and wang, 2012), this is not the case with nigeria. this paper therefore aims to examine why nigeria has failed to produce adequate manpower in the country, with the large number of universities (federal, state as well as private) and other skills development institutions established in the country. skills shortages and mismatches abound in the industrial and service sectors and over 60 per cent of the labour force is classified as unskilled and untrained in nigeria (ahmed rufai, 2012; industrial training fund/unido, 2016). an issue of concern in this paper is how the increasing levels of poverty and unemployment, and the country’s challenge in developing skilled human capital could be addressed. some analysts have argued that national industrial skills development is of utmost importance to nigeria’s quest for development (federal republic of nigeria, 2009; gyang, 2011; ogundele and abiola, 2012; ogbunaya and udoudo, 2015; akanbi, 2017; rufai, 2020). the multiplier effects of skilled manpower for a society is far beyond physical employment and economic growth but manifest in several aspects of the social life of the people. these results are consistent across a wide range of countries, confirming that skills have a profound relationship with economic and social outcomes across a wide range of contexts and institutions (oecd, 2012a; ghalandarzehi and safdarie, 2012; perepelkin, perepelkina and morozova, 2016). skills are keys to tackling inequality, promoting social mobility and inclusive growth (cong and wang, 2012; oecd, 2012a). however, while investments in basic education and skills have positive correlations with economic development in other parts of the world, the experience is not the same in nigeria. the question raised in this paper is: why has inadequate skilled human resource remained a problem in many sectors in nigeria despite the country’s efforts at ensuring skills and human resource development. employing a thematic discourse analysis, the main finding in this paper is that several problems confronting the educational sector and other skills development institutions particularly with regards to tvet in nigeria, have triggered poverty and unemployment in nigeria. the paper concludes that issues of poverty and unemployment in nigeria (which retards the country’s development efforts) will 60 be ameliorated if all stake-holders in the educational sector and skills development institutions work towards strengthening and repositioning tvet in the country. 2. theoretical and empirical literature 2.1 the salient issues of poverty and unemployment poverty has been defined by different scholars, writers and agencies from different perspectives, as such there is no unified definition of the concept. however, the most conventional approach for defining poverty is to measure it in monetary term, by comparing an individual’s income or consumption with some defined threshold below which they are considered to be poor (world bank, 2005; world vision, 2020). the united nations (2017:63-85) notes that often poverty is defined in relative or absolute terms. absolute poverty measures poverty in relation to the amount of money necessary to meet basic needs such as food, clothing and shelter. relative poverty defines poverty in relation to the economic status of other members of the society. people are poor if they fall below prevailing standards of living in a given societal context. ravellion and bidani (1993:3) look at poverty as the inability to have command over basic needs of life such as clothing, food, shelter, among other things. it should be noted that the inability of individuals to access these basic needs has negative consequences on their physical and socio-psychological wellbeing. poverty, however, is not about money alone, it includes issues of access to services such as health care and education, marginalization and exclusion (world vision, 2020). poverty represents a socio-psychological state that is undesirable (jiboku and jiboku, 2009). it is an undesirable state one can find himself in because of its multiplier effects that are negatively inclined. socially, poverty tends to alienate an individual from others. the poor has little relationship with their fellows. a poor person does not see himself or herself fitting with others and as a result does not see himself or herself as having ideas that are relevant to the development of society (mood and jonsson, 2016). with an individual’s partial selfostracization from the society, avenues for empowerment which can emanate from different interactions and associations are lost. contributions that the poor ought to make in decision making that relates to their wellbeing are made by others who may not fill the pinch of the shoes like they would have ordinarily felt (sida, 2002). among several reasons adduced for poverty are an exorbitant cost of living as a result of inflation, high rate of unemployment, government’s failure to provide basic social amenities, early and child marriages, ill-health, lack of storage facilities, crude implements, reckless spending and above all illiteracy, and low level of education (abimbola, orembi and adekeye, 2005; ajakaiye and olomola, 2003; odumosu et al., 2003). on the other hand, unemployment is the condition where a person who is educated or uneducated is without work in order to earn a living (agaba, 2018). the international labour organisation (ilo, 2019a) states that “persons in unemployment are defined as all those of working age who were not in employment, carried out activities to seek employment during a specified recent period and were currently available to take up employment given a job opportunity” (ilo, 2019:6). okafor (2011:361) defined unemployment simply as describing a condition of people who are without jobs. this condition is prevalent among youths in nigeria who constitute a majority of the population. as such youth employment has been described as the “conglomerate of youths with diverse background, willing and able to work, but cannot find any” (okafor, 2011:361). drawing from these definitions, it is possible to deduce that unemployment does not have to do only with those that are educated and possessed necessary certificates, the uneducated and unskilled individuals are also affected (agaba, 2018). in nigeria, the unemployment rate has increased as many graduates churned out from the different universities are without jobs. even so, while some of the graduates who applied for the white 61 collar jobs were subjected to different forms of screening processes before they were offered employment, others among the applicants were described derogatorily as unemployable after four years of rigorous training obtained from the universities. with their university degrees, some graduates have remained unemployed for many years while a few others are engaged in menial jobs and other ‘undeserving’ jobs (which is tantamount to underemployment) in order to survive (sobowale, 2015). okafor (2011:359) notes that many youths who ordinarily would have been productively engaged in some enterprise are engaged in hawking on the nigerian streets in order to make ends meet. even the self-employed individuals experience several challenges in the country due to inadequate infrastructure required for them to carry on in their trades (okafor, 2011; akande, 2014). it is important to highlight some forms of unemployment which have been identified in literature. − cyclical unemployment occurs when there is lack of demand for labour as a result of the fact that the economy is not viable enough to provide jobs for everyone who wants to work. it is found during periods of economic recession or very sluggish economic growth. firms cut back on their production and engage fewer workers or lay off workers (agaba, 2018; skenderi and uka, 2015). − structural unemployment arises as a result of change of the structure of the economy and the labour market cannot provide jobs for everyone that seeks employment. it also happens as a result of labour demand and supply mismatch (skenderi and uka, 2015). − frictional unemployment implies that some people are between jobs. some leave one job to look for a better one while some others have just entered the labour market (skenderi and uka, 2015). according to agaba (2018:202), frictional unemployment occurs between the time an individual is searching for a job and the time such individual finds one. it is a temporary condition (adesina, 2013). it is like a structural unemployment but it is short run in nature while structural unemployment has lasting effect (akeju and olanipekun, 2014). − classical unemployment takes place when real wage for a job are kept above the equilibrium or market clearing level. when this happens the number of job seekers tends to exceed the available job vacancies (agaba, 2018). voluntary employment as the name implies is attributed to an individual’s decision not to take a job (agaba, 2018). − seasonal unemployment occurs because work cannot continue throughout an entire period. it could be due to lack of demand for manufactured goods, weather conditions and so on (skenderi and uka, 2015). − residual unemployment, according to adesina (2013:148) is caused by personal factors such as old age, physical or mental disability, poor work attitudes and inadequate training”. − disguised unemployment or underemployment is a situation where an individual is not in full employment making full use of his/her skills and abilities. such employment could be part-time (adesina, 2013:148). according to dhanani (2004:22), “underemployment includes all individuals who worked less than normal hours and who, in addition, wanted to work more hours”. poverty and unemployment are global problems. however, they remain much more endemic among third world countries, particularly those in africa with rising cases in nigeria (okafor, 2011; sileika and bekeryte, 2013). different studies have found a strong connection with poverty and unemployment and establish that both variables reinforce each other. in other words, poverty is a social problem partly caused by unemployment and unemployment leads 62 to, and worsens poverty (sileika and bekeryte, 2013; udeh, okoroafor and ihezie, 2013; okorie and anowor, 2017). the seeming link between poverty and unemployment shows how each variable affects the other since countries recording high unemployment rates especially in the double digit are bedevilled with high rates of poverty (egunjobi, 2014). scholars have identified that issues of poverty and unemployment (which has been seen to take an increasing dimension in form of youth unemployment) pose threats to the peace, stability and development of nations in different dimensions and this calls for concerted efforts to manage and address them (egunjobi, 2014; nwagwu, 2014; omoju and terfa, 2014; olotu, salami and akeremale, 2015; usman, 2015; okorie and anowor, 2017). okafor (2011:362) asserts that “unemployment has attendant social, economic, political and psychological consequences”. jiboku and jiboku (2019) associated poverty, with its trend of unemployment to electoral violence and democratic failures. the effects are bad governance, bribery and corruption, political and social instability. poverty and unemployment negatively affect security and national economic development. for instance, these problems have been associated with the boko haram crisis in nigeria and other ethno-religious conflicts involving a large number of youths (udeh, okoroafor and ihezie, 2013; ighodalo, 2012; onapajo and uzodike, 2017; evans and kelikume, 2019; elem, 2020). poverty and unemployment have also been connected to negative social vices such as prostitution (alobo and ndifon, 2014), crime (sileika and bekeryte, 2013) including “rape, kidnapping, murder, burglary, fraud, terrorism, robbery, cyber-crimes, bribery and corruption, money laundering and so on” (oguntunde, ojo, akagbue and oguntunde, 2018:1242). a recurring cause of poverty and unemployment in literature (apart from other reasons provided), is the lack of relevant skills and scholars have advanced skills acquisition and entrepreneurship as measures to empower individuals and address these challenges (ahmed rufai, 2012; akande, 2014; egunjobi, 2014; jiboku and jiboku, 2019; rufai, 2020). the issue of skills development needs to be given priority attention not only because of the centrality of skills in development discourses but also the demands and challenges which a fast globalising world presents to all nations and their peoples. this issue is further expatiated with the human capital theory in the next section in this article. 2.2 human capital theory the fundamental role of human capital for socio-economic transformation is well espoused in the literature (becker, 1964; schultz, 1961; ogunade, 2011; keita, 2016). conceptually, the foundation of human capital is based on knowledge and skills acquired by an individual through education, vocational training or other learning activities (kwon, 2009). human capital implies investments that are made in people or that people make in themselves to improve their creative potentials or skills, empower themselves in the labour market and by extension increase productivity (asaju, kajang and anyio, 2013; world economic forum, 2016). in effect, training and capacity building measures invested in people (employees) for better productivity are all embodiments of human capital. frank and bernanke (2007:355) explain that human capital is “an amalgam of factors such as education, experience, training, intelligence, energy, work habits, trustworthiness, and initiative that affect the value of a worker’s marginal product”. the concept of human capital has been used by scholars in different ways and is subject to diverse interpretations and applications. however, the focus in this paper is on gary s. becker’s perspective. becker’s (1964, 1975, 1993) work titled: “human capital: a theoretical and empirical analysis with special references to education” analysed the concept of human capital within the context of the labour market and viewed employees to be of prime importance in wealth creation, economic prosperity and the survival of society. arguing from the same perspective and emphasising the core importance of human capital, schultz (1961:3) stated that 63 to discuss social and economic growth and development outside the concept of human capital would be as paradoxical as to discuss the former soviet union without the doctrine of karl marx. human capital is similar to what marx (1890) referred to as the infrastructure of society upon which the other superstructures rest (see, woods, 2013). it serves as the foundation for societal transformation. schultz (1961:1) observes that even though it is obvious that people acquire useful skills and knowledge, many are not conscious that these skills and knowledge are a form of capital. he emphasised that this capital is a substantial part of a product of deliberate investment that has helped the growth of western societies at a much faster rate than conventional (non-human) capital, and that its growth may well be the most distinguishing feature of the western economic system (see also porter, 1990; perepelkin, perepelkina and morozova, 2016). for developing countries, therefore, schultz (1961), kwon (2009), gyang (2011), rufai (2020) and other scholars advocate investment in human capital as a way of enhancing the quality of human efforts for improvement in productivity. both becker (1964) and schultz (1961) agree that investments in education, training and skills developments generate externalities for firms and they conclude that such investments remain the most distinguishing feature of the modern economic system. without training and improvement in skills, there would only be manual work and many, except for those who have inherited property, would be poor. as schultz (1961:16) asserts, “the man without skills and knowledge is leaning terrifically against nothing”. becker (1964:30-31) notes also that many workers increase their productivity by learning new skills and perfecting old ones while on the job. on-the-job training, therefore, is a process that raises future productivity. skills acquisition is another form of job security, and becker (1964:31-40) observed that employees with specific training have less incentive to quit, and firms have less incentive to retrench them than employees without specific skills or general training, which implies that quit and layoff rates are directly related to the level of training and skills acquired. in essence, the acquisition of skills has multiplier effects on the employees who have been trained to improve their efficiency on the job. on the flip side, lack of skills portends grave consequences for the society (african union commission, directorate of information and communication, 2017). for instance, this arguably, accounts for poverty, unemployment and associated criminal activities in the nigerian society such as the niger delta. the boko haram terrorism ravaging the north east of the country that is accredited to be the poorest region in nigeria, could also be the aftermath of lack of skills, unemployment and poverty. development of skills especially of the youth might be a sustainable approach to a lasting peace necessary for development in nigeria (ladipo, akhuemonkan and raimi, 2013; ayonmike, okwelle and okeke, 2015; ezenwafor, 2015; okoye and arimonu, 2016). human capital is seen by ghalandarzehi and safdarie (2012:164) as a prerequisite for development because the extent of growth and rate of development depends on the quality and quantity of an efficient workforce. human capital provides a springboard for change and improvement, optimises the use of physical and tangible capital, increases the efficiency of production, and accelerates the rate of economic growth (ghalandarzehi and safdarie, 2012; agabi and ogah, 2010; olaniyan and okemakinde, 2008). the human capital theory is useful because of its strength in analysing the importance of training and skills development in the socio-economic transformation of any country. in this paper, human capital theory is used as an analytical tool for understanding nigeria’s skills situation as well as advancing the repositioning of tvet in efforts of the government to address the skills challenge. 64 3. data and methods 3.1 data description this is a theoretical paper and based on desk research. secondary data were used in analysing scholarly arguments on the following discourses: education; skills development through tvet; challenges and potentials of tvet for achieving socio-economic development and technological transformation with particular reference to nigeria. data were obtained from relevant texts; journal articles; conference, workshop and seminar reports and institutional lectures. secondary data obtainable from reliable internet sources were also used. secondary data are compiled data that are now easily accessible for research purposes. it is an acceptable approach to undertake the use of secondary data in social research and this type of data allows for flexibility in utilisation. however, systematic procedure and evaluation must be guided (johnston, 2014). the authors ensured the currency of information employed in this paper by selecting journal articles, books chapters and institutional documents up to the year 2020. in addition, data incorporated in this paper were those of scholars from developed and developing countries who have written and published their works on credible national and international journals. the journal articles and book chapters are those of high repute scholars, mostly academics who are experts in their different institutions. these scholars are experienced and have contributed extensively on issues of education, skills, skills development and training, human capital formation and development, among others. they have also facilitated various national and international conferences, workshops and seminars and have promoted scholarship in their areas of expertise across various parts of the world. in addition, the institutional documents (both national and international) from which data were extracted were those of the united nations, world bank, african union commission, international labour organisation, national bureau of statistics, and organisation for economic cooperation and development (oecd). these institutions have, over the years, been concerned with skills development and human capital development issues and challenges and have contributed immensely to chatting way forward for improvement in different countries. 3.2 data analysis tool the paper undertook a thematic discourse analysis. its approach was descriptive and analytical. discourse analysis is a “methodology for analysing social phenomenon that is qualitative, interpretive and constructionist” (hardy et al. 2004:19). the interest in undertaking discourse analysis is exploring social reality and, in doing so, focusing on the relation between text and context. it enabled the researchers to connect the issues examined in this paper with previous discourses. also, data collected from various sources were subjected to expansive and extensive reviews with the use of content analysis as a veritable tool of data analysis adopted in many studies based on the qualitative research methodology. content analysis, according to hsieh and shannon (2005), is “a research method for the subjective interpretation of the content of text data through the systematic classification process of coding and identifying themes or patterns”. 4. data analysis and discussion 4.1 tvet as a strategy for skills development the enormous contribution of education to the collective development and well-being of individuals and nations is well documented. studies suggest that education is the key that 65 unlocks individual and group potentials. it opens up individuals’ thinking faculties, transforms individuals and, by extension, the society (odukoya, bowale and okunlola, 2018; faiz, 2019). education creates an avenue for every child to reach its potential to lead a productive, healthy life and to acquire a decent job (oecd, 2012b). according to bloom (2014:60), “education also promotes the ability to learn new skills and adapt to new circumstances, the need for which is heightened in a rapidly changing world.” this paper emphasizes technical vocational education and training (tvet). according to the united nations, human rights office of the high commissioner (2001) revised recommendation concerning technical and vocational education (2001), “technical and vocational education is used as a comprehensive term referring to those aspects of the educational process involving, in addition to general education, the study of technologies and related sciences, and the acquisition of practical skills, attitudes, understanding and knowledge relating to occupations in various sectors of economic and social life”. technical and vocational education according to this international organization is further understood to be: (a) “an integral part of general education; (b) a means of preparing for occupational fields and for effective participation in the world of work; (c) an aspect of lifelong learning and a preparation for responsible citizenship; (d) an instrument for promoting environmentally sound sustainable development; (e) a method of facilitating poverty alleviation”. technical vocational education and training is a special form of education and training because it combines the following: technical education, vocational education, vocational training, on-the-job training, and apprenticeship training or any of the combination of these forms (tripney and hombrados, 2013). despite the combination of the terms technical and vocational education, they are different in form and content. vocational education (ve) as the name implies denotes skill based programs which are intended for the acquisition of skills at lower level of education and focuses on exact vocations for entry into defined workplace (okoye and arimonu, 2016). it is considered suitable for the following professions: automobile mechanics, plumbers, electricians and other similar vocations (cong and wang, 2012). on the other hand, technical education (te) is a training that facilitates acquisition of practical skills, applied technical skills and basic scientific knowledge that would empower students for workplace/industry after graduation (ladipo, akhuemonkan and raimi, 2013; okoye and arimonu, 2016). technical education, okoye and arimonu (2016:113) observe, contributes to fields ranging from electrical and electronics technology, metal work technology, mechanical/automobile technology, building technology, woodwork technology, and others. the nigerian revised national policy on education looks at technical vocational education as that aspect of education which leads to the acquisition of practical and applied skills as well as basic scientific knowledge relevant for survival especially in this new age of technological advancement (federal republic of nigeria, 2004). the aim of tvet is to encourage what cong and wang (2012:68) describe as “applicationoriented talents that have related technical theoretical knowledge and practical ability”. nwogu and nwanoruo (2011), egbri and chukwuedo (2013), ladipo, akhuemonkan and raimi (2013); ayonmike, okwelle and okeke (2015); ezenwafor (2015), okorafor and nnajiofo (2017); oladejo (2019) and other scholars in their different studies have identified that tvet is that form of education that leads to development of practical skills. those who acquire such skills would not find it difficult to be gainfully employed in a chosen occupation. tvet will make an individual to become self-reliant and hence contribute to overall national development (federal republic of nigeria, 2009). okoye and okwelle (2013:134) emphasize that: 66 tvet is the form of education that advocates development of the head (knowledge), training of the hand (dexterity) and enriching the heart (consciousness and painstaking) – the 3hs. tvet is a total deviation from the previous emphasis on 3rs – reading, writing and arithmetic, which was fundamentally a form of credentialising entry into elite status with its graduates/products roaming about seeking for the non-existing white-collar jobs. the unesco-unevoc (2006:11) has emphasized that the impact of technology as well as the transformation of different sectors such as agriculture, fishing, forestry, industry, mining and even the service sectors into knowledge based sectors in most developed countries is a pointer that those who would operate in these sectors need targeted education and training to be able to operate computer-controlled equipment. thus, with the demand for more skills as a result of technological revolution and the challenges posed by a knowledge and informationbased economy, there is an increasing demand for skilled labor. these factors are also responsible for the disparities of wages of skilled and unskilled labor (cong and wang, 2012). some of the consequences of this situation are the skills-gap scenario, skills shortages and skills mismatches experienced in the world of work (international labor organization, 2019b). this is particularly the scenario in many african countries (african union commission, directorate of information and communication, 2017). okoye and arimonu (2016:114) point out for instance, that “in nigeria, the too much emphasis on university education has always reduced the economic opportunities of those who are more work oriented than academics”. this again directs our attention to the issue of tvet which many scholars and analysts agree has not been accorded the priority attention it deserves in nigeria (yusuf and soyemi, 2012; ladipo, akhuemonkan and raimi, 2013; ezenwafor, 2015; okoye and arimonu, 2016; okorafor and nnajiofo, 2017). these scholars are among those who argue that while several empirical studies have established a positive nexus between human capital and national development through specialized education like tvet, in nigeria, this form of education and training is confronted with a lot of problems. 4.2 tvet approach for socio-economic growth and development technical vocational education and training (tvet) is widely recognized as a vital strategy for the socio-economic growth and technological development of nations (yusuf and soyemi, 2012; ladipo, akhuemonkhan and raimi, 2013; tripney and hombrados, 2013; ayonmike, okwelle and okeke, 2015; ezenwafor, 2015; ogbunaya and udoudo, 2015). this is evidenced by the experiences of developed countries of the west, as well as east and south-east asia, russia, india and china (ladipo, akhuemonkhan and raimi, 2013; cong and wang, 2012). the wide acceptance of the usefulness and impact of tvet is also portrayed by its prominence on developmental agenda of different nations (both developed and developing) and its inclusion as a topical issue at conferences, think-tanks and workshops organized to deliberate on issues about development both at national, regional and global levels in recent times. in particular, the needs, demands and challenges of a progressing globalization era have made tvet a matter of urgency for nations, and have heightened the imperative of human capital formation as an economic imperative (cong and wang, 2012). there are several factors responsible for this development. for instance, the unesco-unevoc (2006:10) assert that the labor market is undergoing the transformation from the industrial age to the information age. with this trend, there would not only be job shift, but also the need for retraining and dislocation of workers. hence, a worker who hopes to maintain his/her skill and competencies in the labor market and 67 sustain his/her employment needs more training to update skills. again, cong and wang (2012:67) draw attention to the competition in economic markets which has become more intense in a rapidly globalizing world. this phenomenon pushes the demand for expertise and high-quality workforce in various fields of the whole society making new round of development of vocational education imperative. unesco (2016:7) asserts that tvet can improve responsiveness to changing skill demands by companies and communities; it can increase productivity and increase wage levels. there is a growing literature on the vital role of education and skills development through specialized education like tvet in promoting economic growth and development of nations (yusuff and soyemi, 2012; ladipo, akhuemonkan and raimi, 2013; maclean et al, 2013; ayonmike, okwelle and okeke, 2015; okorafor and nnajiofo, 2017). yusuf and soyemi (2012), tripney and hombrados (2013), ogbunaya and udoudo (2015) and others emphasize that tvet has been recognized by governments of different countries as a tool for empowering people with practical job skills especially the youth not only to enable them explore different job opportunities but also for them to be self-employed and in turn contribute to national socioeconomic development. in addition, unesco (2016:7) identify that “in ensuring that skills gained are recognized and certified, tvet can also offer skills development opportunities for low-skilled people who are under or unemployed out-of-school youth and individuals not in education, employment and training (neets)”. following these perspectives, tvet plays a critical role in ensuring peace and social stability in nations as it will assist in mitigating the negative socio-political and economic consequences of increasing levels of unemployment and poverty. as such, governments and policy makers in different countries are carrying out different reforms in their educational sectors in order to enhance tvet. hollander and mar (2009:4) cautions, however, that it may be difficult to explore these potentials of tvet if for instance, there is no labor market to absorb tvet graduates and provide them with decent work. instructively, the world bank (2018) identified that “over the last two decades, subsaharan african countries experienced significant growth as a result of the rapid transformations and foreign investments which helped boost the demand for greater technological skills”. this demand is yet to be met as the world bank noted that there is large gap in the demand and supply of technical and vocational skills in these countries and that the shortage of an adequately educated workforce identified by industries is a major obstacle to further growth and development. this is the scenario in nigeria. despite the country’s enormous natural and material resources which could be explored for economic development, nigeria is still struggling with achieving development objectives and continues to grapple with increasing levels of poverty with its attendant tendencies of unemployment and illiteracy. the country also has a large number of out of school children and adults with limited or no skills (world bank, 2015; industrial training fund/unido, 2016). these negative trends have been associated with different internal political conflicts and social instability experienced in the country. with a large number of universities (federal, state as well as private) and other skills development institutions established in nigeria to produce adequate manpower for the country, skills shortages and mismatches abound in the industrial and service sectors and over 60 per cent of the labor force is classified as unskilled and untrained (ahmed rufai, 2012). this is as a result of the kind of education that have been passed on in the different classrooms apart from the technical knowledge and practical skills required in the world of work. different scholars observe with concern the problems confronting the educational sector and other skills development institutions particularly, with regards to tvet in nigeria which have led to failure of graduates to secure employment amidst other challenges (yusuf and soyemi, 2012; egbri and chukwuedo, 2013; ayonmike, okwelle and okeke, 2015; akanbi, 68 2017). these problems are pointers that nigeria is yet to benefit from the potentials of tvet and reveal further particular missing-links in nigeria’s education and skills development agenda which are unpacked in this paper. 4.3 tvet: the experience of nigeria nigeria, like most nations of the world has acknowledged the role of tvet in enhancing technological transformation and sustainable development (ezenwafor, 2015; akanbi, 2017; okorafor and nnajiofo, 2017). this is demonstrated by the good intentions of successive nigerian governments in putting in place policy and institutional frameworks to ensure skills development through tvet. however, scholars, policy analysts, some national and international agencies which handle issues related to tvet observe that the country is yet to reap the potentials of tvet with increasing records of illiteracy, unemployment and poverty (world bank, 2018; unesco-unevoc, 2019, african union commission directorate of information and communication, 2017). nwogu and nwanoruo (2011), yusuff and soyemi (2012) and okorafor and nnajiofo (2017) and others state that vocational technical education is a very important aspect of the nigeria’s formal educational system under the 6-3-3-4 program. at post-secondary/tertiary levels, technical and vocational colleges, polytechnics, monotechnics and universities have been the institutional structures established to enhance the country’s technical growth and development (yusuff and soyemi, 2012). accordingly, the federal republic of nigeria report of the vision 2020 national technical working group on education (2009), highlight that formal vocational education starts after basic education with three years of technical colleges or more recently, the vocational enterprises institutions (veis), while the majority is found in non-formal training obtainable in craft vocational schools, skills development centers, as well as open apprenticeship workshops spread across the country. in nigeria’s educational system, the quality assurance agencies for tvet include the national university commission (nuc), and national board for technical education (nbte), national business and technical education board (nabtec). while the nuc’s roles include the accreditation, monitoring and evaluation of universities programs, infrastructural facilities, teaching and non-teaching staff, and instructional materials, the nbte performs similar task as that of nuc to polytechnics, technical colleges, and other certificate awarding tvet providers (ayonmike, okwelle and okeke, 2015). notwithstanding, while studies have dwelt extensively on the socio-economic development and technological progress achieved by nations through tvet, some scholarly work have focused on the experience of developing african countries like nigeria (which possess enormous natural and material resources) in promoting tvet in a fast globalizing technologically driven world. as such, ahmed rufai (2012), egbri and chukwuedo (2013), ladipo, akhuemonkan and raimi (2013:16), okoye and arimonu (2016), odukoya, bowale and okunlola (2018) and others assert that despite the relevance of tvet in nigeria, this form of education, although embedded in the country’s education policy, is yet to receive the prioritization which it deserves. in essence, tvet in nigeria is confronted with different social, political and operational challenges (okorafor and nnajiofo, 2017; odukoya, bowale and okunlola, 2018). ladipo, akhuemonkan and raimi (2013) and yusuf and soyemi (2012) note that the first challenge affecting tvet is the poor perception of tvet by parents and wards. several individuals view vocational education as a special education intended for drop-outs and less intelligent learners/people. ahmed rufai (2012), egbri and chukwuedo (2013) and ladipo, akhuemonkan and raimi (2013) identify problems of ill-equipped laboratories/workshop, inadequate tools and equipment and gross infrastructural deficiencies in technical colleges and vocational enterprise 69 institutions (veis) culminating in poor skill acquisition. these have affected the actual functioning of skills development institutions and have also limited the learners’ capacities in acquiring practical skills required for securing employment. furthermore, ahmed rufai (2012), ladipo, akhuemonkan and raimi (2013) and okoye and arimonu (2016) state that the problems affecting tvet in nigeria range from development of policies which are not tailored or in line with the country’s needs and challenges; in essence, the design of curricula that are not targeted towards realistically addressing the mismatch between training and labor market skill demand and problem of effective curriculum implementation. there is also the issue of embezzlement of fund meant for educational development purposes, lack of teacher motivation, poor funding, brain drain, poor staff training, leadership problem and bribery and corruption (okoroma, 2006; ahmed rufai, 2012; ladipo, akhuemonkan and raimi 2013; and okoye and arimonu, 2016). scholars lament the lack of follow-up and continuity of government policies in nigeria and frequent change of government as part of the critical challenges facing the education sector in nigeria (okoroma, 2006; ahmed rufai, 2012; nwogu and nwanoruo, 2011). for instance, odukoya, bowale and okunlola (2018:3) observe that the nigerian government came up with the 9-3-4 system of education while the 6-3-3-4 system was not fully implemented. ladipo, akhuemonkan and raimi (2013:19) state pointedly that at a point in time, technology education (te) was separated from science education (se). then, sudden policy reversal led to a merger of te and se as science and technology education (ste). the implication of embedding tvet under science education is believed to have undermined tvet subject vocations. ayonmike, okwelle and okeke (2015) and ezenwafor (2015) observe the acute shortage of competent tvet teachers/instructors; ahmed rufai (2012) and nwogu and nwanoruo (2011) note the issue of poor remuneration of vocational technical teachers while yusuff and soyemi (2012) decried poor supervision, monitoring and evaluation of tvet programs. in addition to these problems, ahmed rufai (2012), yusuff and soyemi (2012) and odukoya, bowale and okunlola (2018) point to the ceiling on career progression of polytechnic staff, discrimination against graduates of technical schools and low enrolment at all levels of technical education. in addition, the pervasive nature of non-formal tvet in nigeria which is the system of training of young boys and girls by self-employed artisans and technicians has been brought to the fore (yusuf and soyemi, 2012). for ogbunaya and udoudo (2015:143), tvet programs in nigeria are ineffective and of very low quality. 5. conclusion the paper examined poverty and unemployment as salient issues that negatively affect the peace, stability and development of nigeria. it argued that the rising rate of poverty and employment, particularly among the youth portend great danger for the nigerian polity and furthered the position that technical vocational education and training (tvet) should be repositioned and strengthened as part of focused policies and concerted efforts aimed at redressing the rising trend. the authors observed from empirical literature that technical and vocational skills are critical for development and technological advancement of nations and that skills generally contribute to national economies. notwithstanding, tvet appears not to have been accorded priority attention in nigeria. while the paper stressed that successive nigerian governments have put in place policy and institutional frameworks to achieve national aspirations of education and skills development through tvet, this form of education is confronted with multifaceted problems. importantly, the challenges facing tvet constitute missing-links in nigeria’s skills development agenda. the problems explain why the country is yet to benefit 70 fully from the deliverables of tvet and reflected in rising levels of illiteracy, unemployment, poverty, internal conflicts, political and social instability, among other problems. the conclusion in this article is that nigeria cannot afford to continue to neglect tvet and hope to make progress in reducing poverty and unemployment. thus, there is the need for concerted actions aimed at improving the education sector generally and re-aligning missinglinks in nigeria’s technical and vocational skills development agenda. 6. recommendations 6.1 sincere commitment to the implementation of policies nigeria is not lacking in policy; the problem lies in the area of implementation. different policies formulated by successive governments aimed at reducing the hardships as a result of conditions of poverty and unemployment included: accelerated food production programs, nigerian agricultural and cooperative bank, operation feed the nation (ofn), green revolution, agricultural development project (adp), national directorate of employment (nde), national economic reconstruction fund (nerfund) and national poverty eradication program (napep). these alleviation methods were set up in succession in order to take care of lapses and inadequacies of their predecessors. since the return to democratic rule in may 1999, efforts of government has been made to reposition the nigerian economy by implementing economic reforms and sound economic policies. the government has made efforts to restructure state enterprises; it introduced and implemented several reforms in different sectors of the economy; it put in place legislative, policy and institutional frameworks to rebuild the economy and ensure sound financial management. measures to combat corruption and money laundering were also put in place (au/aprm, 2009:142-149; edo and ikelegbe, 2014). president olusegun obasanjo’s national empowerment and economic strategy (needs) initiative was meant to promote reforms. his successor, president umaru musa yar’adua, introduced the seven-point agenda for nigeria’s development. president goodluck ebele jonathan came up with his policy package tagged the transformation agenda which gave the people a lot of promises (uche, 2019). in the same dimension, the current administration is also not taking the issue of poverty alleviation with levity, as existing measures on poverty reduction are being remodeled with more financial vigour under the national social investment programmes (nsip) such as the n-power programmes (federal republic of nigeria, 2016). therefore, the relevant policies aimed at poverty and unemployment reduction and those on technical vocational skills development need to be revisited and implemented with pragmatism as a way of filling the existing gaps in skills development. the governments at all levels need to be actively involved in improving tvet. there is need for adequate funding, supervision and coordination of the policies and programmes of the country’s skills development institutions and stakeholders. while the efforts of the federal ministry of trade and investment through the industrial training fund (itf) is commendable, more industrial skills centres of itf need to be established in different parts of the country to focus on training of adults with tertiary educational qualifications. 6.2 improved funding for the education sector and tvet the nigerian government should properly fund the education sector in line with the guidelines provided by unesco. importantly, more funding is required to adequately equip the technical colleges to enable them to have state of arts equipment and facilities for training in line with the technology of the twenty-first century. the reality that stares nigeria in the face is to urgently reform its education sector and revive its skills centers and tvet in line with global needs in order to develop the human capital that will be instrumental in developing local technology and promoting socio-economic development. 71 6.3. addressing issues of corruption and misappropriation of funds tackling head on the issues of corruption and misappropriation of funds by the political leadership is important. these problems have continuously hindered nigeria’s socio-economic development. the funds which are improperly diverted by the state could properly be invested into priority areas such as education and skills development, improving infrastructures, among other legitimate areas. 6.4 increased enlightenment and sensitization there is need for reorientation of nigerians to view technical vocational skills education and training as important and not for the less brilliant. as it is presently, technical schools are unattractive to many especially the literate ones in the nigerian society. for the young ones who are just leaving secondary school, they need to be encouraged to go to technical colleges for acquisition of technical vocational skills to reduce the number of youths that roam about the streets who could be lured into engaging in unwholesome activities. youth restiveness in different parts of the country would be arrested with tvet. the issue of the ‘almangiri’ youth in the north with very little hope for the future will be turned around and the insurgency ravaging the north east of the country would have been stopped because a skilled individual will not be easily lured into the boko haram sect to boost their ranks and file in the insurgency. 6.5 incorporating and formalizing the informal apprenticeship system for training the informal apprenticeship system for training in different vocations could be incorporated and formalized for training of the youth to make them relevant in different vocations. this will require enactment of policy frameworks at the different levels of government, and with appropriate regulatory framework, a lot of revenue will accrue to the different tiers of government and reliance on craftsmen from neighboring countries would have been halted for national good. developing skills of the large population of the youth does not necessarily have to be limited to the formal educational levels. while formal education and training may be important, considering nigeria’s historical and colonial experiences, emphasizing formal educational setting based on attainment of specific academic level for training and skills development might exclude a substantial proportion of the nigerian youth. many of the youth in rural areas, townships and cities (for no fault of theirs but the socio-political and economic conditions in which they found themselves) are deprived of basic formal education (jiboku, 2016; see also, baah-boateng, 2013). therefore, training and skills development programs should emphasize employment generation, empowerment, and job creation. it should be realized that the government cannot provide jobs for all its citizens. in this respect, the informal apprenticeship skills development program needs to be revived and strengthened for the training of technicians and artisans to complement government efforts through the formal training institution. 6.7 suggestions for future research as this paper has shown, tvet is a viable strategy for nigeria to achieve much needed sustainable development. there is therefore need for more studies to address persisting challenges in nigeria’s educational sector and skills development institutions. more scholarly attention and research could concentrate on coordination and harmonization of functions, policies and programs of the nigerian government with those of other skills development institutions including the multinational corporations which claim to be involved in skills 72 development of their employees. the role of government institutions in monitoring and supervision of skills development programmes in the state needs to be explored. references 1. jiboku, j.o. and jiboku, p.a. 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(1996), "potere e stabilità nei rapporti di fornitura della grande distribuzione britannica", economia e diritto del terziario, n. 3, issn: 1593-9464, pp. 971-1011. 2. theoretical and empirical literature 2.1 the salient issues of poverty and unemployment 2.2 human capital theory 3. data and methods 3.1 data description 3.2 data analysis tool 4. data analysis and discussion 4.1 tvet as a strategy for skills development 4.2 tvet approach for socio-economic growth and development 4.3 tvet: the experience of nigeria 5. conclusion 6. recommendations 6.1 sincere commitment to the implementation of policies 6.2 improved funding for the education sector and tvet 6.3. addressing issues of corruption and misappropriation of funds 6.4 increased enlightenment and sensitization 6.5 incorporating and formalizing the informal apprenticeship system for training 6.7 suggestions for future research references 37 corporate social responsibility practices in the retail sector: a multiple case study analysis of us retailers laura bravi carlo bo university of urbino, italy received: may 18, 2021 accepted: october 22, 2021 online published: november 10, 2021 abstract over the last few years, corporate social responsibility (csr) has become a central theme in corporate management and is a relevant element of competitiveness for businesses. however, it is difficult to find a sustainable business model that fits perfectly to all companies, therefore, the aim of this study is to analyze the social responsibility balances of some of the major american companies in the retail sector through a multiple case study analysis, to verify similarities and differences in their approach to defining a socially responsible strategy. the methodology used is a multiple case study analysis that compares the social reports of 5 american companies selected as a sample as they are leaders in the retail sector, considering the deloitte rankings. the commitment on the social and environmental front of companies considered is aimed at producing long-term collective benefits and is not reduced to formal and facade interventions adopted in the short term mainly for opportunistic purposes. sometimes companies consider sustainability as a goal to be achieved, but from the results of the study, analyzing the different time period 2012-2018, it can be seen that it is not an achievable goal, but a prolonged path, during which the company and its stakeholders try to improve each other continuously. keywords: corporate social responsibility; retail sector; us retailers; corporate strategy. 1. introduction both from literature and from field research, it appears that, over the last few years, corporate social responsibility (csr) has become a central theme in corporate management; it is defined as the commitment of an organization" to behave in an ethically correct way and to contribute to economic development by improving the quality of life of workers and their families, of the local community and of society in a broader sense”. the main idea is defined under the concept of "triple bottom line" (elkington, 1994; elkington, 2013), that is the pursuit of three types of results: economic, social and environmental decisions (arrigo, 2005; księżak and fischbach, 2017). international journal of economic behavior, vol. 11 n. 1, 2021, 37-56. https://doi.org/ 10.14276/2285-0430.3045 38 csr is therefore a management orientation that goes beyond the respect of regulatory compliance and defines a broader objective function than the simple profit. with csr, in fact, it is not only property and management that define and compete for the value created by the company, but all the stakeholders that are part of it, that is, all those subjects directly and indirectly involved in the organization's activities. csr focuses on the composition of the various interests of the multiple stakeholders at the center of the company's objective-function, where the environmental, humanitarian and social dimensions are freed from a historical role of subjection to the objective of profit and, contribute to defining methods and constraints for achieving the most strictly economic results (popoli, 2011; kopel, 2021). according to the literature, a variable that leads companies to consider social issues is competition, which drives companies to differentiate and qualify their offer (souza-monteiro and hooker, 2017). the large multinationals, including the large food chains, were among the first to adopt csr policies (gheribi et al., 2017). developing such a strategy is in fact able to improve the image and reputation of the company by promoting customer loyalty, effectively manage human resources, efficiently use environmental and natural resources, and better manage business risk and relations with financial institutions (księżak, 2016; chatzoglou et al., 2017). in recent years there has been a rapid rise in the global fair trade market but, with reference to the context of large retailers, this is a relatively recent phenomenon. until the 1980s, ecofriendly, organic products were sold in shops, specific shops or directly by farmers. starting from the 1990s, these products entered large supermarkets, which were joined by private label products at more competitive prices. it should be stressed that it cannot be spoken of “responsible large-scale distribution” if the entire upstream chain is not like this. the concept of supply chain sustainability develops alongside that of corporate social responsibility, receiving considerable attention in the industrial world; in fact, an increasing number of companies are implementing annual social reports, sustainability strategies and codes of conduct, deriving from national legislative impositions, international conventions, standards or principles such as: social accountability 8000, iso 14001, global reporting initiative (jadhav et al., 2019; andreson et al., 2020; murmura and bravi, 2020). for the application of the sustainable supply chain, a strong integration between the internal and external environment of the company is required, putting into practice mechanisms to increase knowledge. as regards the internal dimension, it includes the training of employees and the sharing of experiences between groups of workers; in the case of the external one, on the other hand, the training of key suppliers and the development of promotion programs through positive incentives (for example long-term contracts and / or large volumes of orders) are considered for all those who implement codes of conduct and periodic review of their performance (carter and jennings, 2002; zaid et al., 2018). as stated by maloni and brown (2006), it is not possible to find a sustainable business model that fits perfectly to all companies, but each specific case must be studied. for this reason, the aim of this study is to analyze the social responsibility balances of some of the major american companies in the retail sector through a multiple case study analysis, to verify similarities and differences in their approach to defining a socially responsible strategy, considering the time period 2012-2018 and underling the main improvements of their socially responsible strategy during this period. 2. methodology 2.1 sample and data analysis the analysis carried out in this study begins with the consultation and extrapolation of data from the "global powers of retailing" world ranking. this ranking is promoted every year by 39 deloitte, a consulting and auditing services company, the first in the world in terms of revenues and number of professionals, which identifies the 250 largest retailers in the globe based on data published annually by the companies. the methodology used is a multiple case study analysis that compares the social reports of 5 american companies selected as a sample as they are leaders in the retail sector, considering the deloitte rankings. according to creswell (2013, p. 97), a multiple case study method explores multiple bounded systems (cases) over time, through detailed, in-depth data collection involving multiple sources of information (creswell, 2013). in this case the time period considered is 2012-2018. the methodology of the multiple case-study chosen is that of a descriptive type, as the research aims to delineate the general and particular features of a given phenomenon (bertazzaghi et al., 2010). companies for this study were originally selected according to the following criteria: position: all companies must be located in america; industry: all companies must belong to the retail sector; relevance: all companies must be present in the deloitte rankings as leaders in the sector. the choice to focus on the retail sector is motivated by the fact that it is characterized by the presence of companies that have to deal with a large number of stakeholders and that play a dual role: they constantly communicate with consumers, for whom the information and image of the company are decisive in the choice of products and they act as intermediaries in the supply chain of consumers paying more attention to issues related to corporate social responsibility. the purpose of this work is to analyze and compare the corporate social responsibility (csr) policies implemented by american leading companies in the retail sector, in order to understand differences and the possible factors influencing these differences. for the purposes of the multiple case study analysis, in addition to the documents provided by deloitte on its website, the public domain data that can be consulted in the relevant csr reports of the companies selected as a sample were taken into consideration, studied and analyzed. more specifically, with regard to deloitte's "global powers of retailing 2013 retail beyond", the data refer to the 2011 fiscal year with financial years ending in june 2012; while, for the data taken from the global powers of retailing 2019 report, used for the analysis, refer to the 2017 fiscal year with the end of the financial year in june 2018. the main sources of data for financial and other information used by deloitte come from annual reports; sec filing, which is financial statements or other formal documents filed with the united states security and exchange commission (sec); press releases; information sheets of companies or on company websites. if information issued by companies is not available, other publicly available sources are used, including estimates from trade journals, industry analyst reports, and press interviews. it should also be noted that the financial information used for each company in a given year is accurate from the date of publication of the financial report. although a company may have restated the results of the previous year to reflect a change in its activities or as a result of an accounting change, such restatements are not reported in these data. the deloitte investigation is therefore not an accounting report. due to these factors, it reflects the dynamics of the market and the impact on the retail trade industry for a given period of time. the selected sample is shown in table 1 and it is composed by: wal-mart stores, inc., is a us multinational, owner of the walmart retail chain of the same name, founded by sam walton in 1962, in rogers, arkansas. it is the largest 40 chain in the world in the large-scale retail channel. it also owns and operates the retail warehouses of sam's club. it has 2.2 million employees and according to deloitte 2019 data has a turnover of 500.343 billion dollars, currently operates in 29 countries and it has as the largest operating format: hypermarket / supercenter / superstore. headquarters: bentonville, arkansas (us). costco wholesale corporation, is a large american chain of wholesale hypermarkets founded by james sinegal and jeffrey brotman in 1983 in kirkland, washington. it has 225,000 employees and according to deloitte 2019 data has a turnover of 129.025 billion dollars, currently operates in 12 countries and it has as the largest operating format: cash & carry / warehouse club. headquarters: issaquah, washington (us). the kroger co., is a us retail chain founded by bernard kroger in 1883 in cincinnati, ohio. it has over 450,000 employees and according to deloitte 2019 data has a turnover of 118.982 billion dollars, currently operates in one country and it has as the largest operating format: supermarket. headquarters: cincinnati, ohio (us). the home depot, inc., is a us retailer of products for home improvement, construction and maintenance. founded in atlanta in 1978 by arthur blank, bernard marcus, pat farrah and ron brill. it has 400,000 employees and according to deloitte 2019 data has a turnover of: 100.904 billion dollars, currently operates in 4 countries and as a major operating format: home improvement (renovation, improvement and maintenance of houses or apartments). headquarters: vinings, georgia (us). walgreens boots alliance, inc., named walgreen co. until 2013, today it is an american multinational world leader in the distribution of health and wellness products. the new company was founded on december 31, 2014 in chicago following the acquisition by walgreens of 55% of the swiss company alliance boots in which it had already entered in 2012, acquiring 45% of the capital. it has 415,000 employees and according to deloitte 2019 data it has a turnover of 99.115 billion dollars, currently operates in 10 countries and it has as the largest operating format: drug store / pharmacy. headquarters: deerfield, illinois (us). table 1 − sample profile of companies that participated in the analysis (source: elaboration on deloitte 2013-2019 data). company country of origin number of employees fy 2011 retail revenue (us$m) fy 2017 retail revenue (us$m) countries of operation (deloitte 2013) countries of operation (deloitte 2019) dominant operational format wal-mart stores, inc. us 2,200,000 446,950 500,343 28 29 hypermarket /supercenter /superstore costco wholesale corporation us 225,000 88,915 129,025 9 12 cash & carry/ warehouse club the kroger co. us 453,223 90,374 118,982 1 1 supermarket the home depot, inc. us 400,000 70,395 100,904 5 4 home improvement walgreens boots alliance, inc. us 415,000 72,184 99,115 2 10 drug store / pharmacy 41 3. analysis of the 2012-2018 csr report 3.2 company internal organization as for the data reported in the 2012 csr reports, each of the selected retailers has a set of principles and methods that govern their employees and establish duties, rights and working conditions. almost all retailers cite compliance with the universal declaration of human rights which recognizes the inalienable and inviolable rights of all people. walmart does not refer, in their 2012 social responsibility report, to the protection of workers' rights, but report it on the principles that guide the choice of suppliers. overall, it can be said that the common goal of all companies is to create a serene, friendly, stimulating work environment in which employees can grow professionally, develop skills and work peacefully and aspire to leadership positions. the retailers highlight this aspect only in the part relating to the ethical and social characteristics that their suppliers must have, so they implicitly declare themselves opposed to the exploitation of workers and the imposition of unfair working hours. the active participation of employees and their involvement is another very important topic. all companies, with the exception of costco, and kroger have in their 2012 csr report at least one reference to the centrality of their employees and five out of twelve companies periodically submit them to surveys or questionnaires to assess their degree of satisfaction, have opinions and suggestions on the policies to be adopted and, in some cases, involve them in strategic choices. companies want to create a work environment based on dialogue, participation and sharing. interaction is also a goal that many companies want to achieve but still have a long way to go. the development of values of respect and protection towards the worker will certainly help to achieve this goal. occupational health and safety are a priority for all retailers. in particular, walmart's safety programs focus on preventing employee and customer injury by having trained safety professionals in every store. additionally, walmart creates standards to protect workers who use high-risk chemicals or machinery. these proactive measures go beyond local laws and industry standards and improve employee conditions. only costco does not refer to this aspect in its report. therefore, it is possible to note that the problem of workplace safety and accident prevention is a very relevant topic, close to the heart of companies that want to avoid unpleasant accidents and damage that could affect the corporate image. training is a requirement that cannot be missing from any type of company. in fact, all retailers are committed to developing their employees' skills, offering them good career opportunities. in particular, walmart collaborates with universities and training institutes, developing mentoring programs such as “mentor me”, designed to help, create and share diverse knowledge, experiences and perspectives. as for the data reported in the 2018 csr reports, for all the retailers analyzed, setting the economic well-being of their employees as an objective is a form of investment for an organization, because offering higher wages than the minimum standards guaranteed by the contract allows it to build strong links with the community, build employee loyalty and strengthen the organization. human resources are an essential asset. their development represents a fundamental factor for the consolidation of the growth and continuity of retailers. communication with head office and network employees becomes an increasingly important tool for collaboration and innovation, so much that various reports talk about employee loyalty. in 2018, costco employees had, on average, nearly nine years of service at the company. over 60% of us employees have five or more, and over a third have more than ten. worldwide, they have more than 13,000 employees with more than 25 years of service with costco. with 225,000 employees, costco wholesale corporation believes the key to the company's continued success and growth is employee attraction and retention. the overall goal of all 42 retailers is to promote an attractive, fair and safe work environment and encourage an atmosphere of openness and support with an open-door policy, which allows any employee to discuss a problem with any level of management. promote diversity, individuality and personal responsibility within the workforce. what changes is the systematic integration of sustainability into personal development programs through seminars and training courses. also in 2018, most of the retailers analyzed listened to the opinions of their employees through a survey. for walmart, employees are also at the heart of the company's business and it engages with them in a variety of ways, including: individual interaction, group meetings, corporate intranet, facebook workplace and other social media, in addition to traditional digital communications like e-mail. walmart uses the feedback it receives from its employees to understand the issues that are of primary importance and tries to respond as effectively as possible. employees involved are happier and perform at their best. as a result, they provide better customer service by creating a clean, fast and friendly shopping experience. this is why the world's leading retailer invests $ 2.7 billion in its staff over two years in education and training, salaries and programming ensuring that even more collaborators have clear paths to grow and advance. a diverse leadership team, as well as a diverse board, is a priority for walmart, which argues that the best place to find strong leaders for the management team is within the company itself. the health and well-being of its employees, but not only, in 2018, also of its customers, leads to very important reflections for most of the analyzed sample. with this it is appropriate to present the most significant actions implemented by the various retailers. among the most important initiatives in the us, kroger focuses on providing training and equipment suitable for safety, safe working conditions and access to resources to maintain and improve the well-being of members. the company relies on several policies to ensure compliance with relevant osha (professional saftey and health administration) requirements. through clear expectations, routine monitoring, communications and regular engagements, kroger manages to reduce the number of injuries and accidents that occur in the workplace. walgreens boots alliance is committed to creating and maintaining a safe environment for employees, customers and patients. while it did not map a gri standard on employee safety in the 2018 report, it is examining the new 403-4 standard "worker participation and consultation and communication on occupational health and safety" for the 2019 report. the company conducts its global business planning and day-to-day operations with the utmost concern for health and safety management, including through its own retail stores and distribution centers. it constantly strives to expand its robust approach to health and safety and to promote continuous improvements even when they exceed local legislative requirements, including through coordination with the walgreens boots alliance health, safety and environment committee. walgreens encourages open dialogue and constructive feedback from all stakeholders to help ensure best practices in health and safety management are implemented in all businesses around the world. it also requires that all divisions, entities, cross functions and business functions have complete formal governance processes in place regarding health and safety in the business operations for which they are responsible. through training courses and a focus on safety culture, walgreens achieves reductions in employee and customer incident reductions in retail stores over a four-year period, ending august 31, 2018. in fiscal 2018, walgreens also records a significant improvement in its minimization of causes and management of risks relating to accidents at work. walmart associates receive training on a variety of health and safety-related processes. one example is the “walmart compliance champions,” with which the company, through associates chosen by management, promotes compliance and ethics initiatives, including safety. 43 additionally, an active continuous improvement team monitors facility compliance with health and safety regulations, as well as other compliance initiatives. a fundamental tool for developing the skills and abilities of employees is training, which is positioned at the center of the human resources enhancement policies of all retailers. as it has been seen, much of the training is now also provided on the subject of health and safety in the workplace. in addition to the sensitive issue of security, training is also used to achieve: better customer relationships, product knowledge, company operation, hiring positions for new employees and capacity building for digital tools. different from the past are the modules developed to train employees on csr, both on social and environmental aspects. making the staff more and more competent and professional in the management of commercial dialogue is a commitment that all companies undertake towards partners and customers. kroger in 2018, updates the curriculum of “leadership essential", a training program to better prepare trainees for new positions. this training offers skills development to develop technical knowledge and safety expertise to provide the best customer experience. it offers a comprehensive leadership training and development curriculum, through kroger university, with two different levels: role-based skills training from new hiring associate to store manager and leadership development from department head to executive. the home depot employs $ 50 million to train 20,000 merchants by 2028 to help address the shortage of skilled labor. as part of this commitment, in 2017, the thd foundation collaborated with the home builders institute (hbi) to launch a twelve-week commercial training program for military and veteran members through the support of: e-learning, experiences led by instructors, online resources, executive development and mobile learning. the common goal of all retailers is to build a learning-rich environment in which employees and leaders are prepared to succeed, motivated to serve customers well and offer opportunities for growth. development and learning programs expand skills and capabilities so employees can master their roles, which ultimately leads to great customer experiences. understanding, respecting and valuing diversity, styles, experiences, identities, ideas and opinions are the basis on which every company, regardless of the sector of origin, must start to offer equal opportunities to its valuable builders, every day. "a truly inclusive workplace culture is one in which every employee feels able to bring their authentic self to work every day." this is where the world leader in the retail sector, walmart, starts from to respect the theme of inclusion and equal opportunities. unanimously, the analyzed retailers consider diversity and inclusion as a critical success factor as having different talents within their organization is the best way to understand the diversity and expectations of their customers. at the home depot, people from different backgrounds bring different perspectives and ideas to the company and this fosters innovation. the company actively integrates diversity and inclusion into every aspect of the business. the collaborators and suppliers, the selection of products and the services it offers all aim to create a workplace and a company that reflects the community it serves. the home depot proudly collaborates with the national council for female entrepreneurship to promote gender equality among suppliers. finally, the world leader in the distribution of health and wellness products, walgreens boots alliance, argues that diversity and inclusion have a real impact on their brand and it is imperative that marketing and products reflect the diversity of consumers and their needs. starting in september 2018, walgreens boots alliance implements a diversity and inclusion performance target, which is measured by a number of key factors, including an increase in the representation of women in leadership positions, year-on-year, in all countries in which the company operates and a greater representation of people of color in leadership, year after year, in the united states. 44 appreciating the diverse backgrounds, experiences, knowledge and skills of all employees and guaranteeing equal employment opportunities and equal treatment to all individuals is part of the entire sample analyzed today. decisions within companies are made regardless of gender, race, language, religion, ethnicity, sexual orientation, age, disability. the common goal is to achieve gender equality and offer a wide range of job opportunities for workers of all ages and aspirations, from teenagers looking for their first job to experienced career professionals and seniors who wish to stay active and connected in their community. today, making diversity a business asset is part of the corporate strategies of the world's top retailers. 3.2 company family, social and stakeholder context the companies are also active in the social context towards the families of their employees through health insurance, subsidized pension schemes, family assistance programs, insurance services and scholarships. general health insurance and benefits include preventive health checks for workers and their families, free counseling services for heart disease, diabetes, weight problems and nicotine replacement therapy, free preventive care and hiv testing. walmart is moving in this direction, while no health information is reported by costco. the general objective of companies is to guarantee their employees a decent standard of living through satisfactory salaries and benefits, in line with national standards. finally, in the reports of almost all the retailers analyzed, the commitment of the companies to create value for the shareholders is mentioned without going into detail. however, most retailers want to emphasize their member discount policy. companies have long been aware of the need to ensure a better life and good health for their employees. this is why, in 2018, almost all retailers implement health coverage or additional benefits in all countries in which they operate. in view of the recurring disengagement of several states regarding the assumption of certain health costs, various entities are organizing themselves to offer quality services (health / wellness) at competitive prices, thus preserving the purchasing power and health of employees. costco applies its philosophy of pricing and high standards to an industry where price spreads are the norm, creating an alternative solution for employers, transferring all savings to the company sponsoring the benefit plan. this alternative program is part of costco's healt solution offering and is one of the few in the industry to offer this benefit to the end consumer. for each dispensed prescription, the customer pays only the actual cost of the prescription and costco's only source of revenue is a fixed monthly administration fee. this 100% pass-through model matches costco's pharmacy management efforts with the employer's need for transparency and savings and eliminates the spread and gameplay found elsewhere in the industry. companies that participate in the statute of limitations indemnity program typically cut costs by 10 to 25%. even kroger, which ranks immediately after costco in the rankings, is very keen on the physical, economic and financial well-being of its employees. it offers a number of important benefits to help them save money, continue their education, take care of themselves and their families. all this, kroger is ready to help its collaborators with the helping hands fund which, in 2017, provides 2,4 million dollars in financial assistance to over 2,600 employees a 41% increase over 2016. as evidence of how much the companies have assumed responsibility for the lives of their employees, it is also appropriate to report the numerous initiatives taken by the home depot. in 2018, the home depot is launching an updated parental leave policy that provides six weeks of 100% paid leave to all parents, plus an additional six weeks of 100% paid maternity leave to all mothers at the birth of their children. 45 at walgreens boots alliance, proactively supporting employee health and well-being is also a top priority. they recognize that they have a responsibility to enable their employees to receive high-quality care by providing them with the services, resources and the support they need. as the extent and ways in which healthcare is provided vary significantly by country, walgreens boots alliance manages the healthcare and benefits offered to full-time and parttime employees nationwide. for example, in the united states, home to over 60% of employees, the company offers a comprehensive package of full-time employee benefits that typically includes: full medical and health benefits, employer matching to contributory retirement account defined, leisure and paid vacation, paid disability, employee stock purchase program, life insurance and employee discount. for walgreens, engaging and collaborating with stakeholders helps address the most relevant sustainability issues. the company regularly consults with its internal and external stakeholders to ask for their feedback on performance in areas where walgreens has the greatest economic, environmental and social impact. the company proactively involves stakeholders on issues where it believes it can have a significant impact, for example, in the field of health and well-being, as well as on topics in which they are aware of the changing expectations of society. additionally, it seeks to interact with stakeholders representing a wide range of industries, geographies, organization types and sizes. the issues brought to attention are then forwarded to the csr committee. in line with the us models just analyzed, is walmart's experience, which also offers health benefits starting at around $ 26 per month for full-time and part-time employees who work an average of 30 hours per week for the past 12 months. like walgreens, walmart also offers 401 (k)1 contributions and provides full-time and part-time hourly u.s. associates with up to 6% match after one year on the job. members are entitled to contribute to their 401 (k) from the first day of work. other policies envisaged by the us giant are: paid time off (pto), walmart's us pto policy simplifies paid vacation, sick time, personal time and vacation into a single category; extended parental leave, which covers paid employees in the united states and full-time hourly employees. the company has been listed on wall street since 1972, making it inevitable to partner with its shareholders through: formal communications, quarterly earnings materials, securities and exchange commission (sec) documentation, investor conferences, investment community meetings, the annual shareholder report, the annual proxy statement and other information made available through the website. in addition, there are also shareholder awareness programs, which are conducted throughout the year to discuss corporate governance, executive compensation and other matters relating to walmart's business strategy. the expansion of the importance of the family, social context and relationships with stakeholders for the entire sample analyzed, means that the gaps identified in the 2012 csr reports are largely filled and sometimes overcome. in particular, costco, which in 2012 made no reference to this aspect, today guarantees numerous services within the reach of all its employees with a portfolio of over 1,300 treatment and research centers of its own. each reality has the primary objective of making its collaborators feel at home while they are in their workstations, guaranteeing healthy and efficient working conditions from the point of view of safety to avoid any type of accident at work. finally, the detail that is left in the background in the 2012 reports (creating value for shareholders) takes on greater relevance in the 2018 csr reports, as can be seen more from the experiences of walmart. 1 in the united states, a 401 (k) plan is the defined contribution, tax-qualified retirement account defined in subsection 401 (k) of the revenue code. 46 3.3 products and assortments relations with suppliers and degree of control in the 2012 csr reports, in relations with suppliers, the watchword for retailers is "responsible supply", or rather the imposition of quality and social ethical standards that establish long-term relationships of trust. to this end, retailers have a code of ethics or a detailed list of requirements ranging from respect for human (and, therefore, workers') rights to responsible management of the production chain. along the supply chain there are four main areas in which responsible management of resources is activated: a) cultivation and production of products; b) logistics; c) site management; d) waste disposal. suppliers must ensure quality, safe and healthy products and raw materials, minimize the environmental impact both in the production phase and in the transport of goods and in the waste disposal phase. in particular, costco works to protect fish species and the marine ecosystem. suppliers are periodically checked (e.g., on the use of pesticides or substances potentially dangerous to human health) because the nutritional, organoleptic, technological and health quality of the products sold, as well as the reputation and credibility of retailers, depend on them. finally, collaborations with local suppliers increased in 2012. this is demonstrated by the presence, on almost all the shelves of the retailers considered, of products from local suppliers. in particular, walmart and costco have always prioritized local suppliers for all their products, especially food. the relationship with suppliers is central to the development strategy of companies, because a relationship based on fairness and reciprocity guarantees higher standards in products and services. and it is precisely the quality of the products that represents the distinctive character, together with the quality of relations and the desire to be part of the social and economic community of the territories in which one is present. it is for this reason that in the 2018 csr reports of the analyzed dealers, it can be found complete and detailed information regarding the relationships and the degree of control of suppliers. the increasingly stringent regulations in terms of control and selection of the supplier portfolio on the one hand and the preparation by companies of standards that require high levels of efficiency on the other, lead to increasingly accurate decisions and, where necessary, immediately stop any kind of collaboration undertaken. in 2018, all retailers analyzed have a supplier rating system that is based on a detailed classification matrix on standards, which include: the prohibition of any form of forced or other labor and any form of slavery or trafficking human beings; opposition to discrimination in any form; working hours that do not exceed the applicable legal requirements; the prohibition of child labor; safe and healthy conditions; the prohibition of corruption; freedom of association and recognition of the right to collective bargaining; compliance with applicable laws and regulations on environmental protection; commitment to improve the sustainability of products. this list represents what are the qualified standards of primary importance from the different retailers. subsequently, other issues and other requirements related to the specific case of the individual retailer and the country in which it operates are then shown. costco wholesale corporation is committed to protecting the labor rights and safety of the people who manufacture, process or collect the merchandise it sells, recognizing and respecting the cultural and legal differences found around the world. to this end, costco expects its suppliers and facilities to comply, at a minimum, with all applicable labor, employment, health and safety, environmental laws and regulations of the country in which the merchandise is manufactured. in the absence of applicable laws and regulations, suppliers and facilities must meet the requirements set forth in the costco supplier code of conduct. this code of conduct applies to all suppliers who supply goods to costco. the company tries to use suppliers who share their commitment and conducts audits of production facilities on its behalf in order to 47 monitor the commitment of suppliers to the code. costco also reserves the right to terminate the relationship with any supplier and / or facility that does not conform to established requirements and standards. salient points of the code are: antitrust and competition laws; the united states corrupt foreign practices act; restrictions on insider trading; accounting, financial reporting and internal control rules; laws on health, safety and the environment. kroger has programs in place to hold its suppliers accountable for compliance with standards through assessments of environmental, social and human rights practices, as well as working to improve the traceability of its brand products. kroger monitors its supply chain for social and environmental impacts in several ways. many of the company's commitments and programs are aligned with specific environmental and social certification schemes to provide clarity and credibility. kroger organizes social compliance audits, designed to verify the alignment of its suppliers with the supplier's code of conduct. suppliers must, upon registration, accept the supplier code of conduct provided by the company to become part of the kroger supplier hub. the code informs them that the structures they manage or subcontract may be subject to social compliance audits. factory visits are guided by kroger's audit content and conducted by a company-approved third-party audit firm over a five-day audit window. kroger requires social compliance audits for all own-label products (food and non-food products), for non-branded products (such as bulk products) processed in facilities outside the united states, and for imported domestic brand products. additionally, kroger requires all beef, pork, chicken, turkey and egg suppliers to provide evidence of an annual animal welfare audit and they must align with animal welfare standards and be conducted by independent commercial third-party auditing firms. 3.4 products and assortments – consumer protection consumer protection by retailers manifests itself in many ways, through the guarantee of hygiene and safety, product labeling, packaging care, the full range of organic products and own brand products. in addition to having suppliers demonstrate compliance with strict manufacturing standards for food safety, walmart supports research and develops additional food and raw material safety requirements that are science-based. a front icon to help consumers easily and quickly identify healthier food options. kroger conducts a food safety check every two months in each of its stores, through external companies, and the results are checked with the same rigor with which the financial ones are checked. kroger also guarantees security to its customers through its 24/7 service for the removal of "problematic" products from its stores, based on industry and government standards. the company is a leader in this field and is one of the first to create a customer notification service for certain types of product collection (using the database created with the data of loyal customers). kroger offers thousands of natural, organic and eco-friendly products. among others, for attention to the protection of animal welfare, it offers free-range eggs, sells only milk from cows not treated with the artificial hormone bst and supports the sustainable food program. in kroger stores there are pharmacists who provide not only advice on drugs, but also brochures for their disposal. in some points of sale there are “little clinics” (medical micro-clinics) with specialized staff ready to help families. kroger also extends the training to its customers by providing information sheets with advice and general information on food safety at home (how to cook them or at what temperature to keep them). for retailers, product safety is the first commitment to consumers. at a minimum, all retailers comply with national legislation and safety and hygiene regulations, but established internal regulations often go beyond those required by legislation. in fact, most companies use a special management system that allows them to identify any suspicious products, remove them from sale, and inform customers about the products that need to be returned. 48 as already mentioned, customer protection is also achieved by creating innovative packaging that is sustainable (for example by reducing or eliminating unnecessary outer envelopes or using recycled materials), easy to use, useful for rapid product recognition, which contains nutritional information and communicates a healthy lifestyle. in this regard, costco creates sustainable, easily manufactured (or recyclable) and resistant packaging. as for the results that emerged from the comparison of the data relating to the 2018 csr reports, the actions that retailers constantly take to ensure full consumer protection are varied. in particular, costco, walgreens, and walmart have one thing in common, namely the how2recycle label, a us-based recycling label standardization program. the how2recycle label identifies each part of the package and how to recycle it for optimal recovery, thus allowing consumers to know where and how to recycle the packaging. at walmart, the “gigaton” project invites suppliers to avoid emissions as well as reduce waste by reducing unnecessary packaging, optimizing packaging materials and increasing reuse and recycling of the same. walmart is specifically targeting plastics, with extensive waste reduction commitments for its us private brands. in fiscal year 2019, over 800 walmart private label suppliers subscribe to the how2recycle label (compared to just 100 in fiscal year 2018) and over 16,000 inventory units receive the label. costco, on the other hand, offers sustainable packaging that protects the product, complies with laws and regulations, reduces materials and communicates this effectively. costco is also looking for opportunities to reuse packaging, identify the materials used so that the packaging can be recycled or composted, and find already recycled content. costco's innovation in the packaging industry keeps this area in continuous and dynamic improvement. the goal is that all plastic is made from recyclable pet or recycled plastic. it also offers fiber and corrugated packaging, recognizing that there is a limited supply of certified fiber, encourages the use of recycled content whenever possible. costco offers global packaging by developing, through its purchasing team, a standard packaging format for use in multiple countries. this has the advantage of reducing the amount of packaging waste in the production process and eliminating the costs and packaging cycles of individual countries. in 2018, costco creates a global recycling banner for these global packaging items to help understand when to recycle them. the home depot packaging team works with private label product suppliers to apply science to creating better packaging. the goal is to reduce the ecological footprint of packages and use more sustainable materials. in 2018, thd redesigned 134 packaging to reduce size and materials. the home depot's "eco options" program helps customers identify products that have less impact on the environment and encourages suppliers to develop more sustainable offerings. eco options was launched in 2007 in partnership with “scs global services”, a leading, independent, third-party certification body that validates environmental claims. today, eco options branded products are over 25,000. in 2017, the chemical strategy was also published for the first time, which represents an important part of the commitment to offer greener products. strategy that guides the company's efforts to work with suppliers to reduce the impact of chemicals used in products. the publication is a milestone made possible by what the company learns in a decade of attention to sustainability. in 2018, kroger continues to expand its digital reach and enhance the digital shopping experience to offer customers the products they love, as well as weekly ads, digital coupons, recipes, rewards, smart shopping lists and more. thanks also to the launch of the kroger mobile app. the collection and delivery coverage area now exceeds 93% of customers. kroger has long been a leader in customer satisfaction by creating unique and personalized shopping experiences that drive loyalty. each year, it provides over three billion personalized recommendations through the customer analytics team. kroger is creating a seamless digital shopping experience for its customers so they can access everything, anytime, anywhere. kroger offers several options for ordering and 49 delivery, such as "kroger pickup" which gives customers the ability to order online and collect in nearly 1,700 stores. through the partnership with “instacart”, it offers delivery in 2,126 locations. “kroger ship”, its b2c e-commerce platform, extends reach to even more customers across the country. how it improves health and nutrition is important to kroger and its stakeholders, so the president of kroger pharmacy and the little clinic oversees health and nutrition strategies and programs. 18 dieticians on staff and about 60 nutritional technicians in the store promote and develop health and wellness initiatives throughout the company and in stores. sustainable packaging is a fundamental principle of the zero-waste vision. following the reduction, reuse and recycling approach, it is working to reduce the environmental impacts of product packaging. key priorities include reducing unnecessary packaging, increasing the recyclability of packaging and increasing the amount of recycled content and certified fiber, supporting the community in building better infrastructure and offering customers options for recycling. through its “zero hunger / zero waste” social impact plan, kroger is committed to finding innovative solutions to help end hunger and eliminate waste in the communities in which it operates. this is why kroger is also a u.s. grocery retail partner for loop, the revolutionary new circular e-commerce platform that is advancing kroger's zero waste vision by reducing single-use plastics in the environment. several kroger plastic packaging items, as well as many other items, are recyclable in plastic film recycling bins located in kroger store lobbies. collected items, such as disposable plastic grocery bags and bread bags, are recycled into new items and transformed into composite lumber or hi-tech wood. 3.5 products and assortments – communications policies with regard to communication policies, the analysis conducted for the 2012 csr reports highlights a general trend towards a commitment by retailers to carry out their activities towards other economic operators on the market, opposing acts of unfair competition and respecting the national antitrust legislation. indeed, the analyzed retailers try to sensitize the consumer towards sustainable development by improving their csr initiatives and policies to improve their image and reputation. resellers understand that information must be accurate, correct, easily understandable, compliant with misleading advertising law, and communicated clearly and transparently. however, investments in communication and advertising initiatives are quite different. the retail sector presents an extremely competitive market, which is constantly changing and materializes with the emergence of large distribution brands, the emergence of new sales channels and the ever-increasing needs of customers. sales processes become more and more complex and those who work closely with customers must have the tools and information necessary to understand purchasing habits and needs to increase sales opportunities. in 2018, in the csr reports of some analyzed companies, no data emerged to the point of being able to define real considerations. in the last ten years, social media has changed the way in which brands and consumers interact, giving greater importance to consumer opinion, such as to require a customer-oriented approach, and placing ever higher expectations of brands, which must be authentic, respond to consumer concerns and take a stand on issues relevant to social and cultural responsibility. consumer confidence has become crucial to brand success. faced with the implementation of new technologies and services to improve the consumer experience, companies must therefore consider being authentic and reliable among their priorities, always having an eye on the security of consumer data. on the other hand, it is not easy for retailers to gain consumer trust in their brand. it is an activity that involves understanding each individual consumer and constantly satisfying their expectations. for example, kroger uses powerful statistical systems to track consumer behavior trends, which allow it to tailor its digital offers and promotions to 50 individual shoppers. however, this is not always enough. transparency as regards suppliers and materials used, reliability, constant quality of products and services and genuine commitment to charitable activities are also fundamental. attracting consumer confidence is important not only for new brands that are about to be launched, but also for established brands such as the companies in the analyzed sample. 3.6 social commitment – charities, community services and educational initiatives the social commitment of retailers in local communities is divided into two types of actions: on the one hand there are solidarity and charity initiatives, fundraising and community services and on the other there are educational awareness activities. solidarity and charitable initiatives are developed both locally and internationally. in 2012, each of the retailers analyzed creates a foundation that deals with solidarity projects, fundraising or food distribution for people in need. walmart and costco donate unsold, near-expiry or damaged packaging products to associations to provide the opportunity to feed families living in poverty. the walmart foundation is committed to meeting the needs of under-served populations in the united states and supports organizations that positively impact local communities. through financial contributions, in-kind donations and volunteer work, walmart and its associates are committed to operating globally and giving back locally. when natural disasters like hurricanes or earthquakes hit people hard, the walmart foundation steps in by donating food and helping rebuild destroyed homes. an increasing number of children from socially disadvantaged or orphaned families are unable to receive toys at christmas or equipment when they start school. costco promotes access to medical care for children through united way and children's hospital and works proactively to create local jobs through the costco scholarship fund. walmart on the other hand, is very committed to food education. with their campaigns they propose a healthy and correct lifestyle, as well as encouraging sporting activity. in addition, among the initiatives to educate the population to respect the environment, the "water sense" project activated by the home depot, aimed at saving water consumption, should also be mentioned. in the 2018 csr reports, the charity and awareness initiatives implemented by retailers have increased considerably, but above all they are largely detailed compared to the past. for people in difficulty, being a responsible business means being close to people not only at the time of purchase, but also in critical situations. costco's commitment is to be active in local communities. the company expects 1% of pre-tax profits to be donated to selected charitable contributions focused on children, education, health and human services. in 2018, it continues to contribute over 39 million dollars to the aforementioned organizations, united way, costco scholarship fund and the new children's miracle network hospitals. since 2012, costco has partnered with new eyes for the needy to support its overseas program. costco ships used glasses and hearing aids to “new eyes,” where they are sorted, tested and repackaged for distribution to those in need around the world. annual donations are approximately 260,000 used eyeglasses and 1,800 hearing aids. most often, glasses are the first and only pair of glasses that recipients have ever owned. the world vision program to donate non-food items to people in need continues to grow and the company donated 41,945 pallets of products in 18 international countries in fiscal year 2018. additionally, throughout the world, costco's offices donate edible food items to food banks and other nonprofits in their local communities. in order to further reduce food waste and provide food to the needy in the united states, costco expands its program with "feeding america", a nonprofit organization based in the united states that works with local food banks to provide food pantries, canteens and shelters for more than 37 million people. the organization leads the nation in the fight against hunger. in fiscal year 2018, costco donated more than $ 34.7 million 51 worth of edible food products in all states in which it operates, which represents approximately 29 million meals for people in need. also in the 2018 fiscal year, it made cash contributions of $ 1.75 million. like costco, walmart and kroger are also part of feeding america's visionary partners. walmart and the walmart foundation have invested over $ 100 million in feeding america since 2005 to provide charitable meals, develop infrastructure, and build essential programs. these investments provide funding for equipment, trucks and logistics expertise to help food banks at the forefront of providing charitable food to extend their reach and impact. kroger partners with feeding america to complete the new “zero hunger / zero waste” plan by 2025. this program addresses a fundamental nonsense in the american food system: about 40% of food produced in the united states is thrown away, yet an out of eight americans live hunger. as an american grocer, kroger believes it has the size, scope, experience and dedicated collaborators to address this paradox. zero hunger / zero waste represents the vision of the company today. in fiscal year 2018, walgreens boots alliance diverts more than 1.5 million kilograms of products from landfills in the united states by donating them to feeding america. donations of unsold or discontinued products that have been screened for safety include food and household items that often cannot be purchased through government assistance programs. the walgreens health analytics research and reporting team collaborates with academic institutions and scientific researchers on numerous studies, with the aim of helping to improve patient care while reducing healthcare costs. numerous other initiatives are being implemented by the company. every day, according to a study by the united states department of veterans affairs (va), about 20 u.s. military veterans die from suicide. walgreens works with the va and the veterans of foreign wars of the us (vfw) to reduce this number through community disclosure of service organizations available to veterans. for the eighth consecutive year, in recognition of the us national hiv testing day, walgreens and the greater than aids public information campaign are teaming up to offer free hiv testing. on june 27, 2018, the test is made available in over 300 walgreens stores in 180 cities. in recent years, walgreens has partnered with the centers for disease control and prevention (cdc) and the national safety council (nsc) to help reduce falls for older people. according to the cdc, falls are the leading cause of serious and even fatal injuries among adults aged 65 and over. as for educational activities to raise awareness in the communities in which the retailers themselves operate, some companies show different types of actions in their 2018 csr reports, from sports to food, from the environment to food waste. finally, walgreens' experience with boots ireland, which participates for the second year in "see change", an alliance of over one hundred organizations that work together, through the national stigma reduction partnership, to bring about positive changes in attitudes towards of people with mental health difficulties. stores participate in see change's “green ribbon” campaign, which provides customers with over 45,000 green ribbons to promote conversations and break down mental health stigma. for this partnership, boots ireland wins excellence in the workplace category at the chambers ireland 2018 csr awards. 3.7 environmental commitment – energy saving, emissions, waste and recycling to be truly responsible and gain the trust and loyalty of consumers and stakeholders, retailers must also preserve the environment around them. unlike the previous paragraphs, the analysis of the 2012 csr reports on environmental commitment, understood in its broadest sense, shows how companies are already particularly active with the various measures taken in the first decade of the 21st century. analysis of the 2012 reports shows that companies try to save energy through centralized management systems that automatically adjust heating, air conditioning and lighting according 52 to needs and monitor consumption, avoiding waste. another front on which the analyzed retailers are committed is the reduction of pollution due to the transport of goods and separate waste collection through the installation of recycling areas inside the stores. to understand better, let's see individually the carbon footprint of the retailers analyzed. at walmart, renewable energy projects provide 1.1 billion kilowatt hours (kwh) per year, or about 4% of the electricity for the company's buildings globally. the grid provides another 18%, for a total of 22% renewable electricity as of 2010. walmart has 180 renewable energy projects in operation or in development and continues to test solar energy, fuel cells, off-site wind projects and green energy. walmart focuses on helping suppliers identify and implement packaging solutions to create zero waste and achieve packaging neutrality, where it is recyclable, reusable or renewable. by developing a smaller, reusable package, the supplier is able to ship more products per truck. the super sandwich bale (ssb) program allows the recycling of cardboard, paper, aluminum, plastic bags and other items. items not suitable for ssb, including wooden, plastic and polystyrene pallets, are sent to return centers for reuse or recycling. from 2000 to 2012, energy consumption in kroger stores decreased by 31% thanks to the installation of led lights, motion sensors for switching on the lights and the use of "natural" light through a system of skylights. kroger aims at greater efficiency in transport by reducing the so-called "empty miles" and to eliminate excess waste by increasing recycling efforts. since 2009, waste has been reduced by 67.4%. since 2006, in an effort to clean up the community environments where walgreen stores operate, walgreens has partnered with imaginit technologies to bring solar power systems to two distribution centers and 100 stores. this greatly reduces the amount of electricity supplied by external sources. distribution centers and facilities in california produce 20 to 50 percent of their electricity from the solar power system. in 2010, walgreens recycled over 31 million kilograms of cardboard, which is equivalent to the weight of 2,909 school buses. if all of the shrinkage walgreens recycles were placed in one roll, it would span 30,770 kilometers more than three-quarters worldwide. the home depot collects and uses recycled materials extensively in its business. it sells energy star certified products and products that respect environmental sustainability, with the eco options brand. costco in 2007 created the corporate sustainability and energy group (cseg) to evaluate, develop, implement and report on its environmental management efforts. cseg's mission is to help costco-branded companies to operate in an environmentally and socially responsible and sustainable way, reduce the use of resources and the generation of company waste. some of the highlights and ongoing efforts of the cseg are as follows: 1) greenhouse gas reduction program. in 2008, costco completely discontinued the use of hydrochlorofluorocarbon refrigerant in refrigeration systems and air conditioning systems. during 2007, costco completes a basic inventory of greenhouse gas emissions that meets the standards set by the ghg corporate accounting and reporting standard. 2) sustainable construction and renewable energy. the leadership in energy and environmental design (leed) organization, the us energy efficiency and ecological footprint classification system of buildings, has a certification program that is nationally accepted as a benchmark for design and the construction of ecological buildings. in addition, the tons of waste that warehouses generate each week in the form of cardboard, plastic, unusable products and other materials, many of which once used are discarded, are now being refurbished into usable products, recycled into biofuels or compost, or used as feed. 4) high energy efficiency products and innovative packaging. packaging is also more environmentally sustainable. in collaboration with suppliers, it actively pursues opportunities to remove polyvinyl chloride (pvc) plastic from packaging and replace it with recycled or recyclable materials. likewise, changes in the design of innovative 53 packaging make it possible to increase the quantity of product on a pallet, resulting in a reduction in delivery trucks on the road. 5) commuting. costco encourages employees to carpool or vanpool whenever possible to reduce energy consumption and reduce emissions to the atmosphere. the analysis for the 2018 csr reports follows, for convenience, the same sequence just seen. walmart is the first retailer to announce a scientific goal to reduce greenhouse gases in line with the paris agreement. the goal is an 18% reduction by 2025 (compared to 2015 levels), through multiple initiatives. these include increasing the energy efficiency of buildings, with the goal of powering 50% of operations with renewable energy by 2025, improving the performance of refrigeration systems and maximizing fleet sustainability. as of 2017, it reduces emissions by 6.1% compared to 2015 levels. in addition, renewable sources provide approximately 28% of global electricity needs; this includes generating over 520 projects in eight countries, 18 us states and puerto rico. based on the pipeline of solar and wind projects, it plans to supply 35% of its electricity from renewable energy sources by 2020. in addition to direct operations, it aims to galvanize transformative action through the “gigaton” project, a global effort that invites suppliers to join walmart in its commitment to avoid one billion tons of emissions in collective value chains by 2030. launched in 2017, the “gigaton” project engages with suppliers to set goals and pursue initiatives to avoid emissions in any of the six areas where there are opportunities to do so: energy use, sustainable agriculture, waste, deforestation, packaging and product use. kroger uses the environmental protection agency (epa) waste management hierarchy to guide its work. the goal is to move waste management in the hierarchy as much as possible: adopt reduction, reuse and recycling before sending waste to landfill. tracking, synthesizing and analyzing waste management data is critical to making progress on zero waste goals. kroger has joined epa's nationally recognized “wastewise” program and uses their reporting tool to consistently measure and track progress over time. kroger focuses on improving energy efficiency in supermarkets with the goal of achieving electricity savings of 40% by 2020. in 2018, kroger received the "us epa energy star partner of the year" award for adopting a continuous energy management strategy across the organization's entire portfolio of buildings and plants. at the end of 2018, 818 stores are certified as energy star buildings. the current results are in line with the objectives, as, in 2018 alone, there was an electricity saving of 44.9%. this result saves over two billion kwh in stores. in 2018, kroger launches construction of the largest solar power plant ever built to date at its 5,000-square-foot paramount, california distribution center. when fully operational, the array can generate 4.28 million kwh of clean energy annually. collectively, kroger's solar and wind plants generate over 14.59 million kwh of renewable energy in 2018. in addition, it also implements two anaerobic digesters that process organic waste and wastewater and produce renewable biogas as a by-product. kroger makes significant progress towards the goal of zero food waste. in 2018, it conducts food waste analysis, using the world resources institute's food loss and waste protocol. thanks to dedicated collaborators, they have managed to reduce the overall production of such waste, greater diversion from landfills and greater recycling. walgreens invests over $ 115 million in energy efficiency programs, including projects in approximately 2,500 stores. walgreens boots alliance operations generate nearly 17,000 kwh of electricity through solar panels during fiscal 2018, primarily from solar plants in 240 stores and distribution centers. walgreens also involves employees, customers and suppliers in reducing energy. one example is walgreens boots alliance's innovative "energycare" program. the program is designed to educate employees about energy waste and encourage an energy-conscious culture. the program helps reduce emissions by encouraging energy targets, investing and implementing energy-efficient technologies and proactive energy supply management, and developing 54 renewable energy standards. walgreens continues to actively pursue the consumer goods forum's commitment to the second refrigeration resolution to phase out gases with high global warming potential, allowing all new refrigeration plants to use only natural or ultra-low impact refrigerants by the end of 2025. the home depot uses the ghg corporate accounting and reporting standard protocol, which is adopted by more than 90% of fortune global 500 companies, to calculate tons of greenhouse gas emissions and efforts to reduce them. continuously review and refine emissions measurements to reflect business changes and improvements in data collection and reporting. receives an a rating from carbon disclosure project (cdp), reflecting the high level of action on climate change mitigation, adaptation and transparency in 2017. cdp also names the home depot as an industry leader (walmart, which is the retailer par excellence, has a score of a). thd is committed to reducing carbon dioxide emissions by 2.1% per year to achieve a reduction of 39.9% by 2030 and a reduction of 50.4% by 2035. costco's business delivery fleet extends its internal initiative called "truck of the future" aimed at maximizing efficiency in growing delivery fleets. in 2018, costco successfully field tested a customized vehicle with “penske truck leasing”, which improves payload capacity while reducing weight. costco corporate delivery centers implement procedures to use plug-in ground power, connecting to the grid to allow refrigerated trucks to maintain temperature during loading and storage. this eliminates the previous practice of running the reefer diesel engine, thereby saving fuel and eliminating carbon emissions of more than 70% for every truck using power on the ground. since 2008, costco has collaborated with apana to implement an intelligent water management system. costco continues to promote operational efficiency by using this program to reduce overall operating costs through the elimination of water waste and the use of sewers. ultimately, this reduces the associated energy and maintenance costs. using the "apana" program, costco is able to monitor water use in real time, detect inefficient consumption and guide operators to quickly identify and reduce waste. water management systems are currently installed in all warehouses in north america and japan. costco plans to expand these systems to australia, asia and europe. costco also uses waste to generate energy. costco currently has 46 locations in the united states that send waste to a waste-to-energy facility. this program represents $ 43.7 million of post-recycled waste that generates 12,011,368 kwh of renewable energy, enough to power 12,534 homes for one month. much organic waste (inedible food waste) is now recycled into usable products, such as organic fertilizers, compost, pet food, biofuels and electricity. additionally, costco is able to recycle $ 1.7 million worth of scrap metal, which has returned to local commodity markets to be transformed into something new. 4. conclusions the approach to corporate social responsibility has changed considerably over time. today more than ever, many organizations realize that in order to legitimize their work in the market it is no longer enough to ensure a return only in terms of performance. consumers and investors are increasingly informed and want companies to take responsibility for the pressure exerted on the planet and its population. on the other hand, the growing technological and digital innovation that has characterized the last few years, especially environmental, green and clean technologies, allow a growing diffusion of sustainable development worldwide. taking a voluntary path towards corporate social responsibility, also considering the growing increase in the rules drawn up to protect the environment and workers, can allow companies to be ready to face future regulatory tightening and obtain a strong competitive advantage. the sample analyzed, composed of the 5 main us retailers allows to define what are the csr actions implemented by some of the largest companies of retail trade in the world. the 55 commitment on the social and environmental front of companies considered is aimed at producing long-term collective benefits and is not reduced to formal and facade interventions adopted in the short term mainly for opportunistic purposes. sometimes companies consider sustainability as a goal to be achieved, but from the results of the study, analyzing the different time period 2012-2018, it can be seen that it is not an achievable goal, but a prolonged path, during which the company and its stakeholders try to improve each other continuously. the study shows the main csr policies adopted from the us leaders in the retail sector, and while sometimes results of these policies adoption is tangible, in the majority of times, there is a difficulty in measuring results, since typically the return generated by csr policies is reputational and therefore intangible. hence, it would be relevant to develop a complete csr strategy also to evaluate the perception of its customers. all companies, in interfacing with their interlocutors, adopt behaviors that lead stakeholders to formulate a value judgment. it is dangerous for a company to believe that its actions do not have an impact on its reputation. while in the past, to build trust with consumers it was enough to provide quality products, now companies must consider the aspirations of their customers, since issues such as authenticity, community building and data security have become fundamental pillars of trust. facing these challenges would ensure consumer trust and therefore the development of a csr strategy that 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(2006), “responsabilità sociale d'impresa nelle filiere internazionali della grande distribuzione”, symphonya: emerging issues in management, n. 1, pp. 91107. 27. musso f., (2021), “decision-making for international strategies: perspectives for research”, international journal of applied behavioral economics (ijabe), vol. 10(2), pp. v-xii. 28. musso f. (2021), strategie di internazionalizzazione e sviluppo dei mercati esteri, wolters kluwer, milano. 29. musso f. (2004), le relazioni con i mercati esteri delle imprese produttrici di mobili. sistemi distrettuali e canali distributivi, edizioni goliardiche, trieste. 2. methodology 2.1 sample and data analysis 3. analysis of the 2012-2018 csr report 3.2 company internal organization 3.2 company family, social and stakeholder context 3.3 products and assortments relations with suppliers and degree of control 3.4 products and assortments – consumer protection 3.5 products and assortments – communications policies 3.6 social commitment – charities, community services and educational initiatives 3.7 environmental commitment – energy saving, emissions, waste and recycling 4. conclusions references microsoft word 4 (20-18) akinadewo.docx 45 disputations of tax audit assessments on internally generated revenue (igr) sources in lagos state, nigeria: experts’ perception israel s. akinadewo obafemi awolowo university, ile-ife, osun state, nigeria received: august 3, 2020 accepted: october 7, 2020 online published: october 15, 2020 abstract the study appraised the most disputed by the taxpayers, of the sources of the internally generated revenue (igr) in lagos state, nigeria, after the tax audit exercise. primary data through the administration of structured questionnaire on respondents was adopted. the sample size was 301, using krejcie & morgan (1970) formula. personal income tax (pit), withholding tax (wht), capital gains tax (cgt), stamp duties (sd), pools, betting, lotteries, gaming, and casino tax (pblgct), and road tax (rt), were appraised by the tax experts. the study analysed data using descriptive statistical techniques like percentages and tables. the findings revealed that road tax (67.8%), capital gains tax (67.5%), personal income tax (65.7%), and withholding tax (61.8%) are the most disputed sources of igr by the taxpayers. the study recommended for the re-evaluation of tax audit process to bridge the gap of disagreement between the taxpayers and the tax auditors/tax authorities for a more efficient tax administration. keywords: internally generated revenue; tax audit; tax compliance; tax evasion; tax experts 1. introduction globally, nations finance their constitutional responsibilities from diverse sources. these include revenue from natural resources, and taxes, among others. in nigeria, the sources of revenue include the proceeds from the sale of petroleum products, income from taxes, income from agricultural products, and public loans. similarly, the other lower levels of government in nigeria – states and local councils, also have exclusive revenue line constitutionally approved. accordingly, the states in nigeria, including lagos state, improve their revenue from the internally generated revenue (igr) sources like personal income tax, direct tax, withholding tax from individuals and enterprises, stamp duties, road taxes, and business premises registration, among other sources (omodero, 2018, citing schedule ii of nigerian 1999 constitution). thus, the igr of each state is expected to contribute tremendously to the shared revenue for the federation account. scholars have however, opined that the inadequacy of international journal of economic behavior, vol. 10, n. 1, 2020, 45-52 46 revenue generated in emerging economies like nigeria posed a serious challenge to the efficient delivery of public good and services as well as financial stability (omodero, 2018; okeke, chidi & eme, 2017; asimiyu & kizito, 2014). in the recent time, the dwindling revenue of government from the federation account has led to the inward-looking steps of the state government to improve their igr, which is majorly from tax. this, asimiyu & kizito (2014) argued that the state governments in nigeria now face more challenges in terms of struggling to be less dependent on the federal government for financial resources. this has resulted in the formulation of strategies by the state governments in improving their revenue base (asimiyu & kizito, 2014). despite this strategy to improve the igr, the low level of tax compliance by the taxpayers have become a concern to the government and other stakeholders in policy making. the effect of revenue from tax may not have been positively felt due to tax evasion (enofe, embele & obazee, 2019). studies have argued that tax evasion is among the societal issues working against the economic development of emerging economies like nigeria (okoye & ezejiofor, 2014; ogbueghu, 2016). to reduce the incidences of tax evasion and also improve the igr, the states in nigeria embark on tax audit to ensure compliance to tax policies. tax audit, which could take diverse modes like desk audit, field audit and back duty audit has the special role to examine the records of the taxpayers for accuracy and authenticity (enofe, embele & obazee, 2019). in lagos state, the exercise has led to increased revenue as well as additional taxpayers brought into the tax net (lirs, 2019). the tax audit exercise, especially the field audit has not been smooth sailing without resistance from the taxpayers through objections to post audit assessments. consequent to this, tax audit process usually leads to disputes between the taxpayers and the tax authorities before reconciliation and eventual payment of the reconciled assessments (enofe, embele & obazee, 2019, citing nwaiwu & mcgregor, 2018, oyedokun, 2016). in making the assessed figures clearer and more reconcilable among the parties in lagos state, the assessments are mostly segregated into the respective revenue sources and the amount involved. it is in line with this that this study seeks to analyse the opinion of tax experts as to the revenue areas that are most disputed by the taxpayers. 2. literature review 2.1 review of tax audit process tax audit is a periodic exercise of government to ascertain the veracity of the tax documents filed by the taxpayers. in emerging economies like nigeria, where data of eligible taxpayers may not be effectively ascertained, tax audit could also expose the tax evaders that have not been captured in the tax net. this, mebratu (2016) opined that tax audit plays a vital role in improving tax administration and increasing taxpayers’ compliance to tax policies. in the argument of akinadewo, akinkoye, oyedokun & asaolu (2019), there have been reports of tax evasion despite the engagement of tax auditors over the years. enofe, embele & obazee (2019) however, believed that due to the high level of tax evasion, the tax audit exercise, which include desk audit, field audit and a back duty is an essential mechanism for authenticating the information contained in taxpayers tax information. thus, tax audit exposes any underreporting of income, shortchanging of government on tax remitted, and any false information for tax credit. this line of argument is in agreement with the submission of tjondro, soegihono, fernando & wanandi (2019) that taxpayers’ perceptions of tax audits affect the level of compliance. in states in nigeria, the field audit involves pre-field assignment, field work, and post field reports. the pre-field is majorly to identify eligible taxpayers that might not have had any 47 record with the tax authorities. the knowledge of the physical addresses including those of existing taxpayers enables the authorities to effectively communicate on the planned tax audit exercise. the contents of the letter will include coverage years, expectations from the taxpayers, the list of the documents to be made available, and the possible number of tax experts involved in the exercise. the field work involves the in-depth examination of taxpayers’ record with the intention of either substantiating the reliability of the records presented and or identifying with documentary evidence, the unreported income. the unreported income will then be subjected to the relevant tax rules for additional liability inclusive of interest and penalties through assessments. the taxpayers however, are at liberty and within a time frame, to object to the assessments formally through the presentation of documentary evidence. the success of the objection, which could reduce the tax liability on the assessment however, is done line by line, recognising the respective sources of revenue. thus, the taxpayer may agree to the additional tax liability on pay as you earn (paye), but disagree on that of withholding tax (wht) and vice versa. the nigerian tax authorities often adopt civility in the approach relating to the taxpayers with the primary goal of bringing in more revenue as against prosecution (enofe, embele & obazee, 2019). according to these scholars, it is more difficult, time-consuming and costly to prove an act of tax evasion. 2.2 practical investigating process of individual sources of internally generated revenue of states during field audit the igr sources, which include the personal income tax, withholding tax, pools and betting, and capital gains tax, among others follow the same investigative technique but with different and diverse evidential documents. the personal income tax and direct taxes of individuals are payable to the states where they are resident (zubairu, 2014). the personal income tax (amendment) act, 2011 allows the imposition of tax by the state on the income of individuals and families, amount due to a trustee or estate, aside from the persons employed by the armed forces, the nigerian police force, officers of the nigerian foreign service, residents of the federal capital territory, abuja, and persons resident outside nigeria, that derives income or profit from nigeria (olakanmi, 2012, 2015). in investigating the tax liabilities on personal income tax and direct tax, documents like bank statements and personal assets of the taxpayers will be examined and evaluated. if the taxpayer is an employee of an organisation, then the responsibility for accurate deduction and remittance rests with the employer. the tax auditor will examine the payroll and any evidence of benefit in kind. benefit in kind involves the use of company’s properties like official vehicles which the benefits could be attributable to as personal gains to the employee. taxpayers have also been objecting to any additional tax liabilities on the benefit in kind because it is primarily contentious and mostly subjective. the audit procedure includes the scrutiny of organisation’s bank statements for relevant evidence of the net emolument paid to the employee. the withholding tax on individuals and enterprises is another revenue source for state governments. this is treated as advance tax for the taxpayers and deductible from the total tax liabilities in each of the assessment years. in affirming the completeness and the accuracy of the payments remitted, the tax auditor will obtain the list and other necessary information of individuals/enterprises that are suppliers of goods and service providers to the organisation being audited. the rates of the withholding tax are dividend, interest and rates (10%); directors’ fees (10%); hire of equipment (10%); consultancy, technical, commission, and service fees (5%); management fees (5%); construction and building, but excluding the survey design and deliveries (5%); and contracts, but not related to any income in the ordinary course of business (5%) – (pwc tax, 2018; lirs, 2019). consequently, any under remittances could 48 be detected through the analytical inspection of contract agreement with suppliers, suppliers’ invoices, payments to third parties from bank accounts and other financial documents, suppliers’ individual ledger, and evidence of remittances on behalf of the suppliers to the government. the other revenue sources like the pools, betting and lottery; and road taxes, among others are areas where field audit could also be used to improve the revenue of government through the detection of tax evasion. thus, lagos state lotteries board was established by the government for effective generation of the expected revenue and efficient tax administration (akinadewo, akinkoye, oyedokun & asaolu, 2019). table 1 – sample of state assessment attachment to the letter to taxpayer after the tax audit exercise abcidon nigeria limited summary of tax liabilities for the year ended 31st december, 2019 actual paye (schedule 1) n 3,000,000.00 amount paid (schedule 2) n (1,250,000.00) outstanding paye n 1,750,000.00 withholding tax (schedule 3) n 4,250,000.00 amount paid (schedule 4) n (2,000,000.00) outstanding withholding tax n ,2,250,000.00 business premises (schedule 5) n 5,0000.00 amount paid n (0.00) outstanding business premises n5,000.00 sub total n 4,005,000.00 add: penalty 400,500.00 add: interest 841,050.00 total outstanding n 5,246,550.00 source: author’s template (2020) 2.3 theoretical framework allingham & sandmo (1972) did a theoretical analysis of income tax evasion. the scholars theorised that tax declaration decision is that of an uncertainty. the failure to report full income to the tax authorities does not automatically provoke a reaction in form of a penalty (allingham & sandmo, 1972). the scholars, however, opined that if an individual knows that once he is discovered his whole past will be investigated, his behaviour is straightforward, and he will act exactly as he should in declaring everything. this theory is connected to this study through the behavioural actions of the taxpayer when tax audit is conducted. 2.4 empirical review studies have been conducted on issues relating to general tax, internally generated revenue, tax audit and disputes thereof. enofe, embele & obazee (2019) determined the effect of tax audit and investigation on tax evasion in bayelsa state, nigeria. survey research design was adopted 49 for the study with the administration of structured questionnaire to the staff of the state revenue generating agencies. the analysis of data and the testing of hypotheses were achieved through ordered logistic regression technique. the findings showed that tax audit through desk audit, field audit, and back-duty audit has a significant negative influence on tax evasion. tjondro, soegihono, fernando & wanandi (2019) examined the different perception of voluntary tax compliance between three generations – millennials, x, and baby boomers. the study adopted a survey design technique to four major cities in indonesia. the study used custom factorial anova with spss to analyse data. the results revealed that millennials and x had different perceptions of tax audits regarding audit probability, audit procedures, and auditors’ behavior, compare to baba boomers. asimiyu and kizito (2014) examined the growth rate of state governments’ igr in nigeria (1999-2011) using descriptive statistics to analyse data. the findings revealed that the igr growth rate of the state was low at 20.1% and it is higher than those of the rural states than in the urban states. okeke, chidi & eme (2017) examined the ways to enhance igr in states in nigeria. the study used secondary data and were analysed through descriptive statistics. the results revealed that igr constitutes a small proportion of the finance of the states. the findings also showed that the current revenue system is fraught with problems. the study recommended for the establishment of a dependable data base in eliminating revenue leakages through automation and tracking system. nkechi & onuora (2018) examined the relationship between igr and infrastructural development of the south eastern states in nigeria. the study employed descriptive statistics, correlation and linear multiple regression to analyse data. the findings revealed that there is a significant relationship between the variables. omodero, ekwe & ihendinihu (2018) investigated the impact of igr on economic development of nigeria. the study used ex-post facto research design with time series data (1981-2016). multiple regression and t-test were applied to test the hypotheses. the findings revealed a significant positive relationship the variables. the study recommended that government officials with corruption history should not be allowed to continue in the handling of revenue generation responsibilities. despite the reviewed literatures, there is still no feasible study to identify the areas of the internally generated revenue that taxpayers mostly dispute, which this study examined. 3. methodology this study employed primary data. survey research design through the administration of structured questionnaire on tax experts and tax officials in lagos state, nigeria, was adopted. the population consist of 1,243 registered tax consultants, and 144 tax officials. krejcie & morgan (1970) formula, was used to determine the sample size of 301. the sample was selected with judgemental sampling technique based on ten (10) years tax consultancy experience of the respondents. descriptive statistics were used to analyze data. 4. data presentation, analysis and discussion of findings the study analysed the opinion of tax experts on the most disputed of the sources of the igr after the tax audit exercise as shown in table 2. 50 table 2 – the most disputed of the internally generated revenue (igr) sources igr sources range 0-10 (%) range 11-20 (%) range 21-30 (%) range 31-40 (%) range 41-50 (%) range 51+ (%) cumm. freq. (%) decision based on range 41 or above personal income tax (pit) – freq. (%) 5 (1.7%) 16 (5.3%) 36 (12.0%) 46 (15.3%) 85 (28.2%) 113 (37.5%) 301 (100%) 198 (65.7%) withholding tax (wht) – freq./(%) 12 (4.0%) 23 (7.6%) 22 (7.3%) 58 (19.3%) 111 (36.9%) 75 (24.9%) 301 (100%) 186 (61.8%) capital gains tax (cgt) – freq./(%) 4 (1.3%) 25 (8.3%) 31 (10.3% 38 (12.6%) 104 (34.6%) 99 (32.9%) 301 (100%) 203 (67.5% stamp duties (sd) – freq./(%) 6 (2.0%) 31 (10.3% 36 (12.0%) 57 (18.9% 109 (36.2%) 62 (20.6% 301 (100%) 171 (56.8%) pools betting, lotteries, gaming, casino tax (pblgct) – freq./ (%) 6 (2.0%) 31 (10.3%) 36 (12.0%) 56 (18.6%) 109 (36.2%) 62 (20.6%) 300 (99.7%) 171 (56.8%) road tax (rt)– freq./(%) 7 (2.3%) 20 (6.6%) 15 (5.0%) 55 (18.3%) 74 (24.6%) 130 (43.2%) 301 (43.2% 204 (67.8%) source: author’s field work (2020) table 2 explains the responses from the tax experts, on the level of disagreement by the taxpayers with the figures assessed by tax authorities after the conclusion of tax audit. regarding pit, 5 respondents (1.7%) believed that taxpayers dispute from 0-10%; 16 respondents (5.3%) opinionated that taxpayers contest from 11%-20%; 36 respondents (12.0%) believed that taxpayers contest from 21%-30%; 46 respondents (15.3%) were of the opinion that taxpayers normally disagree from 31%-40% of the assessed figures; 85 respondents (28.2%) opinionated that taxpayers dispute between 41-50% of the figure; and 113 respondents (37.5%) opinionated that taxpayers disagree between 51% or above with the assessed figures. regarding withholding tax, 12 respondents (4.0%) believed that taxpayers disagree on 0%10% of the assessed figure; 23 respondents (7.6%) opinionated that taxpayers dispute on 11%20%; 22 respondents (7.3%) believed that taxpayers dispute on 21%-30%; 58 respondents (19.3%) of the total respondents opinionated that taxpayers dispute on 31%-40%; 111 respondents (36.9%) believed that taxpayers dispute on 41%-50%; and 75 respondents (24.9%) opinionated that taxpayers disagree on 51% or above of the wht assessment after the tax audit exercise. table 2 also shows that 4 respondents (1.3%) opinionated that taxpayers dispute between 0%-10% of the capital gains tax assessed on them after tax audit exercise; 25 respondents (8.3%), believed that taxpayers dispute between 11%-20%; 31 respondents (10.3%) believed that taxpayers dispute between 21%-30%; 38 respondents (12.6%) opinionated that taxpayers dispute between 31%-40%; 104 respondents (34.6%) believed that taxpayers dispute between 41%-50%; and 99 respondents (32.9%) opinionated that taxpayers dispute between 51% or above on the value assessed on them on cgt. regarding pools betting, lotteries gaming and casino taxes, 6 respondents (2.0%), believed that taxpayers dispute between 0%-10% of the amount assessed on pblgct; 31 respondents (10.3%) opinionated that taxpayers disagree between 11%-20%; 36 respondents (12.0%) opinionated that taxpayers disagree between 21%-30%; 56 respondents (18.6%) opinionated 51 that taxpayers disagree between 31%-40%; 109 respondents (36.2%) were of the opinion that taxpayers dispute on the figure assessed between 41%-50%; and 62 respondents (20.6%) believed that the taxpayers disagree between 51% or above. regarding stamp duty, 6 respondents (2.0%) opinionated that taxpayers dispute between 0%-10%; 31 respondents (10.3%) believed that taxpayers disagree between 11%-20%; 36 respondents (12.0%) were of the opinion that taxpayers disagree on the value assessed between the range of 21%-30%; 57 respondents (18.9%) believed that taxpayers disagree between 31%40%; 109 respondents (36.2%) said that taxpayers dispute between 41%-50%; and 62 respondents (20.6%) believed that taxpayers disagree between 51% or above of the total amount assessed on them. table 2 also indicates 7 respondents (2.3%) believed that taxpayers dispute between 0%-10% on road tax assessments; 20 respondents (6.6%) believed that taxpayers disagree between 11%-20%; 15 respondents (5.0%) were of the opinion that taxpayers disagree on the value assessed between the range of 21%-30%; 55 respondents (18.3%) opinionated that taxpayers disagree between 31%-40%; 74 respondents (24.6%) said that taxpayers dispute between 41%-50%; and 130 respondents (43.2%) believed that taxpayers disagree between 51% or above of the total amount assessed on them on road tax. consequent on these results and the identification of taxpayers’ objections from range 41 or above, experts believed that road tax (67.8%), is the most disputed of the sources of igr in lagos state, nigeria. this may not be unconnected to the inability to keep effective data base of vehicles plying roads. this is slightly followed by capital gains tax (67.5%). the cgt is believed to be a difficult igr source to effectively identified due to the lack of adequate information on such transactions. it is also believed that many of such sale occur daily between sellers and buyers without any active and accurate relevant information process dissemination to the appropriate tax authorities. the experts believed that pit (65.7%) was the next most disputed after the cgt, and wht followed with a score of 61.8%. stamp duty (56.8%) and pblgct (56.8%), were the least among the most disputed of the sources of igr. conclusion and recommendations the state government embark on tax audit for effective tax compliance by the taxpayers for the improvement of its igr. the tax audit, which include field audit, desk audit and back-duty audit have been established as a policy for revenue increase and tax evasion reduction both in the developed and emerging economies, especially on the second-tier government in nigeria (enofe, embele & obazee, 2019; mebrutu, 2016). in nigeria, the tax audit process however, has been generating disputes between the taxpayers and the authorities, especially on post field audit assessment on sources of states’ igr. this study therefore, appraised the sources of igr that are most disputed by the taxpayers. the findings revealed that road tax is the most disputed. the results also showed that capital gains tax, personal income tax and withholding tax in that order, are the next most disputed by the taxpayers. this study contributes to the body of knowledge through the empirical identification of the igr sources that create disputes between the government and the taxpayers in lagos state, nigeria, which no available study has been able to identify. this is expected to assist the government to reduce the timeframe between the conclusion of tax audit exercise and objection process. this will expectedly resolve tax matters early for timely payment of the assessed tax by the taxpayers. in view of these findings, the tax authorities should re-examine the tax audit process with the intention to ensure areas of disputes with the taxpayers are reduced. the tax authorities should also improve on the tax awareness for taxpayers to effectively educate them of the economic benefits of tax compliance and the consequences of tax evasion. 52 references 1. akinadewo, i. s., akinkoye, e. y., oyedokun, g. e. & asaolu, t. o. 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(2013), strategie e competitività internazionale delle piccole e medie imprese. un'analisi sul settore della meccanica, cedam, padova. 159 “insert coin to play”: the evolution of communication dynamics between brands and video games moreno pasotti carlo bo university of urbino, italy guido capanna piscè carlo bo university of urbino, italy received: august 5, 2022 accepted: october 4, 2022 online published: october 31, 2022 abstract as part of the dynamics of marketing and communication, the practice of celebrity endorsement has seen an increasingly prolific development over the years alongside a new form of brand communication oriented to enhance brand/product perception through endorsements of authoritative celebrities. in more recent times, the advent of the video game medium, and in particular video games, has led brands to develop new promotional and communication methods from scratch or borrow from other mediums. one that is certainly evocative among those derived from other media fields is product placement. among the practices developed from scratch, especially in recent years, it is possible to find the use of characters or elements from video games within brand communications. this study was developed to understand this new communication mode adopted in specific contexts by brands, the effects it has on the target audience and the economic and image returns. the contributions made to the matter by this study concern that part of marketing that is focused on the target audience's perception of the brand to develop a connection, a feeling and to boost sales. moreover, being one of the first studies developed with qualitative methodology, it allows to observe a deeper level of perception from the target audience’s side. the study involved a sample of seven people from various parts of italy, interviewed in a focus group to show how positive and relevant the impact of this form of communication is to the target audience and their impulse to purchase, in addition to the high level of brand awareness this methodology brings. furthermore, during the focus group, it emerged that this practice could be a strong bridge between brands and gamers, by developing a solid feeling of inclusion in the target audience. international journal of economic behavior, vol. 12 n. 1, 2022, 159-175 https://doi.org/ 10.14276/2285-0430.3515 160 keywords: video games and communication; video games endorser; video players and brand; video game advertising. 1. introduction the use of endorsers in the world of advertising is an established practice that has seen a steady increase over the years. this contribution is developed to investigate how much brands, which are not endemic to the world of gaming, use endorsement practices that exploit video game characters or elements for promotional purposes. the intention is to analyse whether the use of video game characters and elements in brand advertisements is effective in reaching the target audience of video gamers, what level of engagement this practice is able to generate, and whether it can develop positive sentiment and purchase intent towards the brand and its products/services. the questions which guided this research are the following: rq1. is the use of video game characters and elements an effective advertising method for brands, which are not part of the video game world? rq2. what psychosocial effects does this type of communication have on the target audience? the main objectives analyzed concern: ˗ to investigate the possibilities and effectiveness for brands of this communication methodology. ˗ the involvement, the feeling developed and the perception of this methodology by the target audience. ˗ the observation of the psychological and social effects that this type of communication manages to develop. the importance of this phenomenon is directly related to the growth capacity of the video game market, thanks to an ever-growing turnover, in 2016, the turnover was around $99 billion, and in 2021 it almost reached 180 billion (newzoo, 2016 – 2021a) and a large target audience that has grown from 235 million to 489.5 million between 2015 and 2021 (newzoo, 2017 2022). this field has become a fertile ground for brands, which are acquiring new places to promote their image, values, and voice. to fully understand the effectiveness of this practice, a focus group was conducted with a sample of seven people chosen according to the latest research on the gamers population (newzoo, 2021b). in this way, it was possible to investigate from a qualitative perspective the phenomenon. previous studies show that using fictional spokesperson characters and video games characters can lead to results which are equivalent to those of real celebrities if specific key dynamics are observed: consistency between brand and character, relationship with the target audience and notoriety of the spokesperson (chuchu & maziriri, 2020; shelton & chiliya, 2014). in fact, the quantitative data collected and analysed by chuchu and maziriri (2020) and those collected by shelton and chiliya (2014), highlight a positive response of the target group towards the use of this communicative 161 methodology, showing, regarding the samples they analysed, the development of a purchase intent thanks to this practice (chuchu &maziriri, 2020; shelton & chiliya, 2014). this research aims to fill a gap with previous studies, in fact, the difference between this research and previous ones is its qualitative format and the reference sample that tries to reflect the target audience as closely as possible. thanks to this choice, it was possible to observe the emotional impact told directly by the target audience and bring to light possible improvement methods to increase the effectiveness of this video game-related communication practice. 2. literature review the earliest examples date back to the 1980s. some brands tried using game characters to promote their products and image to a newly emerging audience: video gamers. there are mainly two prominent phenomena related to this practice: in 1983 a company called 7-up made a commercial using the hungry yellow ball from the video game pac-man “spot 7up soft drink – 1983” as a testimonial (tutto spot 80, 2020); ralston cereal, with its 1989 “nintendo cereal system” commercial (loch snes monster, 2020). today, there are many examples of non-endemic brands that have started using video game characters or elements as endorsers (louis vuitton, ducati, coca-cola, etc.). data collected by various research platforms support this phenomenon. according to the “digital 2021” report by we are social, in the first half of 2021, 85% of the surveyed people between the ages of 16 and 64, who had internet access, defined themselves as gamers (starri, 2021). due to the growth and spread of this phenomenon, it is not unusual to find numerous streamers sponsoring gaming and non-gaming-related products during live gaming sessions. to increase the interest of brands, we find a high level of acceptance for this type of advertising. on twitch, 76% of users believe that brand support for streamers in exchange for advertising is positive, as long as there is consistency between the brand and the content created (twitch, 2021). another phenomenon that has favoured the rapid rise of video games is esports, looking at data from the newzoo platform, there is an increase in spectators of more than 100% from 2015 to 2021, from 235 million to 465 million (newzoo, 2017; 2022). today, this market is worth overall more than $180 billion (newzoo, 2021a). as this reality establishes itself, another form of collaboration between video games and brands seems to be emerging, involving the use of “game character spokespersons” instead of real celebrities as spokespersons. this is also supported by quantitative data from shelton & chiliya's studies (2014) on the ability of even non-endemic brands to generate purchase intent among observers by using video game characters in their communication. in fact, according to their study, the use of video game characters in brand communication "can be effective at positively influencing consumers purchase intentions." (shelton & chiliya, 2014). this is achieved through three fundamental elements: the attractiveness perceived by people towards the video game character used; the trustworthiness that the video game character used evokes in people; the expertise that people attribute to the video game character used, i.e., the suitability of the testimonial chosen to sponsor a particular product. 162 their studies show how these three elements, when present and well-integrated, are able to influence people and persuade them to purchase. in addition: “this result is supported by the research which was previously done by pornpitakpan (2003b) and ohanian (1991); which found that the perceived attractiveness, trustworthiness and expertise of the brand endorser has a positive relationship with the purchase intentions of consumers.” (pornpitakpan,2003; ohanian, 1991; mentioned in shelton e chiliya, 2014). these data also find further support in the quantitative research by chuchu and maziriri (2020) regarding the use of imaginary spokespersons by brands: “the study found that consumers are in favor of spokes-characters and advertisements that use spokes-characters. moreover, the researchers concluded that only a spokes-character’s attractiveness and expertise influence attitudes toward the advertisement and a spokes-character’s trust influences attitudes toward the brand. in addition, the study found that individually, both attitude variables have a positive effect on purchase.” (chuchu & maziriri, 2020). the quantitative data from this research give further evidence of the potential of using this practice by brands. these, in fact, highlight the effectiveness of using fictional characters to develop a purchase intent in the target audience, as long as, as also noted by shelton and chiliya (2014), there are certain elements present: people's perceived attraction to the video game character used; the expertise that people attribute to the video game character selected. the growth of this phenomenon also indicates a change in the social perception of the video game medium, which is no longer seen as mere harmful entertainment, but as a functional element in various clinical and social contexts (pallavicini and pepe, 2020). moreover, as recently stated by the “gamers in the age of streaming” research conducted by samsung ads’ (2021), “advertisers must adjust their strategies and look for innovative solutions to reach gamers in and out of the gaming console environment.”, showing the need for brands to find new ways to communicate effectively with the gamer population. 3. data and method research on this topic is scarce and almost entirely quantitative, leading to a general and cursory knowledge of the phenomenon without being able to generate data to explain in depth the emotional and perceptual effects on the target audience. in fact, as observed in the previous paragraph, previous research shows the ability of this communicative model to increase purchase intent due to the presence of certain characteristics without, however, considering what psychological components develop in the consumer of this type of advertising. shelton and chiliya (2014), in fact, speak about variables that, when added together, lead to the increase of a single factor, purchase intention, without analysing in their studies the psychological perception of individuals. similarly, chuchu and maziriri 163 (2020) focus their studies on understanding the characteristics of “spokes characters” that drive people to increase their purchases from a brand. in these studies, the psychological movement that leads to the creation of a bond of value between brand and observer, the positive effects in terms of perception towards the brand and the psycho-social effects that this practice brings were never analyzed. today, however, it is becoming more and more crucial for brands to put the consumer at the center; this is possible by providing valuable content that enables identification and develops a strong emotional impact in line with the feeling of its target audience. the qualitative method was chosen to investigate the phenomenon, a route which was not taken in consideration in the previous research. this made it possible to understand the target audience's reactions to this practice. secondly, it was possible to investigate consumer sentiment towards brands that use this communication model. to comprehend the emotional effect and effectiveness on the target audience, the development of a focus group was needed to encourage discussion and to develop a discourse on the most relevant topics. this was done to collect evidence and points of view regarding emotional involvement, perception, ability to generate a feeling towards the brand and effectiveness in creating awareness towards the target audience. in order to promote greater homogeneity and emotional openness, a sample of seven people was built. the discussion developed in the focus group followed an informal line with friendly and relaxed tones. in fact, as pointed out by cortini (2005): “mini groups, consisting of four to seven participants, are described in the literature as having a good degree of internal homogeneity that facilitates (...) in terms of emotional openness of the participants. despite this, the low numbers, (...) may make participants feel more pressure on themselves (...). in such circumstances, an informal style of moderation helps to ease this weight and keep participants from feeling under scrutiny.” another relevant point for defining the number of participants and the modalities of its execution concerns the possible problems encountered by the construction of a” full group” (cortini, 2005). this type of group, according to cortini, runs the risk of creating problems such as inhomogeneity, dispersion, background noise and not allowing a complete and involved interaction of all participants. in addition to the main topics of interest, possible ways to increase engagement with the target audience of this type of communication and the ability to generate social inclusion have emerged. due to a lack of funds and time, the focus group was unique. the sample was defined following an in-depth analysis of the gamer population, which led to interviewing a group of seven individuals between 19 and 34 years old of different nationalities, all residing in italy in different parts of the peninsula, three were women, and four were men. four of them obtained a high school education diploma, and the remaining three had a bachelor’s degree. the sample included six regular gamers who owned between 2 and 4 gaming consoles and spent more than 10 hours per week playing video games. one of the six gamers instead, considered himself a casual gamer: he spent less than 5 hours per week playing video games, rarely followed esports, and only owned two or fewer consoles. the research took place between november 2021 and january 2022, instead, the focus group took place on 12 december 2021 and lasted approximately 2 hours. the discussion and 164 starting questions were elaborated beforehand, basing their focus on the visual samples which were going to be shown to interviewees. the aim of the questions was to comprehend the psychological and emotional dynamics developed in the target audience by the chosen visual specimens; the main ones were related to: ˗ the overall perception of the ads, videos and images examined. ˗ emotional and psychological responses of subjects towards the specimens shown. ˗ relevance, interest developed, perceived value and pertinence noted by respondents. the following table shows the first letters of the respondents with their demographic characteristics to provide a more complete picture of the statements in the results section. table 1 – reference letter of each participant and related demographic characteristics name years gender level of education g. 19 m high school education i. 22 f bachelor's degree d. 24 m bachelor's degree a. 26 m bachelor's degree l. 29 f high school education f. 31 m high school education c. 34 f high school education during the focus group, several ads and videos were shown by non-endemic brands that use video game characters or elements to promote themselves. among the ads shown it is possible to find the ones made by: coca-cola, louis vuitton, ducati, un, j-gel and oneplus. 4. results 4.1 effectiveness, involvement, and perception during the research, there were several confirmations of the effectiveness of this format, on one side the ability to create interest in the brand and on the other, the purchase intent. among the first ads shown, we can notice the one used by oneplus to promote the north killer series of phones (oneplus, 2021). to get the most out of the features of their phones, which fit well with the target group of gamers, the company created some sponsorships on its social channels in september 2021, combining a discount campaign with the game magic the gathering. 165 figure 1 – ad created by oneplus in collaboration with magic the gathering. in this ad, oneplus has chosen to use a reference to a game that is very well known worldwide. in the image, is possible to see how the phone is placed inside the reproduction of one of the game's cards, creating a direct connection in players' minds between smartphones and magic the gathering. the connection was immediately grasped by 6 out of 7 participants, who expressed a high interest in the brand strategy. the work of oneplus was then deepened by the respondents, who noticed some aspects of a specific game element. f. “it is not that they made a random artefact, they put (...) things that a player can see, for example, the cost of mana, which is very particular (...) they put some attention to it, they were also a bit careful.” g. “it is very nice (...) it also pulls it off a little bit, no? because it says legendary artefact, it is not just any artefact, legendary!” these statements show how the brand's message immediately reached g. and f., both regular players of magic the gathering. the brand's attempt to attribute “legendary” characteristics to the product by associating it with an element that is clear in the eyes of the title's players, shows how this format, whose aim was to communicate with the gamers, received a positive response. in addition, the ability of this type of communication to attract the target audience by generating a “wow” effect (colletti, 2021) and creating purchase intent through the use of characters or game elements have been highlighted. d. “i see it and i say wow... the oneplus thing i saw it a couple of months ago and i already have the oneplus because otherwise, it would definitely be... if it were the right time to switch phones, it would definitely be influential.” 166 a. “in my opinion, precisely as g. and f. said, it is extremely targeted, and people who know the game well grasp those things that i do not understand and say wow, they are geniuses.” the statements cited above are also supported by data collected by chuchu & maziriri (2020) on the effectiveness of fictional characters in promoting a brand and by those of shelton & chiliya (2014) on the ability to generate purchase interest through the use of video games characters to promote even non-endemic brands. another interesting case is the collaboration of louis vuitton (louis vuitton, 2019a) and ducati (ducati, 2020) with the video game league of legends. league of legends is perhaps one of the games that have caused the most buzz in recent years; the title, which was created in 2009, now has a very high number of players (riot games, 2021). this is also one of the main titles within esports tournaments and, as shown by the nielsen report “esports playbook for brands 2019”, it generates alone around 60% of the audience (the nielsen group, 2019). in the esports world, there are several ways in which brands try to make a presence: sponsoring teams and events, creating customised spots and ads to be published and broadcast during the event days. the first collaboration to draw attention on, is the one between louis vuitton and lol (league of legends). the partnership between the two brands began with louis vuitton's participation in lol's 2019 esports world finals. for that occasion, the fashion house created a custom suitcase to carry and display the world trophy. through this first collaboration, louis vuitton attempted an approach to the target audience, trying to improve its image both towards the community closely linked to the video game and towards the fans who only followed the esports events of this title. this collaboration took place a few months before the release of the video game-inspired clothing collection created by louis vuitton (louis vuitton, 2019b; liberatore, 2019). figure 2 – collection of ads from the first collaboration between louis vuitton and league of legends. 167 furthermore, advertisements were created and posted on louis vuitton's social media to raise awareness during the months leading up to the collection's release, and several “skins”1 were developed to be purchased inside the video game. looking at the creations posted on the clothing brand’s social media, it’s evident the attempt to bring awareness through the use of one of the game’s champions (qiyana), for whom a themed skin had previously been created. there were several interventions by interviewees in this regard: g. “look, in my opinion... the way i see it, it is also a little bit about the integrity of the company developer, i mean it is very easy to become a sell-out (...) among these ads the one i like the most is the one with qiyana with her spinning disc and that because it is very much in the spirit of the game. the character is very appropriate to the product including the character, i mean you cannot put a pc2 as you want, you have to put something that is actually contextualized (...) i mean you do not say “ok the most popular character ever i will put him where i want” (...) and for me the spirit of lol is very much based on the central image” as g. states, the most important thing for him is the consistency between brand and character used, a need that has always been present and fundamental, even when it comes to celebrities in real life. f. then brings to light what he sees as a problem in the use of this method: f. “i like the image on the top right where they have replicated next to nicolas ghesquière, qiyana who gives the clear message of collaboration (...) i see the image i say wow cool lol it becomes so popular that it has managed to go and affect even louis vuitton they have done a collab, but let's say the wow ends there (...) there is a risk of giving in quotes more credibility to the game than to the brand that is using the game.” f. statement highlights a possible secondary point of perception. it is therefore essential to study in depth the dynamics that the collaboration between two brands of this type can generate in the consumer's mind; if on one side the reactions can be positive, on the other, there is the risk that one brand will overpower the other. the following year, louis vuitton repeated the initiative by producing a new suitcase for the lol esports world finals trophy (lombardo, 2020). in addition, the same promotion method was adopted for the french fashion house's new collection of lolthemed clothes, using ads with gaming characters on louis vuitton's social media. the second collaboration to mention is the 2020 partnership between ducati and lol (ducati, 2020), which saw the creation of a digital model of a motorbike for a music video of the virtual group k/da, which was composed of lol champions. 1 skin = different look for characters that can be purchased in the store. 2 pc = a character in a role-playing game or video game who is controlled by the person playing the game. 168 for the occasion, a customized bike version was made for the driver one of the lol champions -. in the music video promoted by lol's official channels, the bike is shown in several shots, and from this, some frames were taken out and used by ducati for their social media ads. this approach has provided the motor house with a powerful impact on two distinct target groups: lol players and k/da fans, who are not always players of the title. figure 3 – ad of the collaboration between ducati and league of legends. most respondents highlighted the attractiveness and involvement of this ad: d. “i think the one about the motorbike is very beautiful”. a. “that is the one i like best too”. d. “that one is really beautiful (...) it really has potential as advertising in my opinion. plus, even on tv, it would fulfil its function as advertisement. when i see it, i stop and say wow!”. i. “i would be interested and if i had seen the motorbike before, i would have run to my father to tell him “dad, look what a f***ing bike ducati has made” and then i would have said “do you know who it is? it is one of the ones in the game i play, and they did an ad with ducati on it, do you like it?” i would have shown it to others because i am not interested in ducati and if i had been i would have thought about it instead of going and telling someone who can buy it”. d. “this makes me say ok wow! how cool akali’s bike is! i’m going to check it out, got it?” c. “i was thinking the same thing” 169 these exchanges show how the use of video game characters as endorsers can achieve high levels of attractiveness to the target audience and the ability to generate an impulse to purchase if the product is within the target audience’s interests and economic possibilities. the example spontaneously given by one respondent is also significant: d. “ok, i will tell you something that was stuck in my mind a couple of years ago. when i went to milan i casually stopped right in front of a shop window... there were really big windows... with an advertisement of final fantasy 7, one of the girls from ff7, i cannot remember who she was, if tifa or someone else… with just... there's an advertisement with them and jewellery next to them and on them and that stuff there, it really stuck with me, it worked like a bomb, the advertisement was well done, she was beautiful with the jewellery on, ok, and she was doing the exact same job that a model could do, but from a cool game”. the example given by d. shows how, in the mind of a passionate gamer of the character or title chosen by the brand, an advertisement of this kind remains imprinted for a long period of time. this is also supported by the nielsen company's “esports playbook for brands 2019” report, which shows that 90% of esports viewers remember at least one non-endemic brand that created bespoke content to sponsor its products during esports (the nielsen group, 2019). furthermore, as reported by kristen salvatore, twitch's sales director, in the nielsen report: “twitch has explained in detail to brands how to authentically connect with gamers and convey their messages. through tournaments, sponsorships, athletes, and the creation of content tailored to esports and its audience” (the nielsen group, 2019). 4.2 psychological and social effects various positive effects in the social and psychological spheres emerged during the research. indeed, we must always consider how advertising communication, in addition to its promotional purpose, clashes with the reality of observers, their perception and society itself. if we consider the perception in past years of the video game medium, there were many parents in the 1980s and early 1990s who were skeptical about their children's passion for video games: “like other media at the time of their emergence (think of the advent of the cinema and the famous flight from the cinema hall of the audience seeing the train arriving at the station of la ciotat, filmed by the lumière brothers), the video game polarized reactions” (semprebene, viganò, 2017). the characterizing elements of video games have been a source of interest for young people from the beginning, while previous generations needed more time to accept them. as expressed by semprebene and viganò (2017), this shift has taken place progressively through the adoption of technologies increasingly linked to video game realities, which have led the more mature public toward a new conception of the video game by showing how: 170 “the video game could be a medium to achieve an end of personal and social utility (...) associating the medium with a (...) more virtuous end (...)it made possible to lower the level of mistrust towards the medium and, consequently, to ignite curiosity for other possible practices with a tool that was no longer perceived as hostile.” (semprebene, viganò, 2017). thanks to this change of perspective, which also emerged during the focus group, the video game becomes something that goes beyond mere entertainment to which one can associate various possibilities of both social and personal growth. it emerged how this type of communication helps the normalization of the video game and its integration on a cultural level and how this makes players feel more integrated and less stereotyped. i. “as a player seeing these pictures and seeing them associated with a brand that goes beyond the video game context makes me feel closer and less estranged from all those people who do not actually give video games a penny and do not attribute any seriousness to them.” i. “and seeing the ducati with akali on it makes me feel less.” i. “less estranged from reality” a. “in my opinion the other side of the coin of what we were saying before...that it does not make you feel, i mean in the sense it makes the game seem like something of” i. “a bit more real.” a. “significant for... even for others who are not necessarily players.” or more: f. “watching the premiere of arcane, to give an example, staying in the context of league of legends, almost all the guests at the party etc., were all over 30 [...] there is a lot of interest (...) so it actually makes it feel more real, closer.” f. “also because there has always been this taboo of those who play and those who do not, those who play are always mocked by those who do not play and say, "you play video games and pu*****te etc..." and then the ducati ad comes out.” d. “now there is no more of this stuff in my opinion” f. “maybe also thanks to this phenomenon [advertising with characters and elements of video games].” these sentences lead us to consider how the mentality of the public, the literature world and brands, changed towards video games. furthermore, it highlights how the strategic and well-integrated use of advertising related to the world of video games generates positive feelings towards the marginalized condition that, until recently, many video gamers used to experience. in this way, it becomes clear the potential this format can have on the image of brands, associating not only the values of the chosen character but also progressive values that aim to integrate and dilute a situation that until not long ago saw a strong stereotyping of gamers. 171 5. discussion this research answered four questions: effectiveness, involvement, perception, social and psychological effects that the use of video game characters and elements generates in the target audience. the first question concerns the area of effectiveness, both in terms of creating interest and generating purchase intent. in this case, thanks to the responses, it was shown how the involvement of video game characters or elements in a brand's communication generates interest in the observers by attracting them to the brand and developing a declared purchase intention. these outcomes are in line with previous research findings by shelton and chiliya (2014) and chuchu and maziriri (2020), according to which this communicative practice is capable of creating clear purchase intentionality in the target audience. the second question concerns the perception of the target group towards this format. if there were a lack of consistency for some collaborations that led to negative perception, the target audience responded positively in those cases where brand and character were found to be similar. this emphasises the importance of carefully choosing the right representative to best convey the company's values and not create a jarring collaboration in the eyes of the public. here, too, as shown in previous studies by shelton and chiliya (2014) and chuchu and maziriri (2020), how the relationship between brand and character is perceived is crucial. both researches have in fact noted as a fundamental characteristic for the success of this practice the expertise of the chosen character, this refers to the coherence of the character and his values with the product, the affinity of his skills with the brand/product and the experience real or perceived by the target audience of the character with the product. the third question concerns the involvement and attraction that this communication can generate in the observer, as pointed out by d. and c. regarding ducati's advertising, who claimed that this type of ad had created amazement and attraction in them and an interest in learning more about the brand's products. this is supported by previous research, in fact, as shelton and chiliya (2014) point out in their article: “this popularity of celebrity endorsement is due to advertisers’ belief that a message which is delivered by a well-known personality will attract more attention, as well as improve recall for consumers.” (shelton e chiliya, 2014). the fourth issue concerns the psychological and social effects. respondents highlighted the ability of these advertisements to make them feel more integrated in the social environment, closer to the brand and the real world, partly diluting the stereotypes that usually affect video gamers and the gaming world. this aspect is not investigated by previous research due to their exclusively quantitative approach. 5.1 theoretical and practical implications the main implication of this work concerns the importance for both marketers and managers to pay more attention to the potential contact points between their represented brands and the partnership opportunities with game companies. what emerges from this research is the advantage of brands that comes from the use of video game characters and elements and the positive effects of this practice. respondents 172 confirmed the ability of this format to engage and develop the “wow” effect for a successful and coherent collaboration between pc and the brand. a further implication of this study concerns the necessity for advertisers to thoroughly research video game characters to sponsor their brand. in this way, it becomes possible to choose what the audience perceives as most similar and connected to the brand in question, to produce an ideal result. if well-balanced, these elements can develop positive sentiment towards the brand and generate purchase intent. furthermore, another implication derived from this research is the following: if brand communication managers are aware that the target audience they want to talk to is involved in the gaming world, this communication methodology is a powerful tool to attract this target audience. this consideration becomes even more relevant by observing the steady growth of esports and its viewers from 2015 to 2021, more than 100% (newzoo, 2017; 2022) -, in combination with the steady growth of the video gamer population from 2020 to 2021, more than 300.00 million (newzoo, 2020; 2021c) -, are other positive signs for the future of this practice. this kind of communication, according to the interviewees, could reduce the distance between the real world and the society that surrounds gamers, a reality that has been perceived many times by them. the analyzed methodology seems capable of creating inclusion, bringing benefits of perception and image to the brand that uses it. this leads us to consider a further implication for marketers and brand managers; in fact, choosing to use this communication methodology when dealing with a target audience of gamers leads to a positive perception by creating an inclusive brand image in the mind of the target viewer. 6. conclusions the evolution of the video game and its communication from the early 50s to the present day shows us how in this field, various forms of interaction with video games are developing, interactions which were partly borrowed by other media that preceded it. at the same time, the evolution shows how these practices are changing, and how this medium is making them its own and adapting them to its user base. also, thanks to the explosion of the video game market, the rise of esports and in recent years the covid-19, advertising campaigns specifically designed to engage the target audience of video gamers have seen a noteworthy increase as well as the number of brands investing in this kind of communication. the repeated collaborations over the years between brands and video game software houses for the development of this kind of communication proves the validity of this methodology, and the focus group interviewees bring further proof, this time from the audience side, of the potential of this tool. it emerges that more attention and emphasis should be placed on this mode of communication. to support this theory, there are many examples also in today's scenario: the 2021 zalando privè commercial in which there are 3d models with explicit references to 80s and 90s arcade video games (zalando lounge/privè, 2021), or the 2022 iliad telephone company commercial that uses the tetris theme music (iliad, 2022), or last but 173 not least, some kellogg's krave cereal commercials that use different graphic interfaces taken from video games (kellogg italia, 2022).3 what's more, considering the constant growth of video gamers, communication that is aware of the public's new interests certainly benefits brands. in fact, consumers are more likely to buy from brands that they perceive to be close and that speak their language. then, considering the statements made by the interviewees, it can be understood how even today, at times, this target group still feels excluded due to the distance between the real world and the world of video games that was created in the past and that still tends to recur today. 6.1 limits of the research and future improvements the main limitation of this research concerns the impossibility of extending the surveys to a larger sample due to a lack of funds and time. this inevitably led to the development of limited results in terms of generalizability to other publics. future opportunities to investigate this phenomenon concern the development of further focus groups as well as the integration of qualitative follow-up interviews. future research should also evaluate a comparison between gamer and non-gamer audiences; this way, it would be possible to understand whether or not the effectiveness of this methodology on the gamer audience can be found in a non-gamer one. other points that should be investigated further by future research include: the psychological and social effects that the phenomenon creates on gamers, and the possibility to understand how many benefits the brand image can obtain from this methodology; secondly, how well and at which level video game characters are able to convey their values to the brand that chooses to use them; finally, future studies should investigate which market sectors can benefit from the use of video game characters and elements within their communication. this topic is wide-ranging and not well explored, however, the data analysed and collected during this and previous research shows the potential of this methodology, and for this reason, the possibilities for future research are diverse and divided into 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(2010), “the social responsibility of retailers and small and medium suppliers in international supply chains”, finanza, marketing e produzione, n. 3, pp. 32-61. 1. introduction 4.1 effectiveness, involvement, and perception 4.2 psychological and social effects 5. discussion 5.1 theoretical and practical implications 6. conclusions 6.1 limits of the research and future improvements references 63 leadership styles and employees’ performance: evidence from federal medical centre (fmc), idiaba, abeokuta, ogun state, nigeria shodiya olayinka abideen crescent university, abeokuta, nigeria olajide alade raji crescent university, abeokuta, nigeria jolaosho surajudeen o. crescent university, abeokuta, nigeria akintaro akinbiyi o. crescent university, abeokuta, nigeria received: april 5, 2022 accepted: june 4, 2022 online published: june 14, 2022 abstract this study examined the effect of leadership styles on employees’ performance in the federal medical centre, idi-aba, abeokuta, ogun state, nigeria. it specifically examined the effect of leadership styles transformational, transactional and democratic dimensions of leadership styles on employees’ performance. a survey research design was used, with one thousand seven hundred and twenty-seven (1,727) medical staff from twenty-nine (29) departments making up the study's population. a sample size of three hundred and fourteen (314) was estimated and selected via a convenient sampling technique. the information was gathered from the respondents using a structured questionnaire. the data was analysed using descriptive statistics and covariance base structural equation modelling (cb-sem). the findings showed that transformational, transactional, and democratic leadership styles all had a significant impact on employee performance, according to the findings. keywords: leadership styles; employee performance; federal medical centre; covariance base structural equation modelling; ogun state. international journal of economic behavior, vol. 12 n. 1, 2022, 63-81. https://doi.org/ 10.14276/2285-0430.3377 64 1. introduction employee performance is defined as how effectively and efficiently a person accomplishes assignments and the attitude with which the employee completes the tasks assigned (sila, 2014). the technique, outcome, application, and accomplishments of an individual determine job performance (gridwichai, kulwanich, piromkam, & kwanmuangvanich, 2020). ali, elmi and mohammed (2013) keep in mind that there are various factors (adequate remuneration of employees, motivation, conducive working environment, employee benefit, etc.) that may influence employee’s performance in an organisation. furthermore, studies have indicated that leadership styles, which refer to the leadership styles employed by the leader and the impact they have on the performance level of the organisation's workforce, are at the top of the list of factors influencing employee performance (yasir, imran, irshad, mohamad, & khan, 2016). leadership is characterised as a method through which leaders can influence their subordinates' behaviour in order to attain corporate goals. (reid & dold, 2016). it is an essential aspect in the formulation and realisation of organisational goal (balemlay, 2020). rathore, abdul khaliq and aslam (2017) opined that organisations are expected to have adequate knowledge of the leadership styles that can play crucial roles in increasing employee performance. as a result, there is little doubt that the character of an organisation's labour force, as well as its useful ability to lead this labor force toward the achievement of the organization's objectives, is critical to its success in both organizational management and business operations (von krogh, nonaka, & rechsteiner, 2012). deribe (2016) defines three types of leadership: transformational, transactional, and laissez-faire leadership. transformational leadership, according to warrilow (2012), is "leadership that promotes positive change for followers by looking out for one another's best interests and acting in the best interests of the group." organizational management is another name for transactional leadership, which focuses on supervisory, organizational and group performance responsibilities (moses, 2018). it can be defined as a leadership style that uses rewards and sanctions to persuade followers to obey orders (adeniji et al., 2020). when managers use the laissez-faire leadership style, sometimes known as the "hands-off" style, they give employees little or no direction (gray & williams, 2012). laissez-faire leadership, according to gopal and chowdhury (2014), is a distinct form of leadership in which people are totally accountable for setting their own goals, making decisions, and resolving problems. individual and organizational performance can be steered in the proper direction by using the right leadership style (kanwal, lodhi, & kashif, 2019). beneficial leadership styles result in positive work outcomes, whereas negative/dark leadership styles endanger an organization's growth and existence (drescher & drescher, 2017). the leadership styles adopted by leaders to influence their followers are regarded to have a positive or negative impact on work results (i.e., employees in a workplace) (mccoll-kennedy & anderson, 2002). as a result, having the right kind of leaders in place to enhance employee performance, efficiency, and productivity is highly encouraged in the workplace (mussolino & calabr, 2014). 1.1 statement of the problem the inability of health managers managing the health sector to improve health worker morale and institute job performance are not unrelated to nigeria's awful health conditions 65 (durowade, kadiri, durowade, sanni, ojuolape, & omokanye, 2020). a large proportion of healthcare managers in nigeria display a lack of awareness of the morale-boosting demands of the health personnel under their supervision due to inadequate leadership skills (onwe, abah, & nwokwu, 2015). this poor leadership style leads to work dissatisfaction and a lack of commitment to the nigerian health system's objectives. however, nigeria has emerged as a serious health issues exporter, with a large number of qualified health-care providers (doctors, nurses, and other medical professionals) leaving the country in search of lucrative opportunities. this reality has played a significant role in the nigerian health indices' bleak outlook (onwe et al., 2015). literature review undertaken on the subject matter revealed that research on leadership styles and employee performance in the healthcare sector are limited. however, the study by abasilim (2019), durowade et al. (2020), girei (2015) and onuegbu and okeke (2018) adopted previous and validated survey scales. the shortcomings of their studies were that the authors violated the assumptions of the statistical analysis they used raising the question of whether their findings were accurate enough to make appropriate recommendations. as a result of these shortcomings, there is need to conduct more accurate studies that takes into consideration choosing the appropriate statistical approach based on the type of data collected to produce reliable results for prediction purposes. therefore, the study examined the effect of leadership styles on employee job performance employing validated psychometric scales and appropriate statistical approach to ensure the results are reliable and generalizable. 1.2 objectives of the study the main objective of the study was to look into the effect of leadership style on employees’ performance in the federal medical centre (fmc), idi-aba, abeokuta, ogun state. however, the following specific objectives were pursued to achieve a broad goal: (i) examine the effect of transformational leadership style on employees’ performance at the fmc, idi-aba, abeokuta. (ii) investigate the effect of transactional leadership style on employees’ performance at the fmc, idi-aba, abeokuta. (iii) determine the effect of democratic leadership style on employees’ performance at the fmc, idi-aba, abeokuta. determine the impact 1.3 research questions the effect of leadership styles on employees’ performance raises several research questions. therefore, the following research questions were used as a guide in achieving the objectives of the study: (i) what significant effect does the transformational leadership style has on employees’ performance at the fmc, idi-aba, abeokuta? (ii) how does the transactional leadership style significantly affect employees’ performance at the fmc, idi-aba, abeokuta? (iii) to what extent does the democratic leadership style significantly affect employees’ performance at the fmc, idi-aba, abeokuta? 66 1.4 research hypotheses based on the general objectives of the study, the following hypotheses were developed, stated in the null forms, and were tested to achieve the specific objectives: h01: the transformational leadership style does not have a significant positive effect on employees’ performance at the fmc, idi-aba, abeokuta. h02: the transactional leadership style does not have a significant positive effect on employees’ performance at the fmc, idi-aba, abeokuta. h03: the democratic leadership style does not have a significant positive effect on employees’ performance at the fmc, idi-aba, abeokuta. 2. literature review 2.1 the concept of leadership style mullins (2000) defined leadership style as “the method a manager chooses to behave with employees and how leadership tasks are carried out.” according to scholl (2000), a leader's leadership style is the pattern of behavior he or she uses to control group members, make decisions on the mission plan, and ensure that group activity runs smoothly. according to clark (2000), leadership style refers to how people are instructed, programme are implemented, and people are motivated. the collection of features, skills, talents, and behaviors that leaders utilize while dealing with their followers is referred to as leadership style (jeremy, melinde, & ciller, 2011). 2.2 types of leadership styles 2.2.1 transformational leadership according to williams, ricciardi, and blackbourn (2007), this form of leadership cultivates trust, loyalty, and respect among employees. this leadership style has several benefits for businesses, including sustaining employee commitment (dunn, dastoor, & sims, 2012); increasing productivity (eunyoung, 2007); and improving employee morale (bass & riggio, 2006). this type of leadership enables employees to go beyond what is expected of them (andrews, richard, robinson, celano, & hallaron, 2012). it can also make organizational reforms permanent (bass & avolio, 1994). as a result, the literature on leadership management attests to the fact that this leadership style is potentially important for a company's success. 2.2.2 transactional leadership transactional leadership clarifies norms and standards to safeguard their employees’ status quo. leaders who employ this style also fix faults and provide careful monitoring to achieve success (bass & avolio, 1995). transactional leadership is described as taking a proactive approach, favouring stability, avoiding mistakes, and focusing on quick gains (forster, liberman, & higgins, 2005). this leadership style helps followers take a preventative approach to their jobs (bass & avolio, 1997). research shows that this leadership method may help develop a trust-based connection between leaders and followers (bass, avolio, jung, & berson, 2003). this leadership style encourages followers 67 to interact with one another, resulting in a successful relationship (bass & avolio, 1990). the influence of transactional leadership style on organizational success has been well documented (bass et al., 2003). as a result, understanding the transactional leadership style is essential and cannot be overlooked in the present research. 2.2.3 democratic leadership democratic leaders frequently include other members of their team in decision-making, however they ultimately make a final decision. as a result, by incorporating others, it increases job satisfaction and helps people develop their talents. employees would also have a sense of control over their own fate, motivating them to work hard for reasons other than monetary gain (mullins, 1988). this method, on the other hand, may take a bit longer to complete, but it often yields better results. when quality takes precedence over time to market or productivity, democratic or participatory leadership is the best choice mullins (1998). 2.3 the concept of employee performance according to miebi (2014), employee performance is determined by the workers’ desire and readiness to accomplish their jobs. kunze, boehm, and bruch (2013) also stated that to achieve a level of performance, employers must ensure that employee tasks are completed on time to meet the organisation’s target. employers can help improve employee’s performance by monitoring and keeping track of their work. furthermore, an incentive system based on employee performance should be developed. the system’s goal is to encourage people to work harder on their jobs. nnamani and ajagu (2014) highlight several aspects that contribute to high employee performance. they include a harmonious work environment, equipment availability, effective performance feedback, reward for high performance, standard operating procedures, adequate knowledge and skills, and an excellent attitude to work. according to mmakwe and ojiabo (2018), efficient performance depends on employees’ talents, intellectual capability, and job resources. as a result, employers must offer proper working circumstances to ensure that employees’ performance reaches the minimum criteria. 2.4 theoretical review 2.4.1 leader-member exchange theory the leader-member exchange theory (lmx) is built on the presumption that a leader has a small group of followers charged with specific initiatives, leading to improved work satisfaction, higher morale, lower turnover, and more stable performance. lmx is described by omilion-hodges and baker (2017) as the strength of a leader-member relationship. according to dwertmann and boehm (2016) who studied 1,253 participants, a disability may influence the quality of the leader-member dyadic connection. when compared to other theories, this theory stands out since it concentrates on the leaderfollower relationship's exchange (northouse, 2016). previous strategies, on the other hand, focused on only one person in the connection. 2.5 empirical review wilson (2017) investigated leadership styles and staff job performance at several secondary schools in rivers state, nigeria. to elicit data, the interview approach was combined with 68 the delivery of a questionnaire. secondary data for the study was collected using the documentary approach. a total of 210 questionnaires with a total of 21 questions were distributed. tables and percentage frequency were used to show and analyse the primary data. the secondary data was analysed using content analysis. the outcomes of the study revealed ten varied leadership styles used by other secondary school principals in the area, demonstrating that different leadership styles had a considerable impact on school personnel work performance. furthermore, the findings revealed that principals struggled with leadership. abodunde, ayo-oyebiyi, and unachukwu (2017) researched on managers’ leadership styles and their influence on employee job satisfaction in insurance organisations. the sample included 135 workers from 15 nigerian stock exchange-listed insurance businesses. the data was collected using a structured questionnaire and an oral interview, and the data were analysed using the pearson product moment correlation coefficient and linear regression. the results demonstrated that transformational leadership style (t = 3.388; p-value = 0.282) had a significant influence on employee job satisfaction at the 1% level, but transactional leadership style (t = 0.557; p-value = 0.048) had no such impact. as a result, the study revealed that transformational leadership style was a major predictor of work satisfaction among employees. following that, the report recommended that nigerian insurance businesses adopted a transformational leadership style in order to dramatically boost employee work satisfaction, citing a strong positive association. idowu (2020) studied the impact of leadership styles on employee performance in private colleges in the states of ondo, ekiti, and osun in south-western nigeria. the researcher chose ten universities among 36 private institutions in south-west nigeria using a purposive sample approach. respondents were surveyed using the multifactor leadership questionnaire. to assess the influence of autocratic leadership style, the researcher devised their own set of questions. the information gathered were analysed using descriptive statistical analysis. the study's four hypotheses were investigated using linear regression and pearson correlation. transformational leadership, transactional leadership, and laissezfaire leadership were the three most frequent leadership styles that had a significant beneficial impact on employee performance, according to the findings of the study. the autocratic leadership style, on the other hand, had no discernible positive impact on staff performance. at the nigeria institute for trypanosomiasis research in kaduna state, mamza, abdullahi, and usman (2020) investigated the impact of leadership styles on employee performance. respondents were sampled using a structured questionnaire and the random sampling approach. the questionnaires were delivered to the respondents in a total of two hundred and thirty (230) copies. the partial least squares method smartpls version 2 was used to analyse data using a structural equation model. the findings revealed that leadership styles such as transformational, transactional, and laissez-faire had a significant impact on employee performance. to increase employee performance in kaduna state, it was proposed that the nigeria institute for trypanosomiasis research used transactional and laissez-faire leadership styles. donoma, tanzania, matiko and mbuti (2021) investigated leadership styles and staff engagement in government hospitals. a simple random sampling approach was used to select 120 employees from a total of 889. data was collected using a standardized questionnaire and then analyzed using regression analysis. the findings found no link 69 between employee commitment and the following leadership styles: task-oriented, peopleoriented, status-oriented, or laissez-faire. in ekiti state, southwest nigeria, durowade, kadiri, durowade, sanni, ojuolape, and omokanye (2020) investigated leadership styles vs health professionals' job satisfaction in tertiary hospitals. the research was conducted in a cross-sectional manner. respondents were chosen using a multistage sampling process. descriptive statistics and logistic regression analysis were used to analyze the data. the findings found that a laissez-faire leadership style was associated with lower work satisfaction. job satisfaction was negatively correlated with the age of the leader and the length of tenure of the heads of units. employee age and contingent compensation were discovered to be important predictors of work satisfaction. sabbah, ibrahim, khamis, bakhour, sabbah, droubi, and sabbah (2020) researched the association of leadership styles and nurses’ well-being in healthcare settings. the research was a cross-sectional study that conducted in 2017 and included a random sample of two hundred and fifty (250) nurses from eight hospitals. the survey contained questions about socio-demographic and health-related factors, as well as the multifactor leadership questionnaire 5x short form and the short form health survey-12 v2 (sf-12v2). the findings showed that managers utilized a mixture of transformational leadership and a lot of transactional leadership. from time to time, the managers took a laissez-faire approach. male nurses regarded their superiors as more transformational than female nurses. except for the social functioning category, all sf-12v2 scale scores were statistically linked to transformational leadership style. the vitality scale scores were linked to transactional leadership style. people who considered their manager's leadership style was laissez-faire had poorer physical and emotional roles, as well as a worse mental health summary score. musinguzi, namale, rutebemberwa, dahal, nahirya-ntege, and kekitiinwa (2018) investigated the link between leadership style and motivation, job satisfaction, and teamwork among ugandan health workers. the study was a cross-sectional study conducted in november 2015. data was collected from 564 health workers from 228 health facilities using a standardized questionnaire. pearson correlation and multivariable logistic regression were used to analyze the data. transformational leaders were favored by ugandan health professionals above transactional or laissez-faire leaders, according to the data. transformational leadership was linked to increased motivation, job satisfaction, and teamwork. transactional leadership was found to be favorably associated with job satisfaction and teamwork. in the federal medical centre in niger state, mawoli and mohammed (2013) examined the impact of leadership styles on staff performance. from a total population of 1,400 fmc employees, an 82-person sample was selected. the respondents were chosen using a stratified random sampling procedure. a standardized questionnaire was used to collect data, which was then evaluated through regression analysis. hence various heads of units, divisions, and departments have been discovered to adopt autocratic, democratic, and laissez-faire leadership styles to achieve varying degrees of work performance. democratic leadership had a considerable impact on health-care workers, but authoritarian and laissez-faire leadership styles had little or no impact. 70 2.6 conceptual framework after evaluating current literature on the variables, the study constructed a conceptual framework to investigate the research hypotheses that have been provided. the concept used transformational, transactional, and democratic leadership styles as independent variables to explain employee performance as the dependent variable. the conceptual framework is represented diagrammatically in figure 1. figure 1 − conceptual framework of leadership style and employees’ performance source: author 3. methodology 3.1 research design this study used a survey research design because it involved collecting data from a sample of participants/respondents in a systematic manner. the survey method was used to quickly and cheaply describe the opinions of a large number of respondents on specific topics (goel, obeng, & rothschild, 2016). 3.2 population of study the population of study comprised 1,727 staff from 29 departments (22 clinical and 7 nonclinical department) in the fmc, idi-aba, abeokuta, ogun state as presented in table 1. the choice of fmc was because it was a tertiary health facility under the purview of the federal ministry of health with large attendance of patients within and outside ogun state. 71 table 1 − distribution of personnel according to department s/n clinical department number of staff 1 anaesthesia not specified 2 catering 39 3 community medicine and primary care 30 4 dental services 19 5 ear, nose, and throat (otorhinolaryngology) 4 6 family medicine 49 7 health records 109 8 medical library 10 9 medicine not specified 10 nursing services 497 11 obstetrics and gynaecology 67 12 ophthalmology 13 13 orthopaedics and trauma not specified 14 paediatrics 25 15 pain and palliative medicine 9 16 pathology not specified 17 pharmaceutical services 34 18 physiotherapy 22 19 psychiatric 7 20 radiology 44 21 social work 8 22 surgery 19 total 1,005 s/n non-clinical department 1 administrative 380 2 finance and supplies 162 3 information and communication technology not specified 4 internal audit 33 5 public relations not specified 6 security not specified 7 works and maintenance 147 total 722 source: fmc official website (2022) 3.3 sample size and sampling technique a sample of 241 (based on the indicator/latent ratio) assuming a medium effect size (f2 = 0.35), the statistical power of 0.8, and the probability of error level of 0.05) was obtained using a sample size calculator for structural equation models via power analysis. the choice of this calculator was because it was specifically designed to calculate sample size for structural equation models. also, it considered effect size, statistical power, and the probability of error level. the sample size is increased by 30% to 314 to provide for nonresponse bias. however, the study adopted the proportionate and convenient sampling technique to determine the exact number of staffs selected from each department as presented in table 2. 72 table 2. distribution of personnel by proportion s/n clinical department no. of staff sample size 1 catering 39 7 2 community medicine and primary care 30 5 3 dental services 19 3 4 ear, nose, and throat (otorhinolaryngology) 4 1 5 family medicine 49 9 6 health records 109 20 7 medical library 10 2 8 nursing services 497 90 9 obstetrics and gynaecology 67 12 10 ophthalmology 13 2 11 paediatrics 25 5 12 pain and palliative medicine 9 2 13 pharmaceutical services 34 6 14 physiotherapy 22 4 15 psychiatric 7 2 16 radiology 44 8 17 social work 8 2 18 surgery 19 3 total 1,005 183 s/n non-clinical department 1 administrative 380 69 2 finance and supplies 162 29 3 internal audit 33 6 4 works and maintenance 147 27 total 722 131 source: author’s computation (2022) 3.4 research instruments the demographics of the questionnaire included gender, age, and year of service, as well as four measures with confirmed validity and reliability: transformational leadership style was assessed using a nine-item scale adapted from zheng, cao, and tjosvold's research (2011). a sample item is, “my supervisor has the ability to make everyone around me enthusiastic about assignments.” the response scale ranged from 1 (strongly disagree) to 5 (strongly agree). transactional leadership style was measured by a five-items scale adopted from the study of felfe and schyns (2002). a sample item is, “my leader clearly formulates expectations and standards.” the response scale ranged from 1 (strongly disagree) to 5 (strongly agree). democratic leadership style was measured through a four-items survey scale adopted from the study of hinkin and schriesheim (2008). a sample item is, “my supervisor involves me when making vital decisions.” the response scale ranged from 1 (strongly disagree) to 5 (strongly agree). employee job performance was measured using a six-item survey scale adopted from the study of kock (2017). a sample item is, “my performance in my current job is excellent.” the response scale ranged from 1 (strongly disagree) to 5 (strongly agree). 3.5 method of data analysis the quantitative data is analyzed using r software for windows (r core team, 2020) version 4.0.3. a p-value of less than 0.05 and two-tailed testing are used to determine a 73 statistically significant result. the relationship between the variables is evaluated using covariance-based structural equation modeling (cb-sem). when compared to regression analysis, which does not account for measurement error, cb-sem provides a more robust statistical analysis of testing hypotheses (ramlall, 2016) 4. results three hundred and fourteen copies of questionnaires were administered to respondents and 306 copies were returned. however, during data cleaning process, four copies were found incompletely filled for data analysis and therefore were excluded. thus, giving a total of 302 copies that were used for analysis. this gave a response rate of 96%. missing data was also imputed using the mice (multiple imputation through chained equations) approach. furthermore, the result on demographic characteristics of respondents listed in table 3 revealed that majority of them were females (55%). the finding implied that female respondents dominated the study. also, the majority (59%) were married and were between the ages of 31 and 40 years (44%). all of them were well-educated and have spent between 11 and 15 years working in the hospitals (42%). table 3 − demographic characteristics of the respondents (n = 302) demographic characteristics frequency percentage (%) gender male 137 45.36 female 165 54.64 age (years) less than 30 21 6.95 31 – 40 134 44.37 41 – 50 124 41.06 above 50 23 7.62 marital status single 121 40.07 married 177 58.61 divorced 4 1.32 education o’ level 29 9.60 nce/ond 97 32.12 b.sc./hnd 148 49.01 m.sc./ph.d. 28 9.27 length of service (years) less than 1 4 1.32 1 – 5 23 7.62 6 – 10 58 19.21 11 – 15 126 41.72 above 15 91 30.13 source: field survey (2022) 74 4.1 measurement model the measurement model's goal is to characterize how well observed indicators work as measurement instruments for unseen variables. as a result, the study took a two-step strategy, starting with a measurement model and then moving on to a confirmatory model to test the hypotheses proposed by anderson and gerbing's (1988). 4.1.1 goodness-of-fit indexes listed in table 4 are the confirmatory factor analysis goodness-of-fit statistics results to determine the model’s measurement fit. the goodness-of-fit indices are examined using the absolute and relative fit indices, which were revealed to be consistent with the accepted thresholds (gunzler, perzynski, & carle, 2021). table 4 − goodness-of-fit indexes absolute indices relative indices fit indices χ2/df gfi agfi srmr rmsea nfi cfi thresholds < 3 > 0.90 > 0.90 < 0.08 < 0.08 > 0.90 > 0.90 actual value 1.835 0.932 0.907 0.059 0.041 0.916 0.908 note: note: 2 / dfχ is the proportion of degrees of freedom to chi-square.; gfi is goodness of fit index; agfi is the adjusted goodness of fit index; srmr is standardised root mean square residual; rmsea is the root mean square error of approximation; normed fit index; cfi is the comparative fit index. source: author’s computation (2022) 4.1.2 convergent validity convergent validity measures whether the indicators reflect their corresponding factors effectively. the result in table 5 revealed that the survey scales used in the study indicated good construct reliabilities as the standardised factor loading estimate values ranged from 0.704 to 0.910, exceeding 0.6 (bagozzi & yi, 1988). the estimation of cronbach’s alpha and composite reliability values revealed that the factors had alpha values that ranged from 0.786 to 0.877, showing that internal consistency is adequate (nunnally & bernstein, 1994). in addition, the p-values for each item were statistically significant (p < 0.001). convergent validity criterion was also met as all the average variance extracted (ave) were above 0.50 (hair, ringle & sarstedt, 2012). 4.1.3 discriminant validity discriminant validity assesses whether two variables are statistically distinct. to investigate the dimensionality of the constructs, the square root of their average variance retrieved (aves) was extracted (gefen & staub, 2005). the off-diagonal correlation values were lower than the square root of the aves, indicating unique discriminant validity, as seen in table 6 (fornell & larcker, 1981). 75 table 5 − assessment results of reflective measurement model factor items standardised factor loading estimates significant at 5% ave composite reliability ρc cronbach’s alpha α transf transf1 0.872 yes 0.641 0.914 0.786 transf2 0.775 yes transf3 0.763 yes transf4 0.721 yes transf5 0.854 yes transf6 0.811 yes transf7 0.704 yes transf8 0.807 yes transf9 0.866 yes transa transa1 0.715 yes 0.647 0.901 0.815 transa2 0.809 yes transa3 0.910 yes transa4 0.814 yes transa5 0.761 yes dm dm1 0.887 yes 0.675 0.892 0.792 dm2 0.819 yes dm3 0.774 yes dm4 0.803 yes ep ep1 0.712 yes 0.602 0.819 0.877 ep2 0.817 yes ep3 0.795 yes ep4 0.899 yes ep5 0.851 yes ep6 0.714 yes note: transf = transformational leadership style; transa = transactional leadership style; dm = democratic leadership style; ep = employee performance; ave = average variance extracted. source: author’s computation (2022) table 6 − discriminant validity construct mean sd 1 2 3 4 transf 3.941 0.926 0.801 transa 3.979 0.925 0.025 0.804 dm 3.027 0.894 0.436 0.022 0.822 ep 3.891 0.895 0.043 0.059 0.270 0.776 note: diagonal elements are square root of ave and off-diagonal elements are correlations. source: author’s computation (2022) the results in table 7 and figure 2 revealed that transformational leadership style ( β = 0.677, p = 0.001) had a significant positive influence on employees’ performance; hence, hypothesis one was not supported. transactional leadership style ( β = 0.714, p = 0.001) had a significant positive influenced on employees’ performance; thus, hypothesis two was also not supported. lastly, democratic leadership style ( β = 0.803, p = 0.001) had a significant positive influence on employees’ performance; therefore, hypothesis three was supported. 76 table 7 − structural model estimates (test of hypotheses) hypotheses path coefficient estimate critical ratio p-value remark h1 transf -> ep 0.677 13.512 0.001 rejected h2 transa -> ep 0.714 10.118 0.001 rejected h3 dm -> ep 0.803 7.358 0.001 rejected source: author’s computation (2022) figure 2 − structural model of leadership style and employees’ performance 5. discussion of findings the results of the analysis of empirical data from a sample of 302 respondents were noteworthy and fascinating. these empirical findings backed up two of the study's hypotheses. furthermore, the study model's overall explanatory power was rather strong, with an r2 of 67 percent for worker productivity, implying that the three leadership styles used in the study, transformational, transactional, and democratic, explained 67 percent of the variance in employee performance. to begin, the results revealed that transformational leadership style (= 0.677, p = 0.001) had a positive and significant impact on employee performance. transformational leadership is defined as a leadership style in which leaders and followers interact in such a way that they boost each other's motivation and morale. according to the findings, the greater the degree of staff performance, the more transformational leadership style is used by hospital leaders. in addition, if individuals at the helms of affair adopt this leadership style, their staff would work towards achieving the hospital's goals. corroborating this finding, dunn et al. (2012) argued that this leadership style enhanced performance in an organization. the discovery is in line with the result of previous studies (girei, 2015; abodunde et al., 2017; al khajeh & fenn, 2020) while it is not in line with the finding of obiwuru et al., 2011). secondly, the result revealed that transformational leadership style ( β = 0.714, p = 0.001), had a positive and significant influence on employees’ performance. the finding implied that the more leaders at the hospital exhibit transactional leadership style, the higher the level of employees’ performance. also, the result indicated that if individuals at 77 the helms of affair adopt this leadership style, their staff would work towards achieving the hospital's goals. thus, the finding is in line with the result of previous studies (awolusi, 2015; ohemeng, amoaks-asiedu, & darko, 2018) while it is not in line with the finding of abodunde et al. (2017) and al khajeh and fenn (2020). finally, the result revealed that democratic leadership style ( β = 0.803, p = 0.001) had a significant positive influence on employees’ performance. the discovery implied that the more leaders at the hospital embrace the democratic leadership style, the higher the level of employees’ performance. thus, the finding is in line with the result of previous studies (basit, sebastian, & hassan, 2017; ohemeng et al., 2018). 6. conclusion and recommendations based on the finding of the study, the study concluded that leadership styles influenced employees’ performance at the fmc, idi-aba, abeokuta, ogun state. therefore, it is recommended that the management of fmc should adopt and encourage transformation leadership style by listening to their employees’ concern and always motivate them. the management should encourage transactional leadership style by taking appropriate action before issues escalate, set work standards, and ensure that they are met. lastly, the authorities of fmc should encourage democratic leadership style by inviting employees of the hospital to contribute to the decision-making process. references 1. abasilim, u. d., gberevbie, d. e., & osibanjo, o. a. 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(2004), “il sistema distributivo cinese fra tradizione e modernizzazione”, china news, n. 1, milano, franco angeli, pp. 11-31. 1. introduction 1.1 statement of the problem 1.2 objectives of the study 1.3 research questions 1.4 research hypotheses 2. literature review 2.1 the concept of leadership style 2.2 types of leadership styles 2.2.1 transformational leadership 2.2.2 transactional leadership 2.2.3 democratic leadership 2.3 the concept of employee performance 2.4 theoretical review 2.4.1 leader-member exchange theory 2.5 empirical review 2.6 conceptual framework 3. methodology 3.1 research design 3.2 population of study 3.3 sample size and sampling technique 3.4 research instruments 3.5 method of data analysis 4. results 4.1 measurement model 4.1.1 goodness-of-fit indexes 4.1.2 convergent validity 4.1.3 discriminant validity 5. discussion of findings 6. conclusion and recommendations references 145 management control system in multinational environment: a critical review richard akinola university of lagos, nigeria henry okundalaiye university of lagos, nigeria received: june 16, 2022 accepted: october 8, 2022 online published: october 29, 2022 abstract organisations are now aimed at achieving fast growth, continuous development, increased performance, profitability and being at the top of the global business spectrum. this necessitates the need for management control system (mcs) within firms which will improve firms’ competitiveness and performance. this study examines the impact of management control systems on organisational performance using belief control, boundary control, diagnostic control and interactive control systems as a proxy in the relationship between mcs and organisational performance. the study was anchored on resource based view (rbv) theory and contingency theory. the study employed survey design which is a type of descriptive research design. simple random sampling technique was employed and relevant data were gathered through the use of structured questionnaire. the sample population consisted of three hundred and fifty-eight (358) employees of globacom limited, lagos state. the findings revealed that all the management control system (belief, boundary, diagnostic, and interactive control systems) are directly related to organizational performance. the study recommends that managers should prioritize where to spend their time and resources when using management control systems. keywords: management control system; belief control; boundary control; diagnostic control and interactive control systems; organizational performance. 1. introduction organizations are undergoing constant change today (romi, 2018). corporations are now aiming at fast growth, continuous development, higher efficiency, profitability and being on top of global business (zhang, 2013). in addition, organizations are now working in a international journal of economic behavior, vol. 12 n. 1, 2022, 145-158 https://doi.org/ 10.14276/2285-0430.3434 146 constantly changing environment that is very difficult to predict these changes. this problem has led organizations to spend a lot of time and money on change so that high performance is achieved (nwakoby, okoye, & anugwu, 2019). amin (2017) stated that performance excellence is not feasible today through traditional management methods and organizations need the new management approaches. formulation, implementation and performance are part of strategic processes which provide information on the drivers of organizational success and failure (albertini & muzzi, 2018). a common activity exists at all stages where activities and results are controlled, to compare the actual performance with the desired performance and where managers can take corrective actions. in this business, the mcs is responsible for developing models and systems that support strategic processes (albertini & muzzi, 2018). nasiru (2018) said that the mcs has developed exponentially in the past two decades which has resulted in the need to better understand its roles and how it can meet managerial needs (nasiru, 2018). the performance of all businesses is crucial according to nasiru (2018). the wide discussion of organizational performance extended the sphere of efficiency, effectiveness, quality, productivity, a good workforce, innovation and learning. companies are focused on general effectiveness (amron & mahmud, 2015). organizations must therefore evaluate their external and internal environment for sustainable performance opportunities and challenges (muhammad, masron & abdul majid, 2017). this calls for the management control system (mcs) of companies to improve their competitiveness and performance of companies. the formulation and implementation of a management control system include all strategic processes that can be achieved through analysis, planning, measurement, control and reward (bedford & malmi, 2018). the management control system (mcs) is defined by hossain and hakeem (2018) as the process that ensures that resources are obtained and efficiently and effectively used to meet the organization's objectives. in another empirical review, ukoha, alagah and zuzu (2017) classified the mcs as a formal control and defined it as a control package including budgeting, formal hierarchy and oversight, accounting reports, rules and operating standards, job descriptions, organizational structure, performance measurement statistics, and staff and assessment systems. okpara (2017) has also reiterated that the management control system supports a company in achieving its strategic goal; it ensures the effectiveness and efficacy of resources in a company, taking into account all of the significant aspects of controls and ensuring their balanced implementation in the company. however, albertini and muzzi (2018) expressed their empirical views by noting that the management control system was vital for management to formulate strategies, specify the operational activities that are required to implement strategies, outline mutual expectations, and set priorities for operational improvements. management control system allows managers to achieve key organizational goals. first, mcs supports managers in decision-making, aligning their goals with the goal of the organization and tracking the performance of managers so that they can take remedial actions in real time if required. second, mcs allows managers to provide strategic direction for their organizations' innovative efforts by making efficient use of resources (lin, chen & lin, 2017). the total economic results of the activities of any organization are the organization’s performance. the performance of every organization namely: effectiveness, efficiency, quality, productivity, quality of life, innovation and profitability has a complex interrelation 147 between these criteria and the organization. in a nutshell, an organization's success depends on the sound implementation of the company's strategy (amin, 2017). in short, the management control system is intended to assist managers in achieving their objectives. individual and organizational goals are permitted to be pursued by managers and their personnel (ukoha, alagah & zuzu, 2017). however, the amount to which managers fulfill these goals is determined by contextual considerations in various business environments. this view makes mcs the main driver of organizational performance (ukoha, alagah & zuzu, 2017). ideally, strategic objectives are provided by top management and the employees pursue these objectives. unfortunately, this is very difficult in practice because an organization, as far as its inner environment is concerned, does not function or remain static and constant. when one or more of these factors change, at least certain aspects of the management control system will probably be redesigned. these changes can result in tension between creative innovation and the movement for predictable goals in the organization. okpara (2017) also noted that the strategic choices made by the company will affect its management control system (mcs), which means that various types of organizational plans and strategies will tend to cause different configurations of control systems that distort organizational objectives. there has been growing evidence of unseemly use of mcs that could lead to employee dysfunction, thereby negating the productivity and efficiency of the organization. the most prevalent occurrences of the organizational dysfunctional regime are the manipulation of real data to either increase firm performance or prevent unfavorable consequences generated by disclosing the facts. there is even a lack of prior empirical research into its use, provided that mcs can be used for various purposes. some studies indicate that mcs is the basis for organizational performance, but how? recent, ambiguous, inconclusive, or sometimes contradictory results have been achieved through research on the impact of management control on organizational performance. despite all the studies, the impact of the various mcs applications on organizational performance still needs to be better understood. this study examines the impact of management control systems (belief, boundary, diagnostic, and interactive) on organizational performance in the light of the resource based view theory and the contingency theory. following the aim of the study, the various research questions are given below: i. to what extent does belief control system improve organizational performance within the telecommunication industry? ii. what is the impact of boundary control system on organizational performance within the telecommunication industry? iii. what are the influences of diagnostic control system on organizational performance within the telecommunication industry? iv. what are the influences of interactive control system on organizational performance within the telecommunication industry? 2. literature review 2.1 resources-based view (rbv) theory barney (1991) advocated a strategic management approach called a resource-based view (rbv). since this time, the strategic management approach rbv has become a leading strategic management theoretical concept, to explain how organizations achieve 148 competitive advantages. this theoretical model considers the resources of an organization as the key to superior organizational performance, according to the resource-based perspective. in this context, rbv defines resources broadly to cover all the assets an organization can use to formulate and implement strategic measures. a competitive advantage can be achieved when an organization creates more economic value than its product market competitors, and thus "the difference between the profits perceived by good purchasers and the economic cost of the enterprise" is referred to as economic value (peteraf & barney, 2003). the development of competitive advantages within the conceptual framework of rbv is strongly linked to the existence of valuable, rare, inimitable or non-substitutable characteristics of organization-specific resources and capabilities (barney, 1991). moreover, a further precondition is the heterogeneous and immobile distribution of resources and capacity among organizations. the conceptual framework of rbv states that corporate resources are broadly divided into two categories, tangible and intangible. the key characteristics of tangibles are that they have visible physical attributes; capital, land, buildings, plants, machinery and supplies are examples of tangible sources. inverse, intangible resources are invisible and have no physical attributes. some examples are the culture, brand equity, knowledge base, reputation and intellectual property of an organization (barney, 2007). according to rbv principles, companies must focus on the identification, development, protection and use of resources and capacities to ensure a sustainable competitive advantage. the resource-based theory considers the resources of the organization as the key to improved organizational performance. in this connection, resources include all the assets a firm can draw on to develop and execute an organizational performance strategy. malmi and brown (2018) affirm that the management control system can help develop an appropriate theory on how to design a series of controls that support company objectives, control activities and enhance organizational performance. 2.2 management control systems the concept and definition of the management control system (mcs) have been examined in various literature. henri (2016) sees management control system (mcs) as procedures and systems that are formalized by using the information to retain or alter the pattern of organizational activity and as well include the planning system, reporting and monitoring system that depend on data provided (henri, 2016). mcs was developed by anthony (1965) as the process for the effective and efficient management and utilization of resources, to achieve organizational objectives (akroyd & maguire, 2017). agbejule (2017), on the other hand, described the management control system as a formal information-based routine and procedures that managers use to preserve and change organizational patterns. bedford and malmi (2018) state that in the form of planning and control, the management control systems include: strategic planning, management control, and task or operational control. strategic planning control addresses problems relating to the fundamental goals and implementation in an organization, followed by monitoring of its progress. management control deals with proper allocation and efficient use of resources, competitive substance and the transformation into the reality of the organizational objectives. the task management controls address the efficiency factors of the company's operations. the organizations' employees are effectively guided in the achievement of their goals. the management establishes formal controls in writing, while employee behavior provides informal control (bedford & malmi, 2018). 149 the management control system is a system, according to albertini and muzzi (2018). a system consists of a combination of machines and people working for a common goal. a system may be described as a number of phases or stages consisting of the input, transformation and output phases. measurement, analysis and reporting phases are added to the system by a control system. measurement of output is carried out as compared to a plan, analyzed and then reported in the positive or negative as feedback in the relevant earlier stages of the control system. data or information is usually returned to organizational management at every stage of the control system. nasiru (2018) argued that management control system is a tool for the company's strategy. however, a more comprehensive view of the management control system may be a system based on the concept of guidance instead of compulsion and also include learning and limits. the concept of the management control system is, therefore, more diverse than the concept of formulating and implementing strategies and is used for various purposes: observation, learning, reporting, restricting, monitoring, and motivation. simons (1995) designed a management control framework to achieve the company's strategic goals. the control frameworks concentrate on the transmission and interaction of information for empowerment, innovation, and control (nasiru, 2018). empowerment means that employees are given more decision-making and rights in addition to senior management; this is believed to be the way to effectively achieve the desired result. managers cannot take all information and decisions into their possession. innovation is based on human activities to improve strategic goals and goals. this framework aims to implement management instruments that can maintain or change patterns of organizational behaviour. this should be done in a way that reduces to a certain level the final control risk. the key in simons's (1995) control framework is the interaction of instrumental control mechanisms with people. the interaction between instrumental mechanisms and people-oriented control mechanisms involves leverage between belief, interactive, boundary and diagnostic control systems. the leverage effect and control levers reinforce one another and efficiently and effectively achieve strategic organizational aims. the following are four control levers for simons (1995): belief control systems: people that are part of a belief control system are encouraged to explore new methods to provide value to commit to the organization's aims. effective managers make an effort to educate and motivate workers about the company's basic values and purpose. these executives believe in people's inherent ability to innovate and bring value to strategic organizations. according to simons (1995), the core values of creating a sort of social control by employees must be strongly identified. this social control reduces abnormal conduct concerning fundamental values. it will also lead project staff to effectively pursue strategic corporate goals (hossain & hakeem, 2018). h01: belief control system has no significant influence on organizational performance boundary control systems: this provides limitations of the employee project so that unethical behaviour can be reduced to a minimum level (such as framework, conditions, rules and code of conduct). furthermore, boundary control systems are designed to reduce risks. this system shows the limits that should not be exceeded on employees in the organization. 150 h02: boundary control system has no significant influence on organizational performance diagnostic control system: it is used to track targets, key performance indicators, and remedy deviations from the default norm. however, using diagnostic control systems alone will not be enough to provide successful control, since the interplay of instrumental and people-oriented control mechanisms, as well as the leverage effects between belief, interactive, diagnostic control systems, and boundary systems, is crucial (hossain & hakeem, 2018). h03: diagnostic control system has no significant influence on organizational performance interactive control systems: they are used for organizational learning and strategy enhancement and concentrate on organizational strategic uncertainty. to perceive internal and external signals and react to the company plan, interactive control is a constant interaction between top management and other participating organizational components. managers may use interactive controls to handle strategic organizational ambiguity, assess risks and opportunities, and react proactively to competitive situations (hossain & hakeem, 2018). h04: interactive control system has no significant influence on organizational performance strict limitations are placed through the diagnostic control and boundary systems-yin supplemented by belief systems and interactive control systems-yang, allowing the required innovation to be made. simons (1995) provided a solution with the principle of control levers, where the necessary creativity and control are sought for interaction. the management should provide the core values of the (project) organization first within the control levers. management must also set clear boundaries for employees to stay. second, to attain the organization’s objectives, the interactive control needs to focus on the communication of senior management with the other parts of the organization. interactive controls aim to create a process of learning throughout the organization through the ongoing reduction of human process deficiencies, optimization of processes and improvement of organizational strategies. this can be achieved by managers regularly identifying risks and evaluating their effects. 2.3 organizational performance according to bashaer (2016), organizational performance refers to a company's performance against its objectives. tomal and jones (2017) also define organizational performance as an organization's actual results or output against the planned product of the organization. in addition, according to bello (2017), a company's potential success is determined by its organizational performance and capacity to successfully execute strategies to fulfil its corporate objectives. the efficiency, performance, and outcomes of the business model are only a few characteristics that indicate organizational performance (beauty, 2017) according to adedeji (2017), organizational performance refers to an organization's actual performance or outcomes as compared to its anticipated performance (or goals and 151 objectives). organizational performance according to adedeji (2017) consists of three particular areas of business performance: i. performance of the financial sector (profits, roa, roi, etc.) ii. product and performance on the market (sales, market share etc.) iii. return of shareholders (total shareholder interest, economic value added, etc.). in most studies, variables such as strategy planning, operations, finances, legal and organizational development are included (paul, 2018). in recent times, organizations have tried to manage their performance using the balanced scorecard methodology, which measures performance in several dimensions like: i. performance of the financial sector (e.g. shareholder return) ii. service to the client iii. social accountability (e.g. corporate citizenship, community outreach) every organization's performance largely depends on its leadership ability in the implementation of strategies (ngwama & ogaga-oghene, 2022). according to silva (2018), the core of leadership is a conditional connection between a manager and his followers. given the fact that organizational objectives are always being thwarted, leaders' tactics must be adaptable enough to accept change. employees are a major element of the firm and comprise the team that works to accomplish organizational objectives, thus their performance is also important. 2.4 empirical review similarly, nasiru and rapiah (2018) conducted a study that shows how nigerian companies' institutional issues have led to a general weakness in their management, which hinders the performance of numerous companies and has resulted in a weak management control system, which is not consistent with the strategic organizational goals. the study adopted a framework consisting of a critical component of the malmi and brown (2008) mcs package of planning control, administrative control and cultural control and would demonstrate improved performance if empirically investigated. the study showed that nigerian managers need to be more informed of the necessity of an improved mcs practice because this would lead to reverse institutional changes, where isomorphic pressure would lead to better mcs practices, which would lead to better business performance. oshode, alade and arogundade (2018) conducted a study which examined the impact of a management control system on the performance of selected lagos, asaba and kano textile firms in nigeria using the tool for structural equation modelling. the study's findings demonstrated that, as predicted, external control and formal internal control systems were highly linked with financial, service quality, and procedural performance characteristics. internal informal control, on the other hand, only had a substantial link with service quality performance. in contrast to the direct association between external control and firm performance, the research found that external control, via the existence of formal internal control, had a greater relationship with all three performance characteristics. in a study by muhammed (2017) numerous studies in several developed and emerging economies studied the effect of the management control system (mcs) on business strategy and company performance. the findings showed that there is a strong connection between mcs, strategy and business efficiency, which can influence the formulation and implementation of competitive strategies positively and support them. 152 in terms of cohesion and adaptability within the nigerian aviation industry, ukoha alagah and zuzu (2017) empirically looked at management control and business effective relations. it tried to explain management control systems to improve the efficiency of aircraft companies. the authors found that management control systems and organizational effectiveness are significantly interconnected by the spearman rank order correlation coefficient in testing the hypotheses. the interaction between the management control systems and the effect it is having on the strategy and organisational performance has been studied empirically by okpara (2017). the result of the research showed that performancedriven behaviour and regular use of management control combine to give improved outcomes. uddin and hossian (2017) carried out a study examining the impact of management control systems on organizational performance and productivity from the perspective of multinationals operating particularly in the telecommunication sectors of nigeria. the study maintains that management control influences organizational performance and productivity significantly in the dynamic emerging world. 3. methodology the survey design, which is a descriptive form of research methodology, was used for this study. the survey approach offers the benefit of collecting vast amounts of data from a big population at a cheap cost. for the population of the study, the study focused on globacom limited. telecommunications services, such as international and domestic voice calls, sms, high-speed internet and fixed landline adsl from the company as well as telecommunications solutions, are provided by globacom limited. nigeria, united kingdom, and ghana are some of the countries in which globacom has customers. due to convenience and easy data accessibility, 358 employees of globacom limited in lagos state were selected for the study. field surveys were employed to collect data, and structured questionnaires were the primary method. out of the 358 employees, 248 employees partook and filled out the questionnaire. simple random sampling was adopted as it provided the entire population with equal chances and lowers the rate of error. each item was measured on a 5-point likert scale: strongly agree, agree, neutral, disagree, and strongly disagree. the items for each of the management control system construct were adapted from mohamed, wee, rahmana and aziz (2014) study. belief, interactive, boundary, diagnostic, and interactive control systems had cronbach’s alpha values of 0.881, 0.897, 0.871, and 0.897 respectively. the items for the organizational performance were developed for this study, and organizational performance had cronbach’s alpha value of 0.756. according to sekaran (2005), cronbach’s alpha of 0 to 0.6 signifies low reliability; if the value is within 0.7, it signifies acceptable reliability; and if the value is 0.8 and above, it signifies that the instrument is reliable. pearson correlation was adopted using statistical packages for the social sciences (version 20) to determine the relationship between the dependent and independent variables. 4. research results the study showed that there were more male respondents (54.8%) than females (45.2%) in the sample of respondents. 71% of the total respondents were aged between 30 and 49 years. the majority of respondents for this study are married representing 80.6% of the total respondents. the respondents were educationally sound with 58% of them having 153 graduated with b.sc./hnd. the majority were middle-level staff, and have spent more than 6 years in the organization. hypothesis one: h01: belief control system has no significant influence on organizational performance from table 1, the correlation result hypothesis one shows that belief control system has a positive correlation coefficient (r) of 0.474 with organisational performance, and it is significantly related at 0.000 (p<0.01). this indicates that there is positive and significant relationship between belief control system and organisational performance. this implies that as the level of belief control system increases in the organization, the better the organisational performance and vice versa. therefore, the null hypothesis is rejected (h0) and the alternate hypothesis is accepted (h1). hypothesis two: h02: boundary control system has no significant influence on organizational performance from table 1, the correlation result hypothesis one shows that boundary control system has a positive correlation coefficient (r) of 0.475 with organizational performance, and it is significantly related at 0.000 (p<0.01). this indicates that there is positive and significant relationship between boundary control system and organizational performance. this implies that as the level of boundary control system increases in the organization, the better the organizational performance and vice versa. therefore, the null hypothesis is rejected (h0) and the alternate hypothesis is accepted (h1). hypothesis three: h03: diagnostic control system has no significant influence on organizational performance from table 1, the correlation result hypothesis one shows that diagnostic control system has a positive correlation coefficient (r) of 0.393 with organizational performance, and it is significantly related at 0.000 (p<0.01). this indicates that there is positive and significant relationship between diagnostic control system and organisational performance. this implies that as the level of diagnostic control system increases in the organization, the better the organisational performance and vice versa. therefore, the null hypothesis is rejected (h0) and the alternate hypothesis is accepted (h1). hypothesis four: h04: interactive control system has no significant influence on organizational performance 154 from table 1, the correlation result hypothesis four shows that interactive control system have a positive correlation coefficient (r) of 0.472 with organisational performance, and it is significantly related at 0.000 (p<0.01). this indicates that there is a positive and significant relationship between interactive control system and organisational performance. this implies that as the level of interactive control system increases in the organization, the better the organisational performance and vice versa. therefore, the null hypothesis is rejected (h0) and the alternate hypothesis is accepted (h1). table 1 − correlations matrix org_perf blf_crtl bon_crtl diag_crtl int_crtl org_perf pearson correlation 1 sig. (2-tailed) blf_crtl pearson correlation .474** 1 sig. (2-tailed) .000 bon_crtl pearson correlation .448** .538** 1 sig. (2-tailed) .000 .000 diag_crtl pearson correlation .606** .530** .682** 1 sig. (2-tailed) .000 .000 .000 int_crtl pearson correlation .620** .605** .612** .704** 1 sig. (2-tailed) .000 .000 .000 .000 ** correlation is significant at the 0.01 level (2-tailed). blf_crtl = belief control, bon_crtl = boundary control, diag_crtl = diagnostic control, int_crtl = interactive control systems, org_crtlorganisational performance 4.1 discussion of findings the management control system is an undisputable instrument for companies to achieve efficiency in terms of cost reduction, coherence and rapid reactions to a dynamic environment for competitiveness and business performance. research shows that management control system elements play an important role in influencing organizational performance positively. the belief control system relates to the company's culture, in which a vision and mission statement that state the interests of all stakeholders are communicated to the employees. this result showed that the belief control system is an indicator to ensure managers produce reports detailing relevant trends to achieve better performance for the organization. the findings backed up hossain and hakeem's (2018) suggestion that organizations should include belief control systems in organizational performance system design to boost employee readiness to share information to create values and modify beliefs to accomplish corporate goals. the study revealed that the relationship between organizational performance and the belief control system is positive and significant. the organization will have an appropriate code of conduct, standard operating procedures and a variety of regulatory constraints so that employees follow industry practices and guidelines by including the boundary control system in the organizational structure design. the results reflect nasiru and rapiah's (2018) findings, stating that boundary control systems aim to mitigate risks. these systems show the limits that should not be exceeded for workers in the organization. findings on the diagnostic control system, for example, the budget and budgetary controls and performance assessment system will enable project managers to regularly monitor the progress of employees. 155 the study also showed that interactive control is a major indicator of organizational performance. interactive monitoring systems give the organization the freedom and mechanisms for periodically assessing customer satisfaction, forecasting and maintaining the firm's existing project portfolio. the results are consistent with those of ukoha, alagah, and zuzu (2017), who hypothesized that an interactive control system might inspire organizations to seek out new methods and practices to improve organizational performance. managers may use interactive control systems to concentrate on strategic organizational uncertainty, learn about dangers and opportunities, and react proactively to changing competitive situations (hossain & hakeem, 2018). 5. conclusion this study examined the link between management control systems and organizational performance in the contextual effect of belief, boundary, diagnostic, and interactive control systems. companies are pushed to establish business models to handle the risks and uncertainties in their business settings in today's competitive and complicated global economy. the role of the management control systems (mcs) in creating competitive advantage by continuously rejuvenating organisational survival and growth in these complex and uncertain environments cannot be over-emphasized. managers employ instruments and systems to guarantee that the business responds quickly to dynamism, reduces costs and improve safety while ensuring that the actions and conduct of workers are compatible with the corporate strategy and goals. businesses may achieve efficiency in terms of cost reduction, cohesiveness, and rapid reaction to the dynamic environment via the use of the management control system, which is an indisputable instrument. 5.1 recommendations i. the company's basic values, beliefs and aspirations should be well communicated to personnel to get them enthusiastic and oriented about the organizational culture. ii. the assessment of corporate project performance is necessary to identify better processes in the execution of future projects by the management control systems. this allows for an optimal control system for management. iii. the study also recommends that to increase organizational innovation, the development and improvement of the top management of a company should be accompanied by leadership features and management control elements. iv. management control systems may demand a lot of time and resources from the management; therefore, managers should prioritize where they can spend their time and resources. performance-driven conduct (i.e., goal-oriented behaviour) among managers and other employees is essential to effective management control. 5.2 contribution to knowledge this study examined the link between management control systems and organizational performance in the contextual effect of a belief control system, a boundary control system, a diagnostic control system and an interactive control system. companies are pushed to establish business models to handle their strategic uncertainties and risks in their business settings in today's competitive and complicated global economy. the role of the management control systems (mcs) in creating competitive advantage by continuously rejuvenating organisational survival and growth in these complex and uncertain 156 environments cannot be over-emphasized. the study demonstrates that the management control system is made up of tools and procedures that managers employ to ensure that the organization responds quickly to change, lowers costs and improves safety, and ensures that employee actions and decisions are in line with the company's strategies and goals. unquestionably, the management control system is a crucial instrument for businesses to use to increase productivity and competitiveness via cost-cutting, cohesiveness, and quick responses to changing external conditions. 5.3 suggestions for further study for future research, the following recommendations have been made: i. this study examined formal control systems. the implementation of informal control systems (shared belief, normative behaviours and values), social relationships, socialisation processes, and the dependence on autonomy demand more empirical studies that deepen academic knowledge of the management control system. ii. in other large service organizations, management system practices studies are needed, mainly for banking and insurance firms, in order to generally frame the management control system policies. iii. a longitudinal study of a wider range of companies would be helpful to study how their decision-making, actions and performance management have affected the use of the management control system. 5.4 limitation of study it was only because every other organization has its own unique set of standards, values and cultural variables that the findings for others were limiting. the research focused only on gathering data via the use of structured questionnaires. respondents were unable to share their ideas outside of the framework since the surveys were closed. references 1. adedeji, b. s. 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(2021), “omnichannelling and the predominance of big retailers in the post-covid era”, symphonya emerging issues in management, n. 2, pp. 142-157. 1. introduction 2. literature review 2.1 resources-based view (rbv) theory 2.2 management control systems 2.3 organizational performance 2.4 empirical review 3. methodology 4. research results hypothesis one: hypothesis two: hypothesis three: hypothesis four: 4.1 discussion of findings 5. conclusion 5.1 recommendations 5.2 contribution to knowledge 5.3 suggestions for further study 5.4 limitation of study references 83 education as an analysis of poverty status of households in limpopo, south africa abdul maluleke tshwane university of technology, south africa emmanuel innocents edoun tshwane university of technology, south africa solly pooe tshwane university of technology, south africa received: february 16, 2022 accepted: june 7, 2022 online published: june 28, 2022 abstract the lives of many south africans have been profoundly influenced by the policies of the racially oppressive apartheid government that ruled the country from 1947 to 1994. the provision of basic services under the apartheid government was very poor, particularly for the greater black majority living in rural homelands. as a result, the country has seen underdevelopment in human capital of the overwhelming majority of the population in rural areas, resulting in low levels of well-being and high levels of poverty and inequality that have persisted to this day. using secondary data sets from the living conditions survey (lcs) 2014/2015 conducted by statistics south africa, this research aims to analyse the role of education on the economic well-being status of households in limpopo province of south africa. the official absolute income poverty line of r10 680 (lower bound) per capita per annum in 2021 prices were used. in order to establish the relationship between education, socio-economic factors and the poverty status of an individual or a household, a binary regression model was used. the results obtained revealed that lower educational attainment is associated with a higher prevalence of household poverty (low well-being status). additionally, findings indicate that age, marital status and household status have a direct impact on well-being. keywords: economic well-being; well-being; poverty; educational attainment; households; employment; limpopo province; south africa. international journal of economic behavior, vol. 12 n. 1, 2022, 83-100. https://doi.org/ 10.14276/2285-0430.3342 mailto:malulekeaf@tut.ac.za mailto:malulekeaf@tut.ac.za mailto:malulekeaf@tut.ac.za 84 1. introduction human well-being is a multifaceted subject spanning decades and geographies due to its capability to inculcate varied academic subjects (camfieled et al., 2018). the existing wellbeing literature, however, has mainly considered subjective self-reported well-being at individual-level using indicators (webster et al., 2021; conger, conger & martin, 2010). linked to lack of or lower well-being is lack of educational attainment; this is supported by various research in the literature (gebresilassie, 2014:134; ferrante, 2009; cunado & de garcia, 2012). according to bloom et al., (2005), palmer, wedgwood, hayman, king and thin (2007), thomson (2008) and badat and sayed (2014), education could be seen as a tool that would lead to changes in both rural and urban communities. various research over the past few years focused on the importance of education in a developing society (zwane, 2020; naveed & sutoris, 2020; wanka, 2014), however, there has been a paucity of studies examining the relationship between education and well-being within a south african context. as one of the primary determinants of individual well-being, the influence of education has produced some interesting results. in general, the evidence regarding the relationship between economic well-being and educational attainment is relatively ambiguous (ferrante, 2009; cunado & de garcia, 2012). research by botha and booysen (2014:163) and kahneman and krueger (2006:2) likewise argued that there is a positive association between educational attainment and well-being. the focus of this study is on education as an indicator of economic well-being status within households in limpopo province, south africa. 2. theoretical and empirical literature 2.1 educational attainment and well-being in south africa since the dawn of democracy in 1994, south africa has continued to invest billions of funds into the education system and the provision of other basic services. despite the persistent efforts from the government in making education accessible to everyone, rural households across the country more specifically are still characterised by low levels of well-being and low educational attainment rates. in addition, majority of these households are based in the more rural provinces notably; limpopo, the eastern cape and mpumalanga (rhodes & mckenzie, 2018). limpopo province is one of the poorest and most rural provinces in the country. poor households within the province are characterised by low well-being status, low levels of education, difficult and time-consuming and lack of access to; health care services, transportation and few opportunities for lucrative employment (stats sa, 2016; wanka, 2014:2). as a result, many households turn out to have very low well-being status in this province. education is seen as a key driver in poverty reduction and to achieve social justice in south africa (wanka, 2014:18). the oecd’s “how’s life? report (2017) proclaim that people’s achievement prospects are widely linked to the various dimensions of well-being. it further exposes the disparity in the quality of life, life expectancy and happiness when education is taken into consideration. according to oecd (2017), educational attainment is one of south africa’s weakness that contributes to the well-being status of its citizens. a study done by wanka (2014), using the income and expenditure survey (ies) showed that households headed by well-educated persons had a lower portability of poverty. evidence from other countries can also be seen in a research conducted by childs 85 (2018), which showed that employment status and education had a huge effect on the wellbeing status of australian youth. binder and coad (2011:275) found that there is a positive association between education and happiness at lower quantiles but a negative on in the upper quantiles. further suggesting that majority of people who are happy have a higher educational attainment as opposed to those with lower educational attainment. 2.2 the influence of education on well-being status as one of the primary determinants of individual well-being, the influence of education has produced some interesting results. in general, the evidence regarding the relationship between economic well-being and educational attainment is relatively ambiguous (ferrante, 2009; cunado & de garcia, 2012). research by botha and booysen (2014:163) and kahneman and krueger (2006:2) also argued that there is a positive association between educational attainment and well-being. previous studies on the relationship between well-being and education many mainly focused on developed countries, where education has found to be a major determinant of well-being. with respect to rural provinces in developing countries such as limpopo, evident research on the link between education and well-being is less common (botha & booysen, 2014). despite the substantial body of knowledge examining the correlates of educational attainment and its bearing on well-being, the interactions between how household wellbeing and education relate to each other have received unexpectedly little attention. survey data as well as reports from both south african and international studies on education and well-being continue to reveal that, education and well-being are somehow positively correlated. walker (2014:418) argued that education is a useful tool that should be prioritised to advance economic growth and reduce inequality in south africa. chen (2011:117) endeavoured to determine the impact of education on happiness in four asian countries using data from the east asian social survey (eass). chen (2011) finds that individuals who received more education are associated with happiness due to having access to having better life conditions; these conditions are related to well-being. geda, de jong, kimenyi and mwabu (2005:10) conducted a study using the 1994 welfare monitoring survey in kenya and found educational attainment to be a significant determinant of poverty in kenyan households. the results further indicated that the lack of secondary education increased the probability of the house being poor. in their theoretical paper, joboku et al., (2021), reported that technical and vocational and educational training (tvet) colleges were seen as great tools to increase human capital and alleviate poverty of the nigerian population. although some studies argue that income is more essential in enhancing well-being and happiness (for example easterlin, 1974; diener & biswas-diener, 2001:119 & kushlev, dunn, & lucas 2015:483), recent research agrees that absolute income plays a crucial role in enhancing one’s well-being (chen, 2011:118; ferrer-i-carbonell, 2005; ball & chernova, 2008). this arise since education is regarded as one of the significant investments in human capital, and educational attainment is highly correlated with absolute income (chen, 2011:118). 86 3. data and methods 3.1 data description the data for this research was obtained from the living conditions survey (lcs) 2014/2015, conducted by statistics south africa (stats sa) during the period 13 october 2014 to 25 october 2015 and embargoed until january 2017 after which it was accessible to the public. the lcs is one of stats sa’s common periodic survey conducted every five years with the aim of collecting data that depicts south africa’s households living conditions and extent of poverty. furthermore, the 2014/2015 lcs is the most recent survey conducted by stats sa. the lcs data were chosen for the present study because they are representative of the national and provincial level economic activities that are aligned to the objectives of the study. the lcs was conducted with specific objectives in mind, one of which was to provide relevant statistical information on household consumption and poverty levels and patterns (stats sa, 2017). 3.2 population and sampling the information contained in the lcs was collected from 23 380 households across south africa over a period of 12 months. when collecting the data, the survey used a combination of the diary and recall methods wherein households were required to answer a variety of questions from the questionnaire developed and administered by stats sa over a four-week period to document household daily acquisitions. the lcs study population consisted of all households across south africa, with 30 818 households sampled to take part in the survey. out of these, the sample realisation constituted of 27 527 (83,65%) (stats sa, 2017:61). however, due to some of the sampled households being out of scope and being unoccupied; only 23 380 households participated in the study. this study will focus only on the households from the limpopo province. the response rate for limpopo province was at 95.6%, with 2 882 households (11 611 persons) participating in the survey (stats sa, 2017:62). the survey sample was comprised of all domestic households, holiday homes and households on workers’ residences. institutions such as prisons, hospitals, dormitories for scholars, old age homes and student accommodation were excluded from the study sample (stats sa, 2017:4). the study sample also omitted boarding houses, hotels, lodges and guesthouses. 3.2 data analysis the data and all association information for this study was were obtained from stats sa and imported into the statistical package for social sciences (spss) program version 26. the statistical analyses were performed using microsoft excel, spss and statistica computer programs. 4. objective method used to measure well-being the most vital step in measuring well-being is determining the method of measurement and principles that guides the measurement. objective poverty measures are based on a poverty definition wherein people are considered poor if their income or expenditure is below a specific level (below the poverty line); or non-poor if it falls above the set poverty line. the poverty line is used a standard to determine or track the poverty status of an individual or household. 87 the economic well-being analysis in this study is based on the absolute poverty measure. the official absolute poverty lines are the starting point of analysis and are constructed using the cost-of-basic-needs (cbn) approach through which well-being is linked to the consumption of goods and services. these poverty lines are money-metric based and are used to indicate the threshold on which poor and non-poor individuals can be distinguished. in south africa, the most and frequent used poverty income poverty lines are the lower bound poverty line (lbpl) and upper bound poverty line (ubpl) developed by stats sa (stats sa, 2018:3). changes in living costs require an annual review and update of the poverty line to preserve the relevance and integrity of the poverty line (stats sa, 2019:3). consequently, this study employs the “lower-bound” and “upperbound” poverty lines which amount to r890 x12 = r10 680 per capita per annum and r1 335 x 12 = r16 020 per capita respectively (in 2021 prices). the per annum amounts are used to predict those consuming below or above the threshold. households are considered poor if their income or expenditure is below the poverty line; or non-poor if it falls above the set poverty line. consistent with similar studies within the south african context, this study used the lower bound poverty line of r10 680 per capita per annum. table 1 below presents the list of inflation-adjusted poverty lines developed by stats sa between 2006 to 2021. table 1 − stats sa inflation adjusted poverty lines from 2006 to 2021 (per person per month in rands) year food poverty line lower bound poverty line upper bound poverty line 2006 219 370 575 2007 237 396 613 2008 274 447 682 2009 318 456 709 2010 320 466 733 2011 335 501 779 2012 366 541 834 2013 386 572 883 2014 417 613 942 2015 (april) 441 647 992 2016 (april) 498 714 1 077 2017 (april) 531 758 1 138 2018 (april) 547 785 1 183 2019 (april) 561 810 1 227 2020 (april) 585 840 1 268 2021 (april) 624 890 1 335 source: stats sa (2021) 4.1 logistic regression in carrying out empirical analysis on the impact of educational attainment on the economic well-being status, most studies used the binary logistic regression mode for instance (endeshaw & adugnaw, 2019:32; michael et al., 2019). the binary logistic regression model is suitable in this case because the dependent variable which is economic well-being proxied by poverty is binary in nature and takes two values; poor or non-poor. 88 logistic regression is a popular mathematical modelling procedure used in the analysis of data to describe the relationship of several independent variable to a dichotomous dependent variable (kleinbaum & klein, 2010:5; field, 2012:761). it is one of the most widely used statistical procedures in fields such as medical statistics, credit rating, social statistics and econometric and similar areas (hilbe, 2015:ix). the logistic regression model is a branch of the generalised linear models (glms). glms are an extension of classical linear models, and all probability models are considered part of glms. logit and probit models are widely used members of the family of glms (cakmakyapan & goktas, 2013:1). there are only two categories (dichotomy) of the response variable in binary logit and probit models. the occurrence and non-occurrence of these events are the groups of the dependent variables. the primary reason why the logistical model is so popular is that the logistic function f(z) is intended to represent a probability that always ranges from 0 to 1. therefore, the logistic model is designed to ensure that any variable outcome that we predict is always a certain number between 0 and 1 (i.e. poor and non-poor in this study). binary logistic regression is useful in the analysis where the prediction of the outcome variables is based on two categorical outcomes (field, 2012:761). logistic regression is based on the principle of expressing multiple linear regression equation in logarithmic terms (referred to as logit) (field, 2012:762). the logistic regression model predicts the likelihood of an event occurring for a given person based on the observations of whether the event did occur for that given person. 4.2 binomial logit model for binary data the logit model is a binomial type of distribution that has two possible outcomes (i.e. they have binary response variables). the outcome variables are classically represented by “success” and “failure” outcomes by 1 and 0 often referred as the bernoulli trial named after well-known mathematician jacob bernoulli. a bernoulli trial has probabilities p(y = 1) = n and p(y = 0) = 1 π, for which e(y) = π .this is the special case of the binomial distribution with n = i. the probability mass function is expressed as: ƒ (𝑦𝑦; 𝜋𝜋) = 𝜋𝜋𝑦𝑦 (1 − 𝜋𝜋)[ 𝜋𝜋 1 − 𝜋𝜋 )]𝑦𝑦 = (1 − 𝜋𝜋) exp [𝑦𝑦 (log 𝜋𝜋 1 − 𝜋𝜋)] when working with glms for binary data, we let y denote a binary response variable, such as the result of a medical treatment (success, failure). each observation has one of two outcomes, denoted by 1 and 0, which we treat as a binomial variate for a single bernoulli trial. the mean e(y) = p(y = 1). we denote p(y = 1) by 𝜋𝜋(x), reflecting its dependence on values x = (x1,....., xp) of explanatory variables. the variance of y is: var(y) = π(x)[1 π (x)] which is the binomial variance for n = 1. among various binary models, the logit model has been popular in estimating poverty. dudek and lisicka (2013) argue that the binary logit model is suitable when dealing with dichotomous variables such as poverty. in 89 addition, cameron and trivedi (2005) as well as hardin hilbe (2007) recommend the logit model when assessing poverty. in table 2 the explanatory variables for the binary regression model are reported. table 2 list of explanatory variables for the binary regression model explanatory variables explanation of variable age age of household head gender gender classification of household head male dummy: 0=no, 1=yes female dummy: 0=no, 1=yes education educational attainment of household head matric education dummy: 0=no, 1=yes post matric education dummy: 0=no, 1=yes household size size of the household less than or equal to 3: 0=no, 1=yes 4 to 6: 0=no, 1=yes 7 to 9: 0=no, 1=yes more than 9 0=no, 1=yes marital status marital status of household head married dummy: 0=no, 1=yes living with partner dummy: 0=no, 1=yes never married dummy: 0=no, 1=yes widower dummy: 0=no, 1=yes separated dummy: 0=no, 1=yes divorced dummy: 0=no, 1=yes source: author’s own compilation 5. results and discussion 5.1 descriptive analysis the secondary data for this study were analyzed and then summarized using descriptive statistics. for the present study, descriptive statistics include frequency tables and crosstabulations for the predominant nominal data. the data were downloaded, ordered, and the percentage results were calculated using statistical programme for social sciences (spss) version 26 and exported to microsoft excel. the descriptive statistics function of spss was used to conduct the descriptive analysis of the data. according to the lcs, the sample included all the residents of the household who were at least one year(s) of age. the age distribution indicates that majority of the participants were between 1 and 18 years of age. the age profile of participants was deemed acceptable as families (households) usually have more children than elderly people. this result is in sync with the population age structure in south africa where up to 58% of the nearly 54 million people in the country are aged between 18 and 50 years (index mundi, 2015:1). furthermore, the age group 18 – 50 years of age are the most economically active group in many countries (population reference bureau, 2015:1), they are most likely to participate in most surveys conducted by statistics south africa. the gender composition of the sample was 45.20% for males and 54.80% for females. one of the main sex distribution indicators is the sex ratio. it shows the number of males 90 per 100 females. if it is above 100, it shows the predominance of males over females, and vice versa. according to stats sa, the sex representativeness of south africa during the 2011 census was 95 (88 for limpopo province). in addition, the census showed limpopo alongside eastern cape were the most affected provinces by inter-provincial migration in terms of outmigration (stats sa, 2012:19). this study submits that males are still, in certain circumstances, more likely to be the breadwinners and the sample distribution was representative. however, contrary to findings above, the lcs reported that there were more male-headed households (58,64%) compared to those headed by females (41,36%), accounting for two-fifths of households in the lcs 2014/2015. in addition, the lcs found a greater gender parity in coloured and black households where there was close 50/50 split (58,88% versus 41,12% and 57,21% against 42,70% respectively) (stats sa, 2017:10). using cross-sectional survey data of debre berhan town in ethiopia; endeshaw and adugnaw (2019:32-33) found that female household headship has been on the rise in many african developing countries. with regards to educational attainment of the sampled respondents, figure 1 indicates that most of the respondents had attended some form of schooling (62.4%), 9,9% had completed matric/grade 12 and 3.7% had some form of matric certificate. approximately, 22.1% of the sample had not attended any form schooling. a very low fraction of the respondents had some form of post matric qualification. while it would be fascinating to find out how educational attainment affects the well-being status, several key issues still need to be addressed. one significant argument relates to what exactly is education, how to measure educational attainment and whether educational qualifications are key indicators of educational level. figure 1educational attainment background of respondents in this scenario, answers are needed concerning why some holders of very high qualifications have a relatively low economic well-being status, as indicated in the literature (howell & howell, 2008:536). there are people who possess very advanced qualifications, but their well-being and prosperity do not correlate to their educational level. conversely, some people do not have any educational qualifications, but their quality of life (qol) is better than those with advanced post-matric qualifications. 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 some form of schooling no schooling grade 12/matric n4/n5/n6 certificate bachelors degree national diploma honours degree other master's or doctoral degree 62,4 22,1 9,9 3,7 0,8 0,5 0,3 0,2 0,1 91 for instance, within the african setup, the attainment of true education was traditionally understood to mean the ability of a person to navigate through the various domains of life such as the economical side (for example, providing for one’s family), respecting the elderly from your community (the social side), and adherence to one’s culture and beliefs, among many aspects (mararike, 2001:63). those who have been able to achieve these qualities were happy and successful in life. however, with the growing acceptance of modernization and the hedonism it entails, the acquisition of educational qualifications has become the prevailing indicator of education. 5.1.1 reasons for not attending an educational institution with regards to reasons for not attending an educational institution by the sampled respondents, table 3 indicates that the vast majority (48%) of the household heads perceived themselves to be too old to further their education. approximately, 17% of the respondents indicated that they were too busy to attend an educational institution. some reasons for not pursuing further education are purely affected by gender. much of these reasons are based on family commitments and lack of funds. table 1 main reasons given by household heads for not attending an education institution reason for not attending an educational institution sex of each household head total male female too old 41,8% 53,3% 48,0% has completed education/satisfied with his/her level of education 3,8% 1,7% 2,7% difficulties to get to school (transport) 0,4% 0,8% 0,5% no money for fees/text books/school uniform 10,7% 8,6% 9,5% he or she is working at home or business/job 23,1% 11,8% 17,0% do not have time/too busy 2,9% 1,4% 2,1% family commitment (e.g. child minding, pregnancy) 2,2% 9,9% 6,3% education is useless or not interesting 0,3% 0,9% 0,6% unable to perform at school 4,6% 3,4% 3,4% illness/injury 1.2% 1,3% 1,2% other, specify 1,7% 10,1% 1,4% not applicable/unspecified 7,6% 6,0% 6,8% total 100,0% 100,0% 100,0% 5.2 regression analysis regression analysis was employed as a means of testing the contribution of certain socioeconomic factors in determining economic well-being status (using poverty as a proxy). using stepwise logistic regression, socio-economic factors, which were the independent variables, were regressed against the dependent variable, i.e. economic well-being status. the binary logistic regression model was used to provide an indication of the relative intensity of each independent variable in predicting economic well-being. 92 we restrict the analysis to the lower bound poverty line (lbpl) line, as this reflect deprivation more acutely relative to the upper bound poverty line (ubpl) measure and is by far the most commonly used poverty line in various south african studies (for example: rogan, 2014:1348; ardington et al., 2006; bhorat & van der westhuizen, 2008; hoogeveen & özler, 2006; leibbrandt et al., 2006). but in analyses not reported here, the results generally hold when the ubpl is used. we classify an individual as poor if they belong to a household with a real monthly per capita income below a given poverty line. though there are arguments on (especially gender-related) intra-household bargaining which suggest that household resources may not be equally shared (iversen, 2003), we adopt the simplifying assumption that individual welfare is a function of aggregate household income, a convention not unusual in the literature (see e.g. klasen et al., 2015). 5.2.1 treatment of data during regression analysis in addition to the abovementioned, the study recognised that the data representing the variables to be tested were in the form of categorical data. all the independent variables as well as the dependent variable were categorical data. in entering the data into the regression models, dummy variables were created for all categorical variables. categorical variables such as gender, employment status, educational status and poverty status were entered into the regression models dichotomously (coded 0-1) since only two categories were recognised for each of them in this study. education variable was categorised into three categories (less than matric, matric, postmatric) with certificate/diploma, honours combined with masters’ and doctoral degrees as post-matric. less than matric category was used as a reference group in the analysis. for better analysis and due to the small sample size of those post matric qualifications; certificate/diploma, honours, were combined with masters’ and doctoral degrees as postmatric. in the analysis age variable was treated as a continuous variable whereas marital status was categorised into six categories (married, living with partner, never married, widower, separated and divorced) with married group being our reference group in the model. household size was categorised into four categories; namely, less than or equal to three, 4 to 6, 7 to 9 and more than 9 persons per family. a new variable, (poverty incidence) was computed and used to represent the economic well-being status variable in the regression analysis for all households in limpopo. 5.3 results of the regression analysis the binary logistic regression was used to capture how education impacts the economic well-being status (proxied through poverty status) of the respondents in limpopo province. the results obtained from the binary regression analysis are presented in table 4. 93 table 4 − binary logistic regression results using 4 predictor variables 95% confidence interval (ci) odds ratio se p-value lower upper male intercept 0.0929 0.0709 0.002* 0.0207 0.4153 age 0.9731 0.0055 0.000*** 0.9623 0.9840 marital status married reference living with partner 10.6743 8.4351 0.003* 2.2682 50.2326 never married 14.6438 10.6364 0.000*** 3.5268 60.8024 widower 14.3254 14.0165 0.007* 2.1050 97.4881 separated 11.8730 10.4412 0.005* 2.1184 66.5451 divorced 22.3180 22.1160 0.002* 3.2000 155.6516 education less than matric reference matric 0.3930 0.1168 0.002* 0.2194 0.7039 post matric 0.3754 0.1386 0.008* 0.1820 0.7742 household size less than or equal to 3 reference 4 to 6 1.3399 0.2890 0.175(ns) 0.8778 2.0451 7 to 9 3.2852 1.2171 0.001** 1.5893 6.7907 more than 9 2.6634 2.0433 0.202(ns) 0.5921 11.9807 female intercept 1.2098 1.2098 0.724(ns) .42035 3.4822 age 0.9757 0.0045 0.000*** 0.9668 0.9847 marital status married reference living with partner 2.2861 1.6742 0.259(ns) 0.5442 9.6041 never married 1.3621 0.6579 0.522(ns) 0.5285 3.5105 widower 0.1695 0.1919 0.117(ns) 0.0184 1.5602 separated 0.8105 0.9878 0.863(ns) 0.0743 8.8330 divorced 1.0033 0.9544 0.997(ns) 0.1554 6.4745 education less than matric reference matric 0.3816 0.1266 0.004* 0.1991 0.7313 post matric 0.1787 0.0714 0.000*** 0.0816 0.3914 household size less than or equal to 3 reference 4 to 6 2.6814 0.4569 0.000*** 1.9200 3.7446 7 to 9 5.2151 1.8789 0.000*** 2.5739 10.5667 more than 9 10.2924 8.4562 0.005* 2.0567 51.5063 *significant at 0.05 level 94 the results in table 4 provides the classification of the binary regression estimates based on the lbpl of r10 680 per annum of households under study based on the lcs data sets. the analysis focused on the set of explanatory variables that were found in the literature to have significant impact on poverty status of households in limpopo. in order to determine the effect of the explanatory variables on the likelihood of an individual or household being poor in using the lbpl, binary logistic regression was run for the limpopo province data sets. it is evident that most of the explanatory variables are statistically significant at 5%, with expected signs. the theoretical deduction based on the expectation of the results suggests that, the people with lower educational attainment in limpopo are prone to poverty incidence. this is consistent with previous research which found similar results. wanka (2014:61-62) noted that people living in developing countries are affected by high poverty rates which makes it difficult for most citizens to advance or complete their schooling. the overall findings indicate that the explanatory variables chosen for this study were significantly associated with lower well-being status for both males and female headed households. the findings are to a large extent in line with what has been reported in other studies. according to nwosu and ndinda (2018:1), female headed households are ideally associated with high poverty levels compared to their male counterparts. in the past few decades, south africa has witnessed a sharp increase in female headed households. buvinic and gupta (1997) outlined three critical underlying issues that mitigate the presence of poverty incidence in female-headed households; females have significant less economic opportunities compared to men, female-headed families have a higher dependency ratio that their counterparts and lastly, a woman is more likely to be the main breadwinner in a female-headed household. milazzo and van de walle (2017) in their findings reported that sub-saharan africa (ssa) region witnessed a sharp increase in the prevalence of female-headed households. some of the reasons for this trend include labour migration by male heads, resulting in leftbehind female heads (mostly spouses of male labour migrants), and female labour migration which results in (even if transitory) female household headship. according to posel et al., (2017:2), the vast majority of labour migration in south africa’s recent past has been men as they search for better employment opportunities whilst females predominantly remain home to take care of the family. in terms of the control variables featured exclusively using the lbpl line, poverty incidence is significantly higher among those who are old of age, living in large household size and have low educational attainment. according to ralston et al., (2016:1), majority of south africans who are 50 years of age and above and living in rural areas are facing complex socio-economic problems such as high poverty rates, unemployment, heath issues and low social status. the results of this research confirm this complex problem with regards to the poverty and well-being status of households in limpopo as discussed below: the first and significant explanatory variable under study was the educational attainment of the household head. the odds ratios on education reflects the prime role that human capital plays in determining and alleviating poverty. in fact, education is an important dimension of poverty itself, when poverty is broadly defined to include shortage of capabilities and knowledge deprivation. it has important effects on the poor children’s chance to escape from poverty in their adult age and plays a catalytic role for those who are most likely to be poor. 95 the results showed that educational attainment (matric and post matric) of the household head is statistically associated with being poor. the odds of being a poor male with matric is 0.39 less than the odds of being a poor male with less than matric. the regression coefficient for mhhs with post matric qualification (or=0.37) was not significantly affected by poverty incidence when compared to the reference group. similar results are reported for fhhs whereby the regression coefficient of those with matric (or= 0.37) were not found to be associated with poverty. remarkably, fhhs with a post matric qualification had a very low association with poverty incidence (or=0.17); suggesting that educated females are less prove to poverty incidence when compared with those with less than matric. these findings imply that a higher level of education provides greater opportunities for a better job and, subsequently, a higher income as depicted in the literature under section 2.5.4. the regression estimates reveal that both male headed households (mhhs) and female headed households (fhhs) are equally affected by poverty incidence when educational attainment is low, with men reporting only a slightly higher score. these findings confirmed the conclusions of other studies, such as hondai et al. (2005) sarwar et al. (2011); bigsten et al. (2003) and widyanti et al. (2009). more so, this finding is consistent with previous research by wanka (2014:61-62), who found that people with lower educational attainment in limpopo were associated with high levels of poverty. todaro (1977) in his research contended that in developing countries (such as south africa), high levels of poverty make it problematic for most citizens to either complete or advance their educational attainment due lack of affordability of direct and indirect costs related to schooling. with reference to age, table 4 reveals some important facts about household headship and poverty incidence disparities and similarities between fhhs and mhhs in south africa when age is considered. the results show that for both genders, a one-year increase in age of the household head is associated with a higher chance of poverty incidence. the 0.97 odds ratio with regards to the age imply that both genders were significantly associated with poverty. the literature revealed that there is an upward trajectory in overall happiness and well-being as age goes up. on average, the elder generation are happier and less prone to poverty incidence than their under-educated counterparts from earlier age ages to mid30s (nikolav & rusakov, 2016:826-830). the third explanatory variable theorised to have a significant impact on poverty was the household size. household size is a continuous variable and refers to the total number of household members who live in the same home during the survey period for six months or more. as theoretically expected, an increase in household size is associated with poverty incidence for both mhhs and fhhs. mhhs with household size of 7 to 9 was found to have a significant (or= 3.28) prevalence of poverty status of households in limpopo. the odds-ratio indicated that male-headed households in this study are likely to be poor about 3.28 times when compared with the reference group (those with less than or equal to 3 members per household), which implies that male-headed households have a higher chance of being poor as household size increases. these findings support the findings reported in various past research wherein household size has been reported to have an influence on the poverty status. endeshaw and adugnaw (2019:32) found that household size as being positively related with poverty by assuming that family size increases, obviously the probability of having economically non-active members or children and doddering ages is higher, then household resource per head decreases. interestingly, fhhs with a household size of more than 9 persons had a higher chance of poverty incidence (10.29 times) when compared to those with a smaller household size. 96 this is significantly higher even when compared to their male counterparts. fhhs with households sized of 4 to 6 and 7 to 9 were also significantly associated with being poor with the odds ratios of 2.68 and 5.29 respectively. these findings are very crucial in a developing country like south africa where the female headship has been on the rise in the previous three decades. the literature established that fhhs are more likely to be poor than mhhs due to them having a higher dependency ratio as compared to those headed by men. thus, in a predominantly rural province such as limpopo, it is expected that large households will demonstrate a higher chance of poverty incidence than those with a smaller household size. with regards to the marital status explanatory variable; the findings of the binary logistic regression revealed that the odds of poverty incidence of unmarried (living with partner, never married, widower, separated and divorced) mhhs was more likely to be occur compared their counterparts (fhhs). more precisely, the odds ratio indicates that males living with partners are 10.67 times likely to be poor than those who are married (i.e. the reference group). the probability of divorced mhhs being poor were the highest with the odds ratio of 22.31, thereby showing that divorced males are linked to higher poverty incidence. the results in table 4 further suggest that mhhs whose head is either unmarried or widower has a statistically significant chance of being poor (or=14.54 & or=14.32) when likened to those who are married. surprisingly, the marital status of fhhs has not been shown to have a substantial effect on poverty relative to their male counterparts. the odds ratio values of fhhs of those who are widows and separated were 0.16 and 0.81 respectively when compared to the reference group (married) whilst those were divorced recorded 1.00 odds ratio implying that they were less likely to be poor. the odds ratio of those living with partner were 2.2 times when compared to the reference group. it can therefore be taken that marital status of fhhs in limpopo do not necessarily cause higher poverty incidence when compared with those who are married, more so when compared to their male counterparts. these findings hold true for many typical south african families where unmarried persons do not have the liberty to share household’s expenses with their partners. the literature revealed that marital status enhanced quality of life, happiness, and less distress among spouses (lehman et al., 2016:170). consistent with previous research, marital status has been found to play a crucial role in the financial well-being of couples (demaris, 2018:337). 6. conclusions does educational attainment affect the economic well-being status of households? many authors have attempted to answer this question using subjective well-being measuring methods which are generally considered very subjective and not a true reflection of poverty status. this paper adopted an objective approach to measure well-being status. overall, determination of the association between educational attainment and well-being is a complex phenomenon. this study contributes at the same time to the literature on measuring well-being and responds to the growing field of economic development by means of highlighting the role of education in alleviating poverty within the context of a rural province of a developing country. this paper suggests a practicable way to disentangle the effects of the various socio-economic problems on poverty incidence. however, three interesting findings are drawn from the study. (1) people with lower educational attainment in limpopo province are prone to poverty incidence. (2) education, marital status and household size are significantly associated with lower well-being status for both males and female headed households. (3) the results show that for both genders, 97 a one-year increase in age of the household head is associated with a higher chance of poverty incidence. 6.1 using recent data in future studies future studies on poverty alleviation and educational attainment is recommended with more up-to-date or recent data, especially considering that community surveys are amongst the most demanding type of surveys run by statistical agencies both for those implementing the survey and the households that are sampled to participate. the 2014/15 lcs datasets used in this study is the most recent data collected by stats sa, policy-making institutions should strive and allocate budget for the collection of much more recent data. 6.2 addressing the gap between policy and practice and addressing corruption south africa is not lacking in policy; the problem lies in the implementation of policies. different policies formulated by various government structures aimed at reducing poverty as a result of low educational attainment included: the national development plan 2030 (ndp), education and capacity development and the national ant-corruption strategy 2020-2030. south africa need to implement the objectives of the national development plan 2030 which entails creating a south africa that is free from corruption, a country that values integrity, transparency and accountability, respect for the rule of law and zero tolerance to corruption. furthermore, south africa should also implement the findings of the national anti-corruption strategy 2020-2030 policy document, which is aimed at eliminating corruption from all spheres of government as well as the private sector. 6.3 improved funding for the education sector in rural provinces the south african government should properly fund the education sector in line with the guidelines provided by unesco. notably, more funding is required to adequately equip the rural-based schools to enable them to have state of arts equipment and facilities for learning in line with the technology of the twenty-first century. section 29 of the south african constitution enshrines the right to education and defines the positive responsibilities of the state in this respect. policy makers are obliged to make this a reality for all south africans. jiboku et el., (2021), reported similar findings in a study that focused on technical and vocational education and training (tvet) institutions in nigeria. 6.4 suggestions for future research as this paper has shown, educational attainment is a viable strategy for south africa to achieve much needed sustainable economic development and poverty alleviation. more scholarly attention and research could concentrate on coordination and implementation (or lack of) of policies and programs of the south african government with those of other poverty focused institutions such as the oecd including other multinational corporations which claim to be involved in poverty alleviation. the impact of these poverty intervention programmes should be thoroughly investigated and findings need to be reported in a scholarly journals and government publications. disclosure statement no potential conflict of interest was reported by the authors of this research. 98 references 1. badat, s., and y. sayed. 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(1994), "integrazione europea e distribuzione commerciale: politiche comunitarie ed evoluzione del fenomeno", economia e diritto del terziario, n. 1, issn: 15939464, pp. 129-175. 56. musso f., risso m., (2013) "csr for retailers' led channel relationships: evidence from italian sme manufacturers", international journal of information systems and social change (ijissc), vol. 4, n. 1, january-march, pp.21-36, doi: 10.4018/ijissc.2013010102. 1. introduction 2.1 educational attainment and well-being in south africa 2.2 the influence of education on well-being status 3. data and methods 3.1 data description 3.2 population and sampling 3.2 data analysis 4. objective method used to measure well-being 4.1 logistic regression 4.2 binomial logit model for binary data 5.1 descriptive analysis 5.1.1 reasons for not attending an educational institution 5.2 regression analysis 5.2.1 treatment of data during regression analysis 5.3 results of the regression analysis 6. conclusions 6.1 using recent data in future studies 6.2 addressing the gap between policy and practice and addressing corruption 6.3 improved funding for the education sector in rural provinces 6.4 suggestions for future research disclosure statement references 101 leadership change and employee commitment:an empirical study of transformational and transactional leadership style in a university justice ngwama crawford university, nigeria joshua ogaga-oghene crawford university, nigeria received: april 7, 2022 accepted: june 8, 2022 online published: july 10, 2022 abstract lack of employee commitment may be a critical threat to organizational survival and growth. private christian mission owned universities seem to be grappling with survival and growth threats associated with a lack of employee commitment, which is likely to be causing inefficient daily operations, delay tasks completion, fostering customer dissatisfaction, and sabotaging revenue generation initiatives. the study examined the extent to which transformational and transactional leadership styles influence employee commitment in a nigerian private christian mission university. survey research design was used for the study. the target population was 774 full-time employees of the university. the sample size of 89 respondents consisted of faculty and non-teaching staff and was determined using the taro yamane formula. the organizational commitment questionnaire (ocq) and multifactor leadership questionnaire (mlq) were employed as data collection instruments. the study employed proportional and simple random sampling methods to allocate and distribute the questionnaires to respondents. correlation coefficient and simple regression analysis were used to analyse data. the findings suggested that transformational and transactional leadership styles significantly affected employee commitment. the findings implied that the social and economic exchange relationship fostered by transformational and transactional leadership behaviours in organizations promote employee emotional attachment and inspires them to be dedicated to its goals. the study recommended that organizations' leaders should consciously create work environments that promote employee trust, responsible, and productivity behaviours. international journal of economic behavior, vol. 12 n. 1, 2022, 101-121. https://doi.org/10.14276/2285-0430.3382 102 keywords: transactional leadership; transformational leadership; employee commitment; affective commitment; inspirational motivation. 1. introduction lack of employee commitment may be a critical threat to an organization's survival and growth. it is likely to hinder efficient daily operations, task completion, foster customer dissatisfaction, and rupture the organizational bottom line. perhaps, the 21st-century role of human resource managers to motivate and retain a productive workforce is increasingly complex. the globalization of the workforce may have created difficulties for managers in attracting and retaining talented employees and fostering an enabling organizational climate where employees can make meaningful contributions to organizational goals as long-term competitive resources. employee commitment is believed to be a vital resource for achieving corporate objectives considering that employees may be instrumental to the efficient and effective combination of the organization's resources in its quest to improve organizational effectiveness (gberevbie, joshua, excellence-oluye, & oyeyemi, 2017; shuck, reio & rocco, 2011; ugochukwu & egwuatu, 2021; zareiea & navimipour, 2016). employee commitment is conceptualized as an employee’s passionate affection for the organization expressed in his devotion to help it achieve its objectives continually (ongori, 2007). expressed differently, it is a prevailing devoted relationship between employees and an organization reflected in employees' resolve to identify with the mission and vision of the organization they serve by productively remaining in its employment (karami, farokhzadian, & foroughameri, 2017; loor-zambrano, santos-roldán, & palaciosflorencio, 2022). according to sharma, et al. (2021), employee commitment refers to the intention to behave beneficially to the organization, which may be demonstrated by going beyond the call of duty to show that they are proud to work for the organization. perhaps, the prevailing functional environment of organizations is very dynamic. potentially, internal and external forces such as strategic vision, technological changes, globalization, expanding customer expectations, economic, political, and regulatory conditions may create an unstable business environment. the continuous environmental changes may be responsible for constant operational reviews and changes in organizational structure, processes, management team, and leadership style changes. interestingly, despite the belief that employees are a vital organizational resource to accomplish organizational effectiveness, many public and private organizations appear to ignore employee work-related attitudinal responses when contemplating and implementing management team changes and the aftermath of the change in leadership style. according to cook, hunsaker, coffey (2001, p.491), leadership is the act of providing direction and energizing others by obtaining their voluntary commitment to the vision of an organization. it is a process by which a person at the helm of affairs of an organization influences subordinates to accomplish organizational objectives and directs the organization in a way that makes it more cohesive and coherent (acar, 2012). however, leadership style is described as the behaviour used by a leader to motivate the subordinates to strive to achieve the organization’s objectives (mwaura, thinguri, & mwangi, 2014). the leadership literature presents a plethora of leadership styles which includes transformational and transactional leadership styles. transformational leadership seeks to encourage employees to develop their full potentials, moralities, and motivation (bass & avolio, 1994; ismail, mohamed, sulaiman, mohamad, & yusuf, 2011). 103 transactional leadership style refers to behaviors where the leader rewards employees for high effort and good performance or sanction them if their work results are unsatisfactory (bass, 1985). thus, incentive structures are used to increase employees’ attainment of organizational goals in a transactional leadership setting. the scholarly claim that organizational effectiveness may be an outcome of the link between employee commitment and leadership styles has elicited several empirical studies. generally, the contexts of most studies were in typical business organizations including some of the few studies conducted in nigeria (acar, 2012; asgari, 2014; alemayehu & batisa, 2020; awoyemi, 2018; fasola, adeyemi, & olowe, 2013; ugochukwu & egwuatu, 2021). besides, studies based on nigerian higher education institutions are rare, and the few did not focus on private universities, especially universities operated by religious organizations (nweke, okoye, & dike-aghanya, 2021). considering the presence of ecclesiastical footprints in the work environment of universities run by religious organizations and the increasing roles and significance of private universities to national manpower development, private universities will be a veritable setting for new insights on the link between employee commitment and leadership styles. johns (2006) avers that context affects organizational behavior and the neglect of contextual influence can affect research outcomes. also, scholars seem to have unresolved tension on the leadership style and employee commitment link arising from the conflicting findings of extant studies (alemayehu & batisa, 2020: mclaggan, 2013). thus, this paper’s objective is to examine what is the extent to which transformational and transactional leadership styles affect employee commitment in a private christian mission university. it also aims to fill the seeming contextual neglect of ecclesiasticalowned private universities in extant studies and empirically account for the likely implications of a leadership change on organizational employee commitment. additionally, we respond to the need for more studies to resolve the ongoing scholarly tension on the relationship between leadership styles and employee commitment. hence, the following research questions guide the study: rq1. what is the effect of idealized influence on affective commitment in in a private christian mission university? rq2. what is the effect of inspirational motivation on continuance commitment in a private christian mission university? rq3. what is the effect of contingent reward on affective commitment in a private christian mission university? rq4. what is the effect of management by exception on continuance commitment in a private christian mission university? the subsequent sections of this article review the concepts of employee commitment, transformational and transactional leadership styles. also, the theoretical basis of the study is explained. next, is a review of prior empirical studies on the relationship between employee commitment and leadership styles. afterwards, the research method and data analysis process are explained. thereafter, the result of our findings is presented and 104 discussed. finally, the study’s conclusions, contributions, implications and suggestions for future research are presented. 2. literature review 2.1 employee commitment research shows that employee commitment has been conceptualised from diverse perspectives. akanbi & itiola (2013) considered employee commitment as the level to which employees associate with their organization and contribute to organizational efforts to achieve stipulated goals and objectives. this viewpoint aligns with mensah, akuoko & ellis (2016), who stated that employee commitment is the level to which an employee is proud to be identified as an employee of an organization and the amount of enthusiasm exhibited in fulfilling his job roles. moreover, steyrer, schiffinger & lang (2008) consider employee commitment as the relative strength of an individual’s identification with and involvement in a particular organization. aydin, sarier, & uysal (2011) explained the characteristics of employee commitment as an explicit aspiration to retain organizational affiliation, association with the aims and achievements of the organization. it includes employee loyalty and a disposition to exercise significant effort towards attaining corporate purposes. akintayo (2010) avers that employee commitment is the extent to which workers feel dedicated to serving the interest of their employers. ongori (2007) points out that employee commitment is the emotional attachment or loyalty employees have for the organization. as conceptualized by these authors, employee commitment suggests that it involves demonstrated employee loyalty and engrossment in accomplishing assigned tasks towards achieving organizational objectives. perhaps meyer & allen (1991, 1997) advanced the most comprehensive concept of employee commitment and upheld by meyer, stanley & parfyonova (2012). he used a three-dimensional approach to define employee commitment. in their view, employee commitment has affective, normative, and continuance elements. the affective aspect of employee commitment refers to a passionate attachment to and membership of an organization. affective commitment is perceived from an employee's unreserved willingness to remain in the organization's employment and devotion to achieving its goals. according to meyer, stanley, and parfyonova, normative commitment is apparent when employees keep their employment with an organization out of a sense of moral duty and obligation. this mindset is born out of the employee's belief that the organization expects him to be loyal, probably because the organization has invested so much in him. furthering their discourse on the concept of employee commitment, meyer, stanley, and parfyonova avers that continuance commitment is a cognitive attachment of an employee to an organization because of the individual's perceived costs associated with resigning his membership of the organization. the foregoing suggests that an organization may face three variants of employee commitment to manage. employee commitment is believed to facilitate service quality improvement because it engenders employee satisfaction, loyalty, responsible and productive behaviors (yilmaz & çokluk-bökeoğlu, 2008). it can propel employees to undertake voluntary actions necessary for organizational life and entrench high standard systems. besides, employee commitment may encourage organizational citizenship behavior leading to innovations 105 with competitive advantages (park, christie & sype, 2014). moreover, it can enhance knowledge sharing among employees to facilitate adaptation to changing business environments for long-term success (demirel & goc, 2013). in the same vein, visagie & steyn (2011) declared that employee commitment is critical to the success of organizational change initiatives because of employees' passionate involvement with the organization. consequently, because of the bond employees experience with their organization, the challenges associated with high rate of employee turnover may be reduced. a committed employee is usually loyal and concerned about the organization's future, making extra efforts to achieve organizational growth. 2.2. leadership styles the organizational leadership literature suggests that leadership is a critical factor that determines the success or failure of an organization. according to rivai (2017), leadership style is the behavioural disposition of leaders towards subordinates to influence them to contribute to efforts to achieve organizational effectiveness meaningfully. it entails the art of inspiring people to bring about beneficial changes in organizations and helps employees to be responsive to the leaders’ directives and expectations (dubrin, 2019; nurani, samdin, nasrul, & sukotjo, 2021)). moreover, the literature presents several leadership styles which impact organizational success. transformational and transactional leadership styles feature prominently in the literature as organizational leadership paradigms with significant potential to influence employee commitment and organizational outcomes. 2.2.1 transformational leadership transformational leadership is conceptualised as a leadership style that seeks to encourage employees to develop their full potentials, moralities, and motivation (bass & avolio, 1994; ismail, mohamed, sulaiman, mohamad, & yusuf, 2011). it implies that the leader inspires subordinates to change their perception, behaviour, morals, ideas, interests, and values to embrace selflessness and be devoted to surpassing prescribed organizational goals in their job roles. similarly, bass & riggio (2006), cited in fok-yew (2015), explained that transformational leadership involves a leadership disposition to constantly stimulate and inspire underlings to achieve exceptional outcomes and, in the process, develop their leadership abilities. it suggests that transformational leadership encourages changes regarding how organizational goals are accomplished. according to lee, cheng, yeung, & lai (2011), transformational leadership entails clear vision articulation, linking individual and collective interests, and providing subordinates with necessary props to achieve organizational goals. there are four significant characteristics associated with transformational leadership. they are intellectual stimulation, individualized consideration, idealized influence, and inspirational motivation (bass & avolio, 1997; nweke, okoye, & dike-aghanya, 2021). a leader is deemed intellectually stimulating if his disposition impresses and encourages subordinates to attempt novel and creative work approaches. it implies the extent to which a leader inspires associates to challenge prevailing assumptions and engage in risk-taking actions (lee, cheng, yeung, & lai, 2011). leadership behaviour characterised by attentive coaching or mentoring aimed at developing subordinates' potentials and enabling selfactualisation is referred to as individualised consideration. it promotes practices that link employee achievement and growth needs with organizational strategy and goals by 106 assigning more responsibilities (avolio, zhu, koh, & bhatia, 2004). idealised influence refers to a leader perceived as charismatic, confident, ethical, mission-oriented, trustworthy, respectable, and exemplary behaviourally (lee, et al., 2011). inspirational and motivating leaders are deemed to be skilful at articulating organizational vision in ways that motivate employees to buy into the vision and strengthen their resolve to achieve superior outcomes. inspirational motivation implies that leaders behave in ways that motivate and inspire those around them by injecting meaning and challenge into their followers' tasks (silva & mendis, 2017). in sum, transformational leaders exert considerable efforts to inspire and motivate their employees by creating vivid pictures of achievable goals. they are perceived as outstanding role models, and their followers emulate most of their actions. moreover, they activate self-confidence in their followers, empowering them to strive for extraordinary performance in their tasks (barth-farkas & vera, 2014). transformational leadership is considered a leadership model with the potential to foster more significant follower commitment than other models. 2.2.2 transactional leadership according to aga (2016), transactional leadership is characterised by an exchange practice predicated on fulfilling contractual obligations. it involves setting objectives, monitoring, and controlling outcomes. in a transactional leadership context, the leader and follower agree on what roles and tasks the follower must accomplish. the bargain can include the material or psychological rewards the leader will provide the follower for completing the agreed tasks. humphreys (2001) noted that a reward system is a prominent characteristic of transactional leadership. the reward system acts as an incentive for employees to achieve organizational goals. transactional leaders are prone to appeal to the self-interest of their workers as a means to stir them towards the pursuit and achievement of set goals. leaders who employ the transactional leadership model help their subordinates to take cognizance of their responsibilities and the prescribed goals to achieve. also, they motivate their followers by developing their self-confidence about attaining expected levels of performance (lo, ramayah, min, & songan, 2010). transactional leadership is described in terms of two characteristics: the use of contingent rewards and management by exception (antonakis, avolio, & sivasubramaniam, 2003). they described contingent reward as the leader's reward to bestow the subordinate once the latter has achieved the predetermined goals. according to rawung, wuryaningrant, & elvinita, (2015), exception management is a leader’s corrective or evaluative response to employees on the job mistakes. thus, transactional leadership emphasises the task-related exchange of actions and rewards between followers and leaders. udayanga (2020) suggests that transactional leadership involves two significant dimensions, namely task orientation and people orientation. he describes taskoriented leaders as persons with minor concerns for employee growth or personal satisfaction. they seem to have a penchant for assigning specific tasks, specifying procedures, scheduling work and clarifying expectations, encouraging hard work, emphasising deadlines, driving full capacity utilisation, and closely supervising employees. conversely, people-oriented transactional leadership is characterised by a leadership orientation that creates an environment of emotional support, warmth, friendliness, and trust. 107 through the contingent reward mechanisms, transactional leaders can elicit from employees a significant level of commitment, loyalty, organizational involvement, and productivity (awoyemi, 2018; garg & ramjee, 2013, wiza & hlanganipai, 2014; silva & mendis, 2017). the leader's commitment to fulfilling reward promises such as enhanced pay, recognition, promotion, bonuses, etc., can facilitate the leader's organizational goals. additionally, management by exception enables leaders to monitor and control the quality of job outputs. in times of relative goal stability, transactional leadership appears to be more expedient at securing employee commitment (aga, 2016). based on the above, transactional leadership is perceived as a leadership model involving commensurate employee loyalty and productivity in response to incentives. the reward is based on predetermined expectations agreed to between leaders and followers. the individual work-related desires of employees are satisfied in the form of recognition, pay increase, promotion, and bonuses. 2.3 theoretical review 2.3.1 social exchange theory the social exchange theory professes that a mutual bond is activated as persons who incur obligations reciprocate in social interaction (blau, 1964; mugizi, bakkabulindi, & bisaso, 2015). the concept of social exchange theory suggests that when employers and employees interact, there is a tangible or intangible social exchange that may be more rewarding or costly to either of the parties. the organization management literature avers that one of the characteristics of organizations is being a social system comprising people with a defined purpose to which all members subscribe. norms and rules regulate the behavior of organizational members. as organizations make and enforce human resource managementrelated rules and practices, employees respond with behaviors that impact corporate purposes (marescaux, de winne, & sels, 2013). thus, organizations can motivate employees to achieve organizational goals through leadership styles that recognize employees' social exchange-related aspirations. doubtlessly, employees play essential roles in the actualization of organizational purposes, and there are ensuing social exchanges emanating from their roles. from the standpoint of employee workplace-related behavioral research, social exchange theory offers a paradigm to evaluate and understand how leadership styles can influence employee attitude as organizations seek to achieve their objectives. geetha & mampilly (2012) suggest that hrm practices serve as organizations' commitment to employees, reciprocated with positive work attitudes such as loyalty and trust. 2.4 empirical review 2.4.1 leadership style and employee commitment leadership styles and employee commitment has been a subject of interest in the leadership and management literature. researchers within diverse contexts have empirically explored it. many studies reported a positive relationship, while others found the relationship negative. abasilim, gberevbie, & osibanjo (2019) examined the relationship between leadership styles and employees’ commitment. the study used correlation and regression analysis to analyse the surveyed data sourced from 97 employees of the lagos state civil service commission. the authors reported a positive relationship between leadership 108 styles and employee commitment. specifically, the report revealed that the association between transformational leadership style and employee commitment is significantly positive. however, transactional leadership style is negatively related to employees' commitment and is insignificant. ugochukwu & egwuatu (2021) used pearson product moment correlation to assess how leadership style affects employee commitment in the banking sector of anambra state, nigeria. the data used for the study was sourced through structured questionnaires administered to 507 employees. the study’s outcome showed a significant positive relationship between transactional leadership style and affective commitment, while the connection between transformational leadership and continuance commitment was significantly positive. dariush, choobdar, valadkhani, & mehrali (2016) studied the relationship between leadership styles and employee commitment dimensions. their study was based on a sample of 223 employees of a government agency in tehran, iran. the multi-factorial leadership questionnaire (mlq) and the organizational commitment questionnaire (ocq) were deployed as data collection tools. at the same time, structural equation modeling and pearson correlation coefficient were used to analyze data. the results showed that transformational leadership was positively related to affective, normative, and continuance commitments. similarly, the results indicated that transactional leadership is positively and significantly associated with continuance and normative commitments. jekelle (2021) explored how leadership styles affect employee commitment. a crosssectional survey was conducted of 151 employees at a public sector agency in abuja, nigeria. the research engaged a quantitative approach to collect data using a questionnaire and analyzed the data with simple regression analysis. the author reported a positive relationship between transformational leadership and employee commitment. similarly, the result of the association for transactional leadership was positive. alemayehu & batisa (2020) analyzed surveyed data of 136 employees of three transport companies from the wolita and dawro zones of ethiopia using pearson correlation coefficient and simple regression analysis. the study's objective was to determine the relationship between transformational and transactional leadership styles and the three dimensions of employee commitment (affective, continuance, and normative). the researchers reported that transformational leadership significantly affected affective and normative commitment, but not continuance commitment. besides, the effect was more substantial on affective commitment. also, transactional leadership positively impacted affective, continuance, and normative commitments individually. chully & sandhya (2016) used correlation and simple regression as statistical tools to analyze data from a sample of 308 faculty members of bangalore-based higher education institutions. the authors aimed at determining how the perceived transformational leadership behavior of departmental heads impact members of faculty's affective commitment. the study showed a significant positive relationship between perceived transformational leadership and affective commitment. nurani, samdin, nasrul, & sukotjo (2021) empirically examined the effect of leadership style on employee commitment and employee performance using an indonesian institution as context. the sample consisted of 94 respondents, and sem smart pls was engaged to analyze the data. the study’s outcome showed that leadership style positively and significantly affected employee commitment. it implies that organizational leadership is a significant factor in fostering and sustaining employee commitment. 109 fasola, adeyemi, & olowe (2013) undertook a study to ascertain the impact of the respective dimensions of transformational and transactional leadership styles on employee commitment. the authors employed correlation coefficient and simple regressions to examine data derived from their survey of 80 employees of 10 nigerian banks through the multi-factor leadership questionnaire (mlq) and organizational commitment questionnaire (ocq). the authors reported an insignificant positive relationship between transformational leadership styles and employee commitment, while the link between transactional leadership and employee commitment was significantly positive. they noted that nigerian bank employees are more responsive to transactional leadership in their commitment than to the transformational leadership approach. shurbagi (2014) showed that the relationship between transformational leadership and employee commitment is a strong and positive one. the study's outcome was based on regression analyzed data sourced from a sample of 227 libya’s national oil corporation employees using the multi-factor leadership (mlq) and organizational commitment questionnaires (ocq). the study also revealed that idealized influence and normative commitment recorded the highest correlation among the various dimensions of transformational leadership and employee commitment. comparatively, intellectual stimulation and affective commitment recorded the weakest relationship. wiza & hlanganipai (2014) employed surveyed data of 160 university academic staff of south african-based institutions to investigate the effect of leadership styles on employees' commitment. the data were analyzed using spearman correlation analysis. the study's findings revealed that affective and continuance employee commitment dimensions were significantly and positively impacted by transformational leadership style. conversely, normative commitment was significantly and positively affected by transactional leadership style. garg & ramjee (2013) employed the multi-factor leadership questionnaire (mlq) and the organizational commitment questionnaire (ocq) to collect data from 197 employees of selected south african public agencies. their study examined the relationship between leadership style and employee commitment using the two-tailed pearson analysis to make inferences from the data collected. garg and ramjee showed that the effect of transformational leadership on affective, normative, and continuance commitment is weak positively and significantly so. however, transactional leadership had a weak but significant positive correlation with normative commitment. overall, findings from available empirical literature suggest that leadership styles significantly influence the various dimensions of employee commitment. 3. methodology 3.1 research design, sample, and data collection the study employed a survey research design to establish a causal relationship between variables. the study's population consisted of 440 faculty and 334 non-teaching staff of a private university in the south west of nigeria. the sample size of 89 was determined using the yamane (1967) formula on sample size determination with a 10% level of precision. the yamane sample calculation is a way to determine the sample size for a study. it is an ideal method to use for survey research and when the population is finite (uakarn, chaokromthong, & sintao, 2021). the yamane sample size states that: 110 n = 𝑁𝑁 1+𝑁𝑁 (𝑒𝑒)2 (1) where: n = sample size n = population = 774 e = allowable error = 0.10 hence, 774 1 + 774 (0.10)2 n = 88.56 n = 89 respondents primary data was generated using the organizational commitment questionnaire (ocq) (meyer & allen, 1997) and the multifactor leadership style questionnaire (mlq) (bass & avolio, 1997). both questionnaires were adopted because they have been widely used and recommended for their sound psychometric properties (fasola, adeyemi, & olowe, 2013; shurbagi, 2014). the results of prior evaluative studies (cronbach alpha and confirmatory factor analysis) of both research instruments were used to assess the reliability and validity of both instruments. the ocq's composite cronbach alpha was 0.91. at the same time, the construct validity, namely rmr, gfi, tli, cfi, and rmsea, indicated models fit (jonathan, 2020). the composite cronbach alpha of the mlq was 0.82, and the validity indices showed models fit (muenjohn & armstrong, 2008; ugu & okojie, 2016). consequently, ugu & okojie (2016) avers thus: “…in sum, the mlq (form 5x) developed by bass and avolio (1997), has proven successful in adequately capturing the full leadership factor constructs of transformational and transactional leadership theory… the coefficient alpha of reliability were generally significant and above the minimum target of 0.70 (nunnally, 1978), and the correlation of the construct showed that the instrument was robust, reliable and valid for assessing the leadership style in nigeria.” both questionnaires employed a five-point likert scale ranging from (1= strongly disagree; to 5= strongly agree) to measure the study's variables. employee commitment was measured using two elements of the ocq (affective and continuance) commitment, respectively. transformational leadership was measured through two dimensions of the leadership approach (idealized influence and inspirational motivation), while transactional leadership was measured through contingent reward and management by exception. three indicators of the respective measuring instruments adopted were utilised to gauge respondents' perceptions of each of the study's variables. table 1 shows the sources of the constructs and indicators. table 1 − sources of constructs and indicators variables construct source employee commitment affective commitment continuance commitment adopted from meyer & allen (1997) transformational leadership idealized influence inspirational motivation adopted from bass & avolio (1997) transactional leadership contingent reward management by exception adopted from bass & avolio (1997) the study adopted proportional and simple random sampling technique in the selection of respondents. the faculty and non-teaching staff of a private university in the south west 111 of nigeria were classified as distinct groups, according to the university’s employee classification. subsequent to the stratification of the target population, simple random sampling technique was used to select a representative sample from the respective groups. the proportionate size of their respective population was the bases for the distribution of the research instrument to each employee category (kassa &raju, 2014; kothari 2010). table 2 shows the proportionate allocation of the data collection instrument. table 2 − proportional distribution of research questionnaire s/n employee group number proportion % allocated questionnaire 1. faculty 440 57* 51* 2. non-teaching 334 43** 38** total 774 100 89 * 440/774 x 100 = 57%. * 57/100 x 89 = 51. ** 334/774 x 100 = 43%. ** 43/100 x 89 = 38. the researcher personally administered the survey instruments to 51 teaching and 38 non-teaching employees of a private university in the south west of nigeria using proportional and simple random sampling methods. the field survey lasted for a period of two months and the response rate was 85% (76 returned questionnaires). table 3 shows respondent’s demographic data. table 3 − the socio-demographic data of respondents description frequency percentage gender male 51 67.1 female 25 32.9 age 21-30 8 10.5 31-40 14 18.4 41-50 36 47.4 51-60 17 22.4 61 and above 1 1.3 respondents’ highest education phd 47 61.8 masters 19 25.0 pgd 3 4.0 bsc/hnd 7 9.2 respondents’ educational background business administration 11 14.5 sciences 19 25.0 humanities/arts 9 11.8 engineering 15 19.7 social sciences 22 29.0 respondents’ length of employment (years) 1-5 12 15.8 6-10 18 23.7 11-15 27 35.5 16-20 19 25.0 112 3.2 data analysis method the dependent variable for this study was employee commitment measured as affective and continuance commitment. independent variables were transformational (idealized influence and inspirational motivation) and transactional (contingent reward and management by exception) leadership styles. based on the study's objectives, the collected data was analysed with simple linear regression to determine the level of influence independent variables have on dependent variables. the fitness test of the regression model was conducted with spss 23.0. the model fitness was estimated using the coefficient of determination, which helped explain how closely the predictor variables explain the variations in the dependent variable. a p-value of 5 percent significance level was determined as a basis for deciding on the directional relationship of independent and dependent variables. 3.3 model specification y = f(x) y is the dependent variable, i.e., employee commitment hence y = (y1, y2) x is the independent variable i.e. transformational leadership and transactional leadership hence x = (x1, x2, x3, x4) where: y1 = affective commitment (ac) y2 = continuance commitment (cc) x1 = idealized influence (if) x2 = inspirational motivation (im) x3 = contingent reward (cr) x4 = management by exception (me) a0 = is the intercept or constant in the equation β1 = regression co-efficient of x1 β2 = regression co-efficient of x2 β3 = regression co-efficient of x3 β4= regression co-efficient of x4 ei = error term expressed in its functional form: ac = a0+β1if+ei (i) cc = a0+β2im+ei (ii) ac = a0+β3cr+ei (iii) cc = a0+β4me+ei (iv) 4. result and discussion 4.1 results 4.1.1 idealized influence and affective commitment the result in table 4 (r-squared = 0.905) emanating from the model summary of the relationship between idealized influence and employees' affective commitment indicated that variations in the perceived idealized influence of leadership accounted for 90.5 percent 113 of the observable changes in affective employees' commitment. it connotes a very highlevel positive correlation (r= 0.952) between this approach to leadership and its outcome on employee commitment level. from the analysis of the variance result (table 5), it was seen that the estimated model of affective commitment was found to be statistically significant (f-statistics= 2163.9; p-value = 0.00) at 1 percent and thus provides statistical validation for the result of the relationship between idealized influence and affective employee commitment. the analysis of the coefficient estimates of the relationship between idealized influence and affective commitment in table 6 portrayed a significant direct impact of this element of transformational leadership style on employees' affective commitment. the detailed analysis of the effect of idealized influence on employees' affective commitment (beta = 0.952; t-statistics= 46.5; p-value =0.000) showed that 95.2 percent of affective employees' commitment was traceable to idealized influence. the result demonstrated that transformational leadership style influences employees' commitment level towards actualizing organizational objectives. table 4 − model summary model r r square adjusted r square std. error of the estimate .952a .905 .905 .387 a. predictor: (constant), idealized influence table 5 − anovaa model sum of squares df mean square f sig. regression 324.571 1 324.571 2163.884 .000b residual 33.899 226 .150 total 358.469 227 a. dependent variable: affective commitment b. predictor: (constant, idealized influence table 6 − coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -.439 .083 -5.314 .000 idealized influence 1.102 .024 .952 46.518 .000 a. dependent variable: affective commitment 4.1.2 inspirational motivation and continuance commitment the result of the model summary (r-square=0.633) in table 7 showed that 63.3 percent of the changes in continuance commitment as a gauge of employees’ commitment was attributed to inspirational motivation as a measure of transformational leadership style. the correlation (r=0.795) implied a significant positive relationship between inspirational motivation and continuance commitment. 114 the anova result (table 8) indicated that the estimated model of continuance commitment was statistically significant (f-statistic=389.4; p-value<0.01) at a 1 percent significance level. the result implied a significant positive relationship between inspirational motivation as a dimension of transformational leadership style and continuance commitment as a measure of employees’ commitment. the analysis of the coefficients (table 9) showed a positive impact of (t-statistics =19.733; beta coefficient =0.795; p-value= 0.000) 79.5 percent of inspirational motivation on continuance commitment. hence, through the inspirational motivation of employees, the evel of employees' continuance commitment is significantly enhanced. the result showed that transformational leadership style could be considered a significant factor that boosts employees' workplace commitment. table 7 − model summary model r r square adjusted r square std. error of the estimate 1 .795a .633 .631 .773 a. predictor: (constant), inspirational motivation table 8 − anovaa model sum of squares df mean square f sig. 1 regression 232.684 1 232.684 389.391 .000 b residual 135.048 226 .598 total 367.732 227 a. dependent variable: continuance commitment b. predictor: (constant, inspirational motivation table 9 − coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -1.270 .210 -6.034 .000 inspirational motivation 1.109 .056 .795 19.733 .000 a. dependent variable: continuance commitment 4.1.3 contingency reward and affective commitment the model result in table 10 showed a strong correlation between contingency reward and affective commitment. it is further seen that 89.8 percent of the changes in affective commitment were traceable to contingency reward. the anova (table 11) result showed that the strong correlation between contingency reward and affective commitment is statistically valid at a 1 percent level of significance (f-statistic =1997.1; p-value =0.000). the analysis of the coefficient results in table 12 showed a significant impact of 94.8 percent of contingency reward on affective commitment (beta coefficient = 0.948; tstatistics = 44.68; p-value<0.01). hence, utilizing more contingency rewards as a leadership style will significantly enhance affective commitment in an organization. 115 table 10 − model summary model r r square adjusted r square std. error of the estimate 1 .948a .898 .898 .402 a. predictor: (constant), contingency reward table 11 − anovaa model sum of squares df mean square f sig. 1 regression 322.027 1 322.027 1997.074 .000 b residual 36.442 226 .161 total 358.469 227 a. dependent variable: affective commitment b. predictor: (constant), contingency reward table 12 − coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -.305 .083 -3.669 .000 contingency reward 1.030 .023 .948 44.689 .000 a. dependent variable: affective commitment 4.1.4 management by exception and continuance commitment the model summary results in table 13 indicated a strong positive relationship between management by exception and continuance commitment. the result of the correlation coefficient (r=0.813) showed the existence of a strong correlation between management by exception and continuance commitment. the statistical significance of the model (f-statistics = 441.6; p-value<0.01) at 1 percent level of significance in table 14 suggested that the strong positive relationship between management by exception and continuance commitment was statistically confirmed. the coefficient estimates of the relationship between management by exception and continuance commitment are shown in table 15. the result indicated a significant impact of 81.3 percent change in continuance commitment that was attributable to management by exception (beta coefficient = 0.813; t-statistic = 21.0; p-value <0.01) at significant level of 1 percent. the result, therefore, suggested that management by exception could be considered a significant leadership style that affects the continuance commitment of employees in an organization. table 13 − model summary model r r square adjusted r square std. error of the estimate 1 .813a .661 .660 .742 a. predictor: (constant), management by exception 116 table 14 − anovaa model sum of squares df mean square f sig. 1 regression 243.236 1 243.236 441.551 .000b residual 124.496 226 .551 total 367.732 227 a. dependent variable: continuance commitment b. predictor: (constant, management by exception table 15 − coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -.719 .173 -4.166 .000 management by exception .927 .044 .813 21.013 .000 a. dependent variable: continuance commitment 4.2 discussion the regression results showed that idealized influence and inspirational motivation, which are elements of transformational leadership, have a significant positive effect on affective and continuance employee commitments. it reflects empirical persuasions that when subordinates perceive a leader as a role model and a source of motivation, employees tend to be emotionally attached to the organization and are inspired to give their devotion to its goals. it implies that infusing challenges and meaning into job roles would ultimately improve organizational effectiveness due to enhanced employee productivity and lower absenteeism and turnover rates. the literature on leadership styles suggests that transformational leadership styles affect employee commitment levels with implications on organizational outcomes. this study's result is consistent with wiza & hlanganipai (2014), whose findings revealed that affective and continuance employee commitment was significantly and positively impacted by transformational leadership style. similarly, jekelle (2021) reported a significant positive relationship between transformational leadership style and employee commitment. nevertheless, to some extent, this study's result was inconsistent with the findings of alemayehu & batisa (2020). they reported that transformational leadership positively affected affective commitment but negatively related to continuance commitment. the divergence in outcomes may be attributed to contextual and methodological factors. furthermore, the analysed data for this study indicated that contingent reward is positively related to affective commitment and significantly so. also, the result showed that management by exception has a significant positive relationship with continuance commitment. this finding implies that transactional leadership facilitates positive work attitudes and high performance by provoking employees to set and realize diverse work targets, such as timely and efficient task completion, promotion, and salary upgrade. besides, the result suggests that the social and economic exchange relationship fostered by transactional leadership behaviours such as the leader's clarification of the role and task 117 requirements for subordinates as well as the performance criteria and the rewards upon accomplishing desired goals, promotes employees' emotional attachment to the organization. the findings agree with xenikou (2017), which showed that employee affective identification with an organization is influenced by evaluating the resources and rewards that the organization offers to its employees through the transactional style of leadership. ugochukwu & egwuatu (2021) and alemayehu & batisa (2020) also demonstrated a positive link between transactional leadership and employee commitment. however, the findings of abasilim et al. (2019) showed that transactional leadership style is negatively related to employees' commitment and is insignificant. possible reasons for their differing results may be the study's settings, methodological approach, and population characteristics. fasola, adeyemi, & olowe (2013) demonstrated that nigerian bank employees are more responsive to transactional leadership in their commitment than to the transformational leadership approach. 5. conclusion we investigated the relationship between leadership styles and employee commitment by examining sampled data of a higher education institution in nigeria. the result suggested that leadership style is positively related to employee commitment, particularly transformational and transactional leadership styles. the overall findings indicated that transformational and transactional leadership are complementary leadership approaches facilitating organizational effectiveness. while transformational leadership behaviours activate self-confidence in employees, empowering them to strive for extraordinary performance in their tasks, transactional leadership helps to clarify employee roles, task requirements, performance criteria, and the rewards upon accomplishing desired goals. these leadership attributes promote employees' emotional attachment to the organization leading to more positive work attitudes, extra effort, and higher employee performance. the current study provides fresh insights into the literature on employee workplace behaviour and the leadership paradigm. it contextually demonstrated that transformational and transactional leadership styles encourage employees to identify with an organization emotionally, fostering long-term positive work behaviours. the study's finding helped resolve the prevailing tension on the leadership style and employee commitment link arising from the conflicting results of extant studies by reinforcing empirical convictions that there is a significant positive relationship between the variables. also, the result demonstrated that change in leadership style associated with changes in an organization’s leadership can significantly affect employees’ devotion to the organization. besides, the study's outcome reaffirmed the social exchange theoretical postulations, which argued that a mutual bond is activated when persons who incur obligations reciprocate in social interaction. the ensuing recommendation from this study's findings is that organizational leaders should make conscious efforts to establish human resource policies and practices that foster employee trust, responsible, and productive behaviours. the agreed exchanges between the organization's leaders and subordinates should be fairly implemented as a means to establish employee emotional attachment to the organization. 118 while this study has provided new insights into the nexus of leadership style and employee commitment, future studies should address its limitations. first, limiting the contextual scope to one ecclesiastical-owned university may constrain a general application of the findings. therefore, future studies may consider using several church-owned universities as context. in the same vein, future studies may benefit from comparative studies between church-owned and government-owned universities regarding leadership styles and employee commitment relationships. second, the study focused on two out of the three perceived dimensions of employee commitment and two out of the four professed dimensions of transformational leadership. therefore, interpretation of the result may be limited to the relationships regarding the examined dimensions. consequently, future studies may consider a comprehensive model involving all dimensions of employee commitment, transformational leadership, and transactional leadership. finally, we used a survey approach for the data collected that was analyzed to determine the directional relationship between the variables. the response bias associated with the questionnaire as a data collection instrument possibly limited the general application of the findings. however, the reliability and validity assessment of the data collection instrument mitigated the occurrence of response bias. references 1. abasilim, u. d., gberevbie, d. e., & osibanjo, o. a. 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(2021), “omnichannelling and the predominance of big retailers in the post-covid era”, symphonya emerging issues in management, n. 2, pp. 142-157. doi: 10.4468/2021.2.11fortuna.risso.musso. 72. angioni, m., musso, f., (2020). website adoption for agritourism companies: key features and perceptions of customers. in information resources management association (usa) (ed.) destination management and marketing: breakthroughs in research and practice, pp. 345-362. hershey, pa: igi global. 1. introduction 2. literature review 2.2. leadership styles 2.2.1 transformational leadership 2.2.2 transactional leadership 2.3 theoretical review 2.3.1 social exchange theory 2.4 empirical review 2.4.1 leadership style and employee commitment 3. methodology 3.1 research design, sample, and data collection 3.2 data analysis method 3.3 model specification 4. result and discussion 4.1 results 4.1.1 idealized influence and affective commitment 4.1.2 inspirational motivation and continuance commitment 4.1.3 contingency reward and affective commitment 4.1.4 management by exception and continuance commitment 4.2 discussion 5. conclusion references microsoft word 5 (20-16) pilotti c.docx 53 organization vs. strategy towards rethinking management for trajectories of resilience in world pandemic post-crisis* luciano pilotti university of milan, italy alessandra micheletti university of milan, italy received: march 27, 2020 accepted: august 6, 2020 online published: october 205, 2020 abstract the recent history of organizational modelling shows a dominant position of strategy on organization with a weakening of the former in front of growing global complexity and change all over the world. in recent years we have seen organization as “part” of strategy as a dynamic counterweights process of action able to improve managers to take decisions often decoupling them, to put them back together in better and more suitable organizational models for more dynamic stability and gaining resilience in front of innovation and change. we see in digital world – in particular to the organization as a (quasi)-substitute for an increasingly weaker concept of strategy as linear process and an alternative and flexible solution to the failures by the logic of pure calculation of consequences (deterministic rationalism) or simple reactivity – as describe by pavlov 100 years ago (bound by external resources), or enclosed in the narrow spaces of a contingent intuitionism of the bergsonian type (subjectivism and dependence on the constraints of internal resources). analyzed rigorously by weaver in the interaction between complexity and science because all problems which involve dealing simultaneously with a sizable number of factors which are interrelated into an organic whole that needs of a governance action both with or without information or decision. exaptation is a model mutuated by biology able to produce solution before problems and in particular after post pandemic crisis. * a first version of this work it has been presented in the 1st international interdisciplinary conference on “strategic decision-making in international context”, held in urbino on february 27, 2020. international journal of economic behavior, vol. 10, n. 1, 2020, 53-64 54 1. introduction we have to see when a rough sea generating complexity of our direction searching for trials and errors where the speed of trial overcome the speed of reasoning neural cortex as in case of non-verbal human language where we need of high level of learning with all of our senses in particular after crisis of covid-19 as an emergent global shock (not first and not last) following financial one of 2008 by usa sub-prime. in modern man we see cultural limits and not only by bounded rationality à la simon, with a disrupting coordination between thinking and action facing emergent world where body and mental reactions are decoupling by reducing scarcity of resources and consequently the efficiency of linear processing of action by strategy that presupposes absence of uncertainty (motterlini and guala, 2011). along a jagged emerging ridge of dynamic learning organizations, want to try to synthetically formulate the ongoing transition starting from an evolution of operational and behavioral contexts, increasingly influenced by the paradigmatic shift between predictability and unpredictability, between simple linearity (in a stable world) and complexity (in an unstable world). exploring the effects and emergence of substitutes, such as that of ecology that shows that it is possible to settle the crisis of the strategy with the appearance of new resilient organizations, just like in the organic whole defined by weaver. leveraging on non-linear and dynamic complexity models, which integrate interdependent biological, cognitive and social dimensions. ecologies, where change can be understood as self-reorganization of results that derive from (social and cognitive) inter-connectivity between the members of the community, the sub-systems and the environment designed by density overlapping feed-back loops of network and network-of-network nodes, in the sense of maturana and varela (1987) and capra (1996) or in case of exaptation mutuated by biology of j.f. gould (gould and vrba, 1998; la porta, pilotti and zapperi, 2020). in the last case we can see how organisms “normally” push their adaptation in opportunistic way structures just available for many other functions, as could be for human beings when they transform their organizational and social forms to “control” change but with high level of imperfections and without optimization strategy in a bricolage of actions. 2. which human behavior in unpredictable world? science – as we know – works by connecting (or trying to connect) the causes and effects of natural and social phenomena. in the "hard" sciences, however, this connectivity turns out to be relatively simpler because the variables to be considered can be "isolated" in the laboratory and replicated in their relationships to verify that a simple correlation is also an expression of causation, capable of confirming or denying a research hypothesis and therefore also a theory or segments of it. on the contrary, in the social sciences this exploration of the relationships between causes and effects is more complex, because laboratory replicability is almost never possible. in the social sciences the methodological reductionism, that is usually adopted in the hard sciences to isolate some variables and replicate the experiments, is rarely possible, even if it has been tried to “align” economics and social sciences with the hard sciences, with frequent disappointing results. such unsatisfactory results have been demonstrated, for example, by the scarce ability of economists academic and / or professional to foresee the crises that have occurred over the past 120 years. robust forecasting models have always been sought also in the management trying to connect the structure of behaviors to the performances, for example, as in the well-known deterministic approach s-c-p, based on a substantive rationality followed by the agents and assuming a stable world. this led chandler (1962) to detect that “structure follows strategy”. 55 therefore, a linear approach of connection between structural market variables (average dimensions, number of occupied people, number of competitors, consolidated technologies), which would influence the conduct or choice behaviors (strategic behaviors), would eventually determine the (positive or negative) performances, precisely according to linear logics. but this would happen in the substantial absence of innovation and where the variables at time t cannot change at time t + 1, which configures what economists define steady state (borrowing the concept from biochemistry or physics see figure 1): situation in which the starting conditions do not influence the final or exit conditions of the process. figure 1 – example of a chemical-physical steady state representation in this case, the decisions would be determined by the original structural factors that would lead to specific performances, based on a good forecast of the future, having gathered the necessary and available information. "good predictions", in this case, of the economy and management, will depend on the degree of complexity of the surrounding (as well as internal) environment. on one hand, low or no complexity will determine good predictions (which all agents should be able to provide, having the same information and knowledge, or the same technology), even for a prevalence of close innovation. a case in which the value of the information approaches the "0", because all the agents can access it at almost zero costs. while, on the other hand, high complexity will force us to formulate alternative scenarios (from best to worst), scoring the results based on the probability that some circumstances will occur (or not) and in conditions of open innovation. in this case, the information value is different from "0" and positive, because it will depend on alternative scenarios and differentiated emerging conditions. the latters, however, are perceived in different ways, which will influence the final results as well as the starting conditions. 3. an “efficient strategy” through organization preparing action by information networking the linear-deterministic model in economics and even more in management does not work effectively in conditions of complexity of the interacting variables (internal and external), since we (decision makers) are ourselves part of the object of observation and therefore part of the process of decision-action. 56 let us start with a practical example, like the persimmon plant and the farmer (figure 2). the farmer's problem is to determine the best forecast of the times of fall of the leaves (and persimmons) and of their quantity to adapt the technology (trolley and broom) to collect them. the persimmon plant tend to differentiate the adopted strategies in a linear (or simple) world with respect to a non-linear (or complex) world. in the first case, the farmer has only the persimmon plant and only that in the absence of other disturbing variables (wind, rain, birds, and other plants), in a short time and without innovation (the technology cannot change). in this context, the strategy represents the minimization of resources, given the technology and the time needed to reach the plant, according to a principle of energy saving. in this case we can speak – as known – of an optimization procedure. here the concept of strategy is suitable because it leads us to accept a sequential and deterministic relationship between decision and action, that will ultimately tend to coincide, given the objectives, the resources and timeframe within which the phenomenon is assumed to have run, in a linear and highly predictable manner. the timeframe, however, is short (within a limited space) and susceptible to recourse to some form of stochastic or probabilistic forecasting, capable of giving us an (efficient) measure of the space that can be spanned and of useful or necessary energy consumption. in these situations and contexts, opposite and equivalent solutions cannot exist in the outcomes, in order to exclude possible errors in the chosen solutions to the problem. the strategy is the calculation of the expected value of the farmer's decision-action, without other considerations on the behavior, that is assumed to be rational and in which the outcomes will not be influenced by the initial conditions, also for the prevalence of short termism. on the whole, we would always face classes of "reversible" phenomena, as in the hard sciences. figure 2 – persimmon plants 3. complexity and non-coincidence between decision and action: the concept of effective ecology and catastrophe change model taking up the elementary example of the persimmon and the farmer, we must note that if together with the persimmon plant we have other plants, we introduce the wind (or snow) and also birds that lean on the persimmons and move them, or the presence of insects that condition the life of the plant the original problem changes. it can also change based on the behavioral influences of the farmer and the sense of proper actions and his own perceived identity as his competences. a set of factors that change dynamically the original steady state conditions. the outcome is no longer that of simple energy optimization or resource minimization given 57 an objective, which, moreover, in the short term is supposed not to change, but to understand the effects of the network or of the interdependence between the variables. in this case, then, the problem of the farmer is no longer to predict when the fruits will fall and how many, but what to do when they fall and how to collect them and whether he will have the appropriate technology, as well as the spirit (awareness of himself and of his potentials) to do it (pilotti, 2019; 2011). therefore, we will no longer have a “standard forecasting” problem in a strict sense, but the need to understand and design the interaction perimeter between the relevant variables, which arise when all this will happen, so that our farmer knows how to intervene appropriately. here the concept of strategy is no longer useful because the objective is not given and the process of interaction between the variables changes the relationships in space-time and even theself-perception of the farmer. another concept is needed, capable of delimiting a problem of appropriateness in the variables interaction and/or in the networking and/or in the perception: the concept of ecology could be useful for this purpose. since the concept of ecology is able to point out the appropriateness of behaviors and useful resources designed in their complex interactions to accept the challenges of a multi-interaction context (also subjective and behavioral) between variables in unpredictable forms, with multiple effective solutions. the question is then which solution to choose and furthermore: what connection between decision and action in an unpredictable world? if cognitive functions are co-emerging with respect to the reference environment, to individuals and activities, then decisions no longer coincide with actions but tend to decouple from them. the main reason is because the same decision can bring to more possible actions or, viceversa, the same action can be generated by multiple independent decisions, given the plurality of objectives and the generativity of knowledge emerging in the process. therefore, the starting conditions can change the final results of the activities and thus we enter a class of irreversible phenomenous as in case of butterfly effect analyzed by edward lorenz for the first time in 1962 (new york academy of sciences, 1963). as we know by lorenz (1963) and anticipated by turing in 1950 -, in chaos theory, the “butterfly effect” is the sensitive dependence on initial conditions in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state. a very small change in intial conditions had created a significantly different outcome. from this point of view renè thom (francophone mathematician, winner of the prestigious fields medal in 1985) proposing some form archetypes, tries to solve this problem of discontinuity and irreversibility of the phenomena of change with a qualitative use of quantitative models of geometric or topological type, suggesting the possible forms of change that would lead in our case the farmer to accept the challenges of leaps in process innovation and in the system of objectives, as well as in perception. the 7 catastrophes of renè thom have the purpose to draw, in a topological sense, the possible connective structures that the variables will or could have when the event takes place and adopt appropriate behaviors to absorb the impacts on subjects and institutions and certainly on the context. his major contribution is in differential topology and in particular in the catastrophe theory, applied mathematically to natural phenomena. in particular, the differential topological theory of catastrophes, by the use of mathematical models, represents those discontinuous phenomena caused by the continuous variation of the parameters on which they depend, i.e. those phenomena that introduce variations in the starting conditions. thom classifies seven possible types of elementary catastrophes that tend to describe a sudden change in a process that is considered structurally stable. such theory can be applied to the genesis and evolution of fields ranging from hard sciences (physics, climate change, bio-engineering, chemistry) to human and social sciences (linguistics, semiotics, ethology, sociology, economics). according to this approach the world 58 cannot be described as chaotic by itself, but it is the expression of a series of rational structures whose sequence is the object of a morphological investigation (pilotti, 1984). the specific case of the cusp of innovation adoption is representative of many of the complex problems that managers and organizations today have to face in circumstances of permanent and continuous or disruptive change, which normally determine behavioral situations of bifurcation of possible choices. contexts of choice in which the prediction or the concept of standard strategy are misleading or not useful because they assume a stable, linear and substantially adaptive world for incremental changes. in situations of radical change, we need another concept, more capable of indicating a different complex (or ecological) relationship between the variables and of non-coincidence between decision and action. not coincidence that occurs in a precise point in space where time collapses and gives rise to the innovative "leap" and the cusp. the ecology of the relationships between subjects and environmental contextual factors that give origin to the cusp is effective in representing the process of innovation in adoption in an ecological form, of which the cusp (final outcome) is among the possible forms and the surface describes instead process continuity. in figure 3 we have the cusp catastrophe proposed by renè thom and adapted to interpret consumption adoption within a three-dimensional scheme, capable of discriminating between innovator and follower or, even, no consumption. figure 3 – the cusp catastrophe interpretation of consumer adoption the cusp catastrophe (figure 3) that we have chosen, appears in systems which have two control factors (exogenous variables) and an axis of behavior (endogenous variables), which are interrelated by the action of a potential, which alters the energies of behavioral factors, influencing their direction. however, while in natural phenomena the geometry of the potential is given, in economic-social phenomena it is subject to mutation. the continuous changes of the slope of the paraboloid are generating discontinuous changes in the behavior of the system and determine explosive effects and divergence (unstable equilibrium); or, the discontinuous changes of the paraboloid are incapable of altering the continuity of the behavior of the system, so that they generate implosivity of the process and convergence (stable equilibrium). topological languages help us to model the relationships between exogenous (discontinuity) and endogenous (continuity) variables along the crests of a radical and discontinuous change, not predictable, as can be consumption and innovation. they are offering 59 the availability of appropriate tools and languages to grasp discontinuities and structural asymmetries of the changing nature of change (which is technological, but also social as well as economic), expression of a reunion between economic-non-economic, technological-nontechnological, endogenous-exogenous factors. they prove also useful to explain the relevant passages from variables normally considered exogenous to an endogenous or behavioral dimension, that assign "autonomy" to the organizational and institutional aspects of a structure with respect to technological ones, changing the traditional causes between social, economic and technological factors towards bifurcation chains between action and decision. to be rejoined in an appropriate ecological understanding of change, that reassigns a role to the subjectivities and relationships, both in their organizational and inter-organizational aspects. overcoming, at least in part, the specialized exasperation assumed by academic studies, which shattering reality into thousands of micro problems and contingent micro solutions, is dispersed in a thousand rivulets and sometimes it loses the sense of the whole in the hard sciences and, in part, also in the social sciences, but that seems instead assured by the italian corporate tradition. the lack of the sense of the whole constitutes a serious problem for all the disciplines, but in particular for the social sciences when they adopt methods and solutions translated sic et simpliciter from the natural sciences. and yet around the concept of ecology they show unusual convergences through, for example, the categories of self-organization, reflexivity, feedback, resilience, homeostasis. they are trying to solve the structural conflict of each organization, namely that between monocratic centralization and pluralistic decentralization, between top-down and top-down control and bottom-up or bottom-up selforganization. couples both necessary as long as one limits and enhances the other. such as to found an organizational postulate so far not denied by the theoretical and practical history of the organizations: the power of government of an organization must be concentrated enough to allow to face the complexity of the problems in their organicity in "reasonable" times, but not so concentrated to inhibit the initiative, autonomy and skills of all actors in the space-time exploration of useful alternative solutions. because sometimes those solutions even precede problems, especially in a world with a high rate of change that breaks down the causes from the effects, the decisions from the actions. indeed, that postulate from the bottom up can be reformulated as follows: the nature of the problems, the speed of change, the role of specialist skills require an articulation of the power of corporate governance to endow each point of the company organization with autonomy, responsibility and capacity of initiative, useful to feed creativity and widespread cognitive productivity. as long as they are compatible with the unity of direction and governance of processes, internal and external to the company. 4. change management and “dramatization” of decisions: exaptation as solutions before problems we must start to recognize the irreplaceable importance of free, responsible, motivated actors, able to multiply their effectiveness through hybridization, cross-fertilization, respect for differences, awareness of the "ecological" long-term consequences of their decisions (sérieyx, 1993, p. 248). only in this way, the company legitimizes its role and allows human capital to preserve itself and to develop, produce utility, consolidate ties, share values and meanings. markets and organizations need rules but also meanings and certainly without the latter, neither the first nor the second are governed, because the calculation cannot foresee them. we are at the great historical and paradigmatic passage from the fordist representation of the rigid and fortified enterprise like the castle to the net (from the 90s of the last century) and from this to the community (of the first decade of the century in progress), as was well underlined by butera 60 (2005) and dioguardi (2007). transformations that even under the lashes of globalization and digitalization, the internet and ai, migrations and climate change are paving the way for holocratic organizations, also in the form of ecologies. a form of organized ecologies aimed at privileging osmotic elasticity and flexibility in relations with the external (and internal too) environment as dynamic and complex, impressing trajectories of self-organization, towards a growing decoupling between decision and action, between cause and effect. in this way, we could say that “the space of the possible” can be represented as a multidimensional matrix between actions-systems-ecologies. a matrix of systems and actions differentiating between spaces of uncontrollable variables with unlikely and high-value information (high uncertainty) and spaces with controllable variables with probable low-value information and high certainty. we see a differentiation of actions between single purpose (high specialization as replication of original conditions) reducing variety on one hand. with multipurpose to the other oriented to co-evolution (of / with original conditions) increasing variety. complexity of the systems (organizations) coupling with multipurpose actions (and functions) create emergent ecologies. figure 4 – the space of the possible (or emergent) like a multidimensional matrix actionsystems-ecologies differentiated by the degree of complexity generating learning chains the spaces of controllable variables correspond to historical and social situations (figure 5) that can be traced back to fordism (since 1910 until the 1970s), while the spaces of noncontrollable variables are attributable to post-fordism or the current situation (after fall berlin wall in 1989 and started new globalization) and digital worlds of artificial intelligence in the last two decades. in the former, machines (calculation and performance) and hierarchical systems (authoritative and functional equivalence) prevail, governed by "well-functioning" and stable markets with incremental innovations and where decisions and actions are coupled linearly, as proposed by scp linear modeling in 1960. instead, in the latter, ecologies (compatibility and meta-standards) and subjects (meaning, communication and interaction) prevail in the presence of highly unstable markets triggered by radical innovation, where 61 decisions and actions are decoupled, because subjects (stakeholderships and employeeship) are emerging by systems with self-organizations procedure supported by collaborative digitalization. figure 4 – the institution-enterprise governs the risk-complexity pair by comparison of competitive solutions from fordism to post-fordism in situations of non-coincidence between decision and action – as in case of high complexity there arises the need to offer sense and meaning, as in the innovative emerging contexts of the bifurcation of a cusp and where the concept of strategy is no longer useful. consider, for example, the decisions of the managers to select a choice, which cannot be based strictly on a standard forecast, derived in some form from a sufficiently stable past and for unchanged contexts accompanied by performance calculations and supported by self-reference. in the current post-fordism we need to "represent the change in an ecological sense", as it could happen in different configurations, to be able to accept its benefits as an essential part of that change. to do this we need representations of scenarios through a theatricalization of the decision-making process and assess the impacts on the context and on the actors where the solution anticipates or precedes the problem, in an ecological meaning: a dynamic mix between rationality and creativity as a viable connection exchanging intelligent collaboration and pluralism of points-of-view (pilotti, 2011) (figure 5). the theatricalization of the decisionmaking process in the organization is then useful in giving a "living" form to ecology (script or storytelling towards scenarios) on which we will have to decide, by choosing between possible or only emerging scenarios, the direction to take, sharing it. choice of scenario that will no longer be of a reactive-adaptive type, but shared with all participants in the (decisional) play of dramatization within a new realistical narrative: achievable, defensible, and sustainable. 62 figure 5 – 4 main mechanisms by simple to complex machines – systems – subjects – ecologies in the standard approaches, in fact, we see the centrality of indicators that generally refer to: costs, product, quality, level of profit, customer satisfaction. while in ecological approaches we see relevance: relationships, patterns, scenarios, processes, motivations-emotions and contexts. we are replacing caesarist, assertive and decision-making leadership with a democratic and shared, inclusive leadership that initiates and promotes motivating and involving employeeship, building together the way to go with the business community. as in school contexts of children in primary school we see increase in heuristic, applicative and experimental reasoning. because, inductively it does not sink its own thinking (predictive-mathematical logic, calculus) on a series of progressively acquired and gradually applied mental structures to various assimilable contexts, but rather on the concrete and experimental experience of concepts learning them in the reality, gradually experienced also by the theatrical representation that can variously be configured. building “solution configuration scenarios” for problems that could only emerge later, and that, when emerged, will be able to accept and respond to the problem, having already tested the possible solutions. in everyday practice we could cite the cases of nudging, that is, of policies capable of "educating" by encouraging virtuous behavior, such as in the separate waste collection where prizes are offered for those who on the basis of their virtuosity "certified" by the smart card that records the quantity discharged for the individual components (plastic, glass, damp, metals, etc.) through a subsidy. or in driving incentives with the "points license". all this pushes towards an ecological and eco-systemic balance between multiple variables of subjective behavior (of all the stakeholders) that crowd in an interdependent way and that 63 must be "pushed" or encouraged to reciprocally condition each other towards "virtuous results" producing skills and abilities "evolutionarily constructive" in anticipating solutions to problems. preparing to accept the shocks and becoming resilient by decoupling decisions from actions to reconnect them ecologically. adopting a conscious decision today (separate collection / prudent driving), to carry out a responsible action tomorrow (clean up the environment / avoid accidents), contextualizing the overall "vision", minimizing costs and maximizing the creativity of those acts, assigning them sense and a good perception of the self. managers are interested in innovative skills with investments in r&d not because they identify a precise immediate result, but because they can climbing on the highest tree in the forest able to explore horizon. they will be able to send a longer look at the emerging landscape that those same investments contribute to achieve (exaptation) in team projects, continuously oscillating between exploration (open) and exploitation (close), as in the chesbrough open innovation model (fig. 6). figure 6 – chesbrough open innovation model it is evident in the chesbrough model that the research project processes are displayable as ecological activators of connections between markets, companies, networks, team projects and single people, as a self-engaging tree capable of generating new ideas for multiple trajectories, generating complexity or entropy. a "persimmon tree" that gems solutions before problems, continuously decoupling and re-coupling decisions and actions without any need to predict the (unpredictable) future, but instead, with the imperative to build it and rebuild it in a warp of options and subjects without clear hierarchies and directionality. where "dramatized narratives of possible scenarios" hybridizing and contaminating languages-roles-functions (semantic capital of floridi 2019) can try to shed light on disorder by constructing / reconstructing tentatively a new order, by assigning a meaning to those connections to reduce entropy without reducing variety. giving origin in this way to resilient organizations, in the ecological activation of conversations and dialogues that peter drucker (1986) already referred to as a necessary outcome almost forty years ago. resilient organization is – consequently a horizontal network of people supported by roles and information incentivated (with monetary and non-monetary tools) to participate to dialogue process of actions for trial and errors in decisions as a chain in real terms often not necessarily coinciding with the axiomatic norms of a so-called rational choice. because as in david hume (1748) approach facts and roles or norms are to distinguish for the simple reason 64 that what it is “normal” or statistically with high frequence or “natural” (independent by human action) in not coinciding with what’s right. resilience in a complex world can be represented as an ecology of the value produced by interacting actions between multiple actors that exchange credible information on their mutual perceptions of that world or by an emergent one in a fabric of “virtuous” imperfections in the sense proposed by steven j.gould where solutions anticipate problems. references 1. butera f.(2005), “il castello e la rete: impresa, organizzazioni e professioni nell’europa degli anni ’90”, franco angeli, milano. 2. capra f. 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(1980), stabilità strutturale e morfogenesi. saggio di una teoria generale dei modelli, einaudi, milano. 20. brondoni s., musso f. (2010), “ouverture de ‘canali di marketing e mercati globali’, symphonya: emerging issues in management, 1, 1-6, doi: 10.4468/2010.1.01ouverture. 21. 51 attitudes towards saving and debt-taking behavior during first major flexibility on pandemic restrictions in argentina rocío giselle fernández da lama pontifical catholic university of argentina national council of scientific and technical investigations, argentina maría elena brenlla pontifical catholic university of argentina received: march 21, 2023 accepted: july 26, 2023 online published: august 12, 2023 abstract the aim of the study was to investigate the influence of time perspectives, sociodemographic and debt-taking behavior data on the attitudes towards saving in the argentine population during major flexibilities in pandemic restrictions. the present study was online questionnaire-based. a total of 720 participants were recruited through snowball sampling method (447 women; 62.1%) between the ages of 18 and 65 years of age (m=34.37; sd=13.67). a sociodemographic and financial behavior was administered along with locally adapted version of the zimbardo time perspective inventory. it was found that future and past-negative time perspectives were positively related to some of the positive attitudes towards saving. conversely, present-fatalistic, and present-hedonistic were positively related to negative saving attitudes. debt-taking behavior was positively related to the difficultness on saving. also, female participants showed more difficultness in saving than men. the research on economic psychology that contemplates time perspective theory is scarce, particularly in argentina. this is the first study that highlights the importance of predominant time orientations on the analysis of saving behaviors. keywords: time perspective; economic psychology; saving; indebtedness; individual differences. 1. introduction the pandemic caused by the virus sars-cov-2, worldwide known as covid-19, has constituted a milestone in human history, along with challenging consequences ever since. international journal of economic behavior, vol. 13 n. 1, 2023, 51-70. https://doi.org/ 10.14276/2285-0430.3716 52 as in most countries, the government and local authorities of argentina have taken numerous measures to control the spread of the virus, including border closures, mandatory quarantine, and social distancing (calcagno et al., 2020; salvia & poy, 2020). measures implemented in turn led to an increase in unemployment and a decrease in people's incomes (palomino et al., 2020) causing a strong socioeconomic impact (donza, 2020). nonetheless, by the end of 2021 to date several flexibilities have been taken place, particularly regarding public transportation, the use of face masks, and social activities that in turn has had some positive impact on local economy (centenera, 2021). overall, the covid-19 pandemic has had a profound impact on the argentinean economy and society, and even today it faces challenges in recovering from its effects, while the number of cases and deaths remains high even today (czubaj, 2022). reports on economic behavior focused on the complexity of the situation in terms of macroeconomic aspects (bloem & farris, 2022; mandel & veetil, 2020), however, several investigations have also addressed microeconomic variables such as household saving, expenditures, and consumers’ behavior (brickell et al., 2020; denegri et al., 2022; moon et al., 2021; palmeira et al., 2020; wang et al., 2021). consumption, saving and indebtedness are a topic of interest for economic psychology, as it has been shown that having a good level of savings can help people in difficult economic situations and meet their financial goals (nyhus, 2002, 2018; rha et al., 2006). despite its importance, many people find it difficult to save due to multiple factors of external and internal nature. in general, people tend to hold a positive attitude towards saving and a more cautious one for indebtedness, however, nowadays, various facilities for consumer credits and loans have generated a more permissive view on this, that might lead to an engagement in irresponsible borrowing and thus, the financial incapacity to repay these obligations, which could be the reason for ill-being and many other economic and socio-psychological problems (denegri et al., 2012; ranyard et al., 2018). based on the above, the general purpose of this research was to investigate the influence of time perspectives and sociodemographic data on the attitudes towards saving and debt-taking behavior in the argentine population during major flexibilities in pandemic restrictions. 2. literature review economists contemplated saving and debt-taking behaviors under theoretical premises that conceived the individual as rational, self-interested, and utility-maximizer being that could process available information unbiasedly to reach to the most adequate decision-making processes (traut-mattausch & peus, 2008). nonetheless, these approaches have been largely questioned based on the inaccuracies on reflecting and predicting realistic behavior (wärneryd, 1989). an interdisciplinary effort has been made to include psychological perspectives on economic behaviors (lewis et al., 1995), especially including the study of personality, decision-making, ideas, beliefs, and attitudes towards money, saving and indebtedness (bucciol & zarri, 2017; denegri et al, 2012; furnham & cheng, 2019; lunaarocas & tang, 2004; mcnair & crozier, 2018; musso, 2019; setyobudi et al., 2015; tang, 1992; wang et al., 2008). sociodemographic factors do not fully explain the variability in economic behaviors and, as it has been proven, decision-making processes deal with emotional aspects that influence individuals’ choices for consumption (park & sela, 2017). therefore, 53 psychological factors, especially pertaining personality variables, have been a consistent research issue for the last decades (asebedo et al., 2019; furnham & cheng, 2019; pinjisakikool, 2017; tangney et al., 2004; thaler, 1995, 1999). another relevant aspect of decision making about money is time and the way people perceive it. on one hand, several studies have shown that individuals with a lower time preference, i.e., those who value the future more compared to the present, tend to save more over time (bickel et al., 2014; green et al., 2012; loewenstein, 1987). this relationship is explained by the greater willingness of individuals with low time preference to postpone gratification and forgo immediate consumption in favor of a greater accumulation of longterm financial assets. on the other hand, time preference may also influence borrowing decisions. individuals with high time preference, who value the present more than the future, may be more likely to go into debt to satisfy their immediate needs and desires, even at the cost of a greater financial burden in the long run (read et al., 2013). lack of patience and the pursuit of instant gratification can lead to greater indebtedness and a reduced ability to repay debts. additionally, time perspective (tp) -nonconscious process by which an individual encodes, analyzes, and organizes experiences that took place on different time frames, past, present, and futurehas been relevant in the study of human behavior (cernas-ortiz et al., 2018; stolarski et al., 2018). one of the most widespread models on tp is that of by zimbardo and boyd (1999). the authors described five main tp dimensions: past-negative -negative and aversive personal attitude towards the past, due to real experiences of unpleasant or traumatic events, the negative reconstruction of benign events-, presenthedonistic -the search for pleasure in the present, reflecting a hedonistic, risky attitude towards time and life-, future -general orientation to planning, conquering future goals and search for rewards-, past-positive -a warm, sentimental and positive attitude towards the past-, and present-fatalistic -reveals a pessimistic experience of the present, revealing a helpless, desperate attitude with negative expectations towards the future and life-. the primacy of a time orientation over others gives the unique style of tp that each person has and establishes specific ways for the individual to remember past and present moments, plan goals, build future scenarios and make decisions (brenlla et al., 2016). it stands to reason that saving and borrowing would be greatly affected by the main dominant individual tp. studies have reported that future tp is a strong predictor of positive saving attitudes, consistency in the act of saving and loan re-payment (brougham et al., 2010; klicperova et al., 2015). moreover, individuals high on present-fatalistic were also responsible for re-payment of debts but exhibited less saving activity, which in turn might suggest that the use of those loans could have been for covering daily expenses. also, people more hedonistic time oriented were more likely to engage in impulsive purchasing (klicperova et al., 2015). past time orientations have been less studied about economic behavior despite its relationship with past traumatic events that might trigger strong reactions among individuals in renewed economy crisis (brown & stix, 2015; loose et al., 2021). consumption varies significantly according to age and gender. it has been found that older people tend to save more than their younger counterparts, which could be attributed to higher financial capability and time patterns more oriented towards future (rolison et al., 2017; xiao et al., 2015). also, the life-cycle hypothesis (modligiani, 1986) determines 54 that individuals try to smooth their consumption through saving, investing, and borrowing in their more active life so that they would have a comfortable retirement. in terms of gender, studies suggest that being a female and head of household signifies greater efforts and struggles when it comes to managing financial resources, consumption patterns, and access to household and personal money (antonides, 2011; bennett, 2013; burgoyne, 1990; burgoyne & kirchler, 2008). these gender differences could respond to disadvantages regarding labor market participation and general inequalities that reproduce traditional role models adopted by most households (heilman & caleo, 2018; judge & livingston, 2008; verniers & vala, 2018). recent studies have shown that women were found in a more economic disadvantaged position during the pandemic, for instance, higher unemployment rate and fewer labor market options than men (alon et al., 2020; adamsprassl et al., 2020; foucault & galasso, 2020), moreover, a very compelling study by dang and nguyen (2021) conducted on a multi-country setting revealed that women were more likely to permanently lose their job in comparison than men, expect a 50% reduction on their salaries, and therefore, were prone to reduce their current consumption and increase their savings. based on this, the following hypothesis are proposed: h01: a predominant time orientation towards past and present time perspective is related to a more negative attitude towards saving. h02: a predominant future time perspective is related to a positive attitude towards saving. h03: there are differences according to age on attitudes towards saving in a way that younger individuals are less likely to save than older participants. h04: there are differences according to gender on attitudes towards saving such that female participants exhibit a more positive attitude towards saving but display a higher difficultness on saving than men. 3. data and methods 3.1. participants and procedure 720 participants were recruited through snowball sampling method (447 women; 62.1%) between the ages of 18 and 65 years of age (m=34.37; sd=13.67).most of the participants resided between the autonomous city of buenos aires (n = 318, 44.2%) and its surroundings (n = 304, 44.2%), and a small proportion lived in more distant cities in buenos aires (n = 98, 13.6%). participants were contacted by an email advertisement in which the main purpose of the present study was explained. in terms of ethical considerations, all participants were given a consent form in an online assessment platform and were informed prior to their responding about the purpose, the benefits, and potential risks of the study, as well as their right to withdraw their participation at any time (world medical association [wma], 2001). 55 3.2. measures participants stated their sociodemographic data. the following affirmations were formulated to assess attitudes towards saving based on albiñana-cruz (2013): 1. saving is useless; 2. saving is important; 3. it is better to spend than to save; 4. every month i try to save; 5. even if i wanted to, it is impossible for me to save. each statement would code for a particular attitude regarding saving behavior, that is, uselessness, importance, hedonistic approach to saving, consistency, and saving perceived as difficult, respectively. participants responded using a five-point likert scale: (1=completely false; 5=completely true). a higher score would indicate a higher agreement on the statement. to determine debt-taking behavior participants were asked if they had requested for a loan, or a salary advance during major flexibility arrangements using a dichotomist scale (yes -no). a short argentinian form of the ztpi was used (germano & brenlla, 2020). the scale consists of 29 items that assess five domains of tp: present hedonistic, present fatalistic, past negative, past positive and future. responses include a five-point likert scale (1 = very untrue; 5 = very true). the argentinian adaptation of the inventory showed acceptable reliability of each domain (from α = 0.60 to α = 0.84), however, in this study, the reliability analyses indicated that past-positive tp’s cronbach alpha was below .60, therefore was excluded of the analyses. 3.3. data analysis descriptive and inferential statistical analysis were performed to answer all the research questions of this study. frequency and percentages were estimated for descriptive purposes pertaining to saving attitudes (ordinal) and debt-taking (nominal) behaviors. assumptions for normality were not met, therefore non-parametric analyses were conducted. to determine the effect of gender and age among participants on saving attitudes, kruskalwallis and mann whitney u tests were conducted. the variable gender was coded as 1 for women and 2 for males, while age was classified into three groups following baikeli et al. (2021) criterion: emerging adults (24 years and below), young adults (25-44 years), and middle-aged adults (45-65 years). ulteriorly, since the main goal of the study was to model the predictive value of a series of independent variables (gender, age, tp, and debt-taking behavior) on an ordinal dependent variable, an ordinal logistic regression (ols) analysis was performed. to do so, the assumptions checked were as following: a) absence of outliers: the dataset was scrutinized by both researchers to detect potential outliers through the scanning of skewness and kurtosis, and the q-q plot for every variable in the model; b) absence of multicollinearity: the variance inflation factor (vif) was found to respect the cut off values (no lower than .2 and no higher than 4) for all variables (hair et al., 2010). also, spearman correlations’ matrix was calculated which indicated that there were no association greater than .80 between predictors (lewis-beck, 1993). 4. results 4.1 descriptive results figure 1 shows the distribution of responses. most participants disagreed on the futility of saving (n = 628, 87.2%), while the majority agreed with the statement regarding the utility of saving (n = 653, 90.7%) during first major flexibility arrangements. when it came to the 56 hedonist approach to saving, almost half of the respondents indicated their disagreement (n = 349, 48.5%), however, a large proportion of respondents seemed to be neutral/indecisive about this question (n = 284, 39.4%). when participants were asked about the consistency in saving behavior, results were mixed. most participants showed a general higher agreement (n = 510, 70.8%), but a relevant number of participants were unsure about it (n = 131, 18.2%). similarly, asking people about the difficulties associated to the act of saving, half indicated a higher disagreement (n = 373, 51.8%), while a few participants seemingly agreed on the veracity of the statement (n = 197, 27.4%). questions regarding debt-taking behavior revealed that 7.6% of participants acknowledged to have demanded a salary advance. as for loans, a 19.6% of the people asked for one during major flexibilities time. table 1 – the frequency of responses for each likert point saving statement during major flexibility arrangements source: authors’ analysis 4.2 comparative results table 1 shows mean value for each attitude towards saving during major flexibility arrangements in function of age and gender. for comparative purposes, differences among on attitudes towards saving behavior based on gender and age group was explored. there was a significant effect for age group on it is better to spend than to save (x (2) = 6.67, p < .05) during major pandemic flexibilizations. post-hoc mann-whitney tests confirmed a significantly higher agreement on the statement on emerging adults than middle-aged group (p < .05). there was no significant difference for middle-aged group and the young adults (p = 1) and for young and emerging adults (p = .15). there was also a significant effect for age group on every month i try to save (x (2) = 15.72, p < .001) during major flexibilizations. post-hoc mann-whitney tests confirmed a significantly lower agreement on emerging adults in comparison with young adults (p < .01) and the middle-aged group (p < .01). there was no significant difference between young adults and the middle-aged group (p = .38). there were no significant differences for age group in the present time on saving is useless (x (2) = 3.77, p = .15), saving is important (x (2) 57 = 2.07, p = .36), and on even if i wanted to, it is impossible for me to save (x (2) = .86, p = .65). table 1− mean and standard deviation for each attitude toward saving during major flexibility as a function of age group and gender age gender emerging adults (n=258) young adults (n=237) middle-aged adults (n=225) female (n=447) male (n=273) uselessness m(sd) 1.55(.86) 1.49(.81) 1.64(.89) 1.61(.92) 1.48(.74) importance m(sd) 4.42(.72) 4.45(.70) 4.33(.79) 4.42(.72) 4.36(.76) hedonistic m(sd) 2.59(.91) 2.44(.96) 2.36(1.02) 2.48(.94) 2.43(1.01) consistency m(sd) 3.60(1.12) 3.95(.98) 3.97(.90) 3.82(1.03) 3.85(1.03) difficultness m(sd) 2.57(1.23) 2.56(1.28) 2.67(1.31) 2.75(1.28) 2.37(1.24) source: authors’ analysis there was a significant effect of gender on even if i wanted to, it is impossible for me to save (u = 50214.50, p < .001) during major flexibility arrangements with a higher agreement on the statement for females than males. 4.3 correlational results table 2 shows the correlation coefficients for the relationship between each attitude towards saving during major flexibility arrangements, sociodemographic data and measures of tp. size effects were contemplated according to cohen’s limit values: 0.2 small, 0.5 medium, and 0.8 large (1988). data indicated medium size correlations among variables (from d = .50 to d = .29). the direction of the correlations was expected: negative attitudes towards saving and higher debts were positively associated with present and past tp, age and gender, meanwhile, a more future time orientation was negatively related to these parameters. 58 table 2 – spearman’s correlation coefficients between age, gender, time perspective, debttaking behavior, and attitudes towards saving during major pandemic flexibility arrangements age gender pn ft pf ph db us .04 -.05 .05 -.19*** .18*** .03 .05 im -.04 -.04 .02 .26*** -.16*** .01 -.01 he -.09* -.03 .02 -.15*** .06 .11** .04 co .12** .02 -.11** .24*** -.15*** -.10** -.05 di .02 .15** .13*** -.08* .14*** .04 .21*** us = uselessness; im = importance; he = hedonistic; co = consistency; di = difficult. pn = past-negative; ft = future; pf = present-fatalistic; ph = present-hedonistic; db = debt-taking during major flexibility arrangements. gender is coded as 1 for women and 2 for men; debt-taking is coded as 1 for having no debt and 2 for having taken debt. *p<.05; **p<.01; ***p<.001. source: authors’ analysis 4.4 regression analyses logistic ordinal regression analyses with proportional odds were conducted to establish the effect of sociodemographic factors, and tp on each attitude towards saving during major flexibility arrangements. table 3 exhibits the results of the ordinal regressions for each saving attitude with 95% confidence intervals. for saving is useless, the model was a statistically significant, (χ2(8) = 64.5, p < .001), with pseudo r squared values of .045–.054. age, future, and present-fatalistic tp were predictors of the statement. a higher agreement on the futility of saving was positively related with being older and more present-fatalistic time oriented, while being more future time oriented was an indicator of a lower agreement on this attitude. for saving is important, the model was a statistically significant, χ2(8) = 95.6, p < .001 fit for the data, with pseudo r squared values of .026–.080. a higher agreement with the statement was associated with higher values of past-negative and future tp and not having taken a debt during major flexibilizations, while a lower agreement was associated with decreasing age and a higher value of present-fatalistic tp. for it is better to spend than to save during major flexibilizations, the model was a statistically significant, (χ2(8) = 33.3, p < .001), with pseudo r squared values of .001– .022. a higher agreement with the statement was associated with a higher value of presenthedonistic tp, while a lower agreement was associated with a higher value of future tp. for every month i try to save the model was a statistically significant, (χ2(8) = 73, p < .001), with pseudo r squared values of .020–.049. a higher agreement with the statement was associated with a higher value of future tp, while a lower agreement with the statement was associated with higher present-fatalistic tp. for even if i wanted to, it is impossible for me to save, the model was a statistically significant during major flexibility arrangements (χ2(8) = 79.4, p < .001), with pseudo r squared values of .022–.047. a higher agreement with the statement was associated with increasing age, being a female, and a higher value of present-fatalistic tp, while a lower agreement with the statement was associated with not having taken debt. 59 table 3 – wald z tests, odds ratios and 95% confidence intervals from the ordinal regression for attitudes towards saving during major flexibility arrangements age gender pn ft pf ph db uselessness b wald z test odds ratio (95% ci) .018 2.94 1.02** (1-1.03) .252 1.57 1.29 (.94-1.76) -.065 -.64 .94 (.77-1.14) -.73 -5.55 .48*** (.37-.62) .456 3.89 1.58*** (1.25-1.99) .112 .967 1.12 (.89-1.41) -.269 -1.44 .76 (.53-1.11) importance b wald z test odds ratio (95% ci) -.014 -2.39 .99* (.98-.99) .167 1.074 1.18 (.87-1.60) .309 3.09 1.36** (1.12-1.66) 1.057 7.84 2.88*** (2.21-3.75) -.504 -4.29 .60*** (.48-.76) .078 .681 1.08 (.86-1.35) .144 .776 1.15 (.80-1.66) hedonistic b wald z test odds ratio (95% ci) -.007 -1.28 .99 (.98-1) .161 1.13 1.17 (.89-1.55) -.13 -1.40 .88 (.74-1.05) -.501 -4.22 .61*** (.48-.77) .167 1.59 1.18 (.96-1.45) .217 2.12 1.24* (1.02-1.52) -.123 -.727 -.89 (.64-1.23) consistency b wald z test odds ratio (95% ci) .005 1.021 1.01 (.99-1.02) -.143 -.988 .867 (.65-1.15) -.053 -.587 .95 (.79-1.13) .799 6.713 2.22*** (1.76-2.81) -.309 -2.88 .73** (.59-.91) -.117 -1.09 .89 (.72-1.10) .123 .731 1.13 (.81-1.56) difficult b wald z test odds ratio (95% ci) .012 2.29 1.02* (1-1.02) .591 4.190 1.81*** (1.372.38) .013 1.53 1.14 (.06-1.36) -.329 -2.85 .72 (.57-.90) .24 2.32 1.27* (1.04-1.56) .072 .712 1.08 (.88-1.31) -.860 -5.193 .423*** (.31-.59) pn = past-negative; ft = future; pf = present-fatalistic; ph = present-hedonistic; db = debttaking behavior. gender is coded as 1 for women and 2 for men (reference value), and men is taken as reference. debt-taking is coded as 0 for having no debt and 1 for having taken debt (reference value) *p<.05; **p<.01; ***p<.001. source: authors’ analysis 5. discussion this study aimed to evaluate attitudes towards saving and indebtedness in adults from argentina during major flexibility arrangements in terms of social distance measures. also, it was of interest to determine the role that tp, and sociodemographic measures -age, genderand indebtedness had on saving attitudes behavior. results at a descriptive level showed a positive view on the importance of saving and the consistency in doing so. also, most respondents revealed a higher agreement, and when inquiring about the futility in saving, participants were largely prone to disagree. studies suggests the idea that universally people would have a positive attitude towards saving (katona, 1975; keynes, 1936). katona’s theory of expectations on adult saving goes along with these findings, since it is expected that people might feel impelled to save during an economic recession, particularly after the first wave of the pandemic. in this line, individuals would be more prone to save and less likely to incur in debt, since pessimism and uncertainty was highly present among individuals. it could be argued that individual dispositions to save (a predominantly higher future tp) and not to borrow money might 60 have maintained practically the same throughout adversities, meanwhile, people with a personal disposition that would lead them to save less and incur in debt could have been struggling regardless of the situation and therefore, not having reported differences in their conditions of living. moreover, individuals in desperate needs might have been able to get public assistance with direct economic support that could have mitigated the impact of their hostile economic situation. nonetheless, contemplating contextual factors turns necessary in evaluating economic behavior in unstable economies (fernández da lama & brenlla, 2023). focusing on argentina's socioeconomic reality, a complex and challenging panorama can be found. the country has gone through periods of political and economic instability throughout its history due to external and internal factors such as government policies, global economic fluctuations and social crises that have strongly impacted the lives of citizens (rojas, 2003). among the series of significant economic challenges are high inflation, external debt and lack of investment that have contributed to economic instability (carballo & girbal, 2021). especially, inflation, which has been a persistent problem, negatively affecting the purchasing power of citizens and generating economic uncertainty. the analysis of the impact of these conditions on argentines is also a subject of study for other countries, for example the new york times portrayed the paradoxical side effect of high inflation and the devaluation of the local currency, whereby people rush to spend their savings and income in argentine pesos before they lose their value even more (alcoba & pabst, 2023). different events that have taken place in argentina, such as the well-known "corralito" (economic measure taken during the mandate of former president de la rúa in 2001 together with the asymmetric pesification of bank deposits and other financial instruments) have marked generations of argentines and left a trace of distrust towards banks and public institutions in general (ozarow, 2008; teubal & palmisano, 2013). surprisingly, when asking about the hedonistic perspective on saving, even though a larger number reported a higher disagreement, several were doubtful or unsure of the statement, which might indicate the existence of opposite and extreme tendencies that deal with balancing consumption of goods and services and saving at the same time. overconsumption has become a vital component of economic socialization and consumer’s identity (denegri et al., 2012; wilska, 2002) which can influence part of daily expenses and economic decisions. noteworthy, when people were asked about the struggles they could face at saving, agreement responses were more equitably distributed, even though most participants disagreed with this, a relevant number were neutral and some even agreed on the statement. this might stand for the most experiential aspect of attitudes towards saving in an already unstable economy that also offered obstacles and difficulties in those first adaptative instances for individuals facing a “new normality”. attitudes towards saving during major flexibility arrangements were related to personality and sociodemographic variables. being a female positively predicted struggling on daily saving. research has stated the existence of disadvantages that women face in terms of financial education, higher risk aversion, worse paid jobs, and marital differences in shared resources (binder, 2020; fisher & yao, 2017; heilman & caleo, 2018; judge & livingston, 2008; verniers & vala, 2018). moreover, women exhibit more impulsive purchasing which could reduce saving capacity and increase a positive view on credits and loans leading to larger debts (coley & burgess, 2003; godoy et al., 2018). furthermore, being older was a positive predictor of counting with a higher view on the uselessness on saving and the difficultness in doing so, and consequently, increasing age 61 also negatively predicted a higher vision of the importance on saving. conversely, research has shown that older individuals find it more easily to save due to their more stable incomes in comparison to younger people (rolison et al., 2017; xiao et al., 2015). additionally, debt-taking behavior was a positive predictor of having an attitude towards saving of uselessness, difficultness, and lack of consistency on saving, and consequently, it was a negative predictor of the importance of saving. studies have found that people who are more permissive towards debt tend to save less and over-consume (denegri et al., 2012; frigerio et al., 2020). several dimensions of tp yielded as significant predictors of saving attitudes. future tp was predominantly a positive predictor for importance and consistency in saving and a negative predictor for a view on saving based on uselessness and on a hedonistic approach. this result goes along with the line of other studies that found that people who were more concerned about their future and meeting their financial goals behaved in a more proactive way towards achieving them (kooji et al., 2018; klicperova et al., 2018). unexpectedly, past-negative tp turned out as positive predictor of the importance on saving. this can be contemplated from the resilience theory by which individuals that went thorough traumatic and negative experiences might be more easily triggered by external events (such as the pandemic and all the tragedy around it) and would try not to face those aversive situations again (zimbardo & boyd, 2008). also, as explained above, there were many different events in argentina´s socioeconomic history that might have discouraged people in saving through proper and formal channels, and that could influence negatively on their economic behavior and financial planning. it could be suggested that individuals high on adverse experiences would be fully aware of the potential negative consequences of not having savings to face these sorts of events. in the line of a pessimistic view on reality, present fatalistic positively predicted uselessness attitude and struggling when it comes to saving, and negatively predicted importance and consistency in saving. it has been reported that individuals that are high on this time orientation tend to believe that they have no power or control over their reality, and that most thigs that occur are due to external events (zimbardo & boyd, 2008). consequently, people with a fatalistic tp may be less likely to save money, as they believe they have no control over what will happen in life (klicperova et al., 2018). instead, they may choose to spend their money in the present, as they believe they cannot influence their future. this can also lead to greater long-term indebtedness, as people may not be financially prepared to deal with potential obstacles. and lastly, present hedonistic tp was a positive predictor of a hedonistic approach to saving attitudes, which would make sense since it has been suggested by numerous studies that individuals with a tendency of searching for joyful and exciting experiences without the necessary deliberation of their thoughts (zimbardo & boyd, 2008). this type of impulsive behavior goes in line with overspending that might reduce the saving capability and could increase the use of credit cards and other deferred payments possibly leading to indebtedness. 6. conclusions the present study found several variables to be adequate predictors of attitudes towards saving. older individuals considered saving to be more useless and a struggle than their younger counterparts, who also considered saving to be more important. being a male was 62 a positive predictor of saving monthly consistency, while being a female was a positive predictor of finding saving a difficult thing to do. similarly, people who had borrowed money showed a higher agreement on the futility and difficultness of saving, reported a lower agreement on its importance and were less consistent in monthly saving. individual dispositions were also adequate predictors of attitudes towards saving. in terms of tp, people who were more future time oriented considered saving as more important, were more consistent on monthly saving, while individuals high on present fatalistic tp were more prone to find saving as useless and difficult. surprisingly, past negative tp was a positive predictor of contemplating saving a something important. and finally, as it was expected, present hedonistic tp was a positive predictor of a hedonistic view on saving. finally, one interesting and relevant result that was present in this study is one that can be described as a paradoxical cognitive and behavioral effect in argentinian´s population. as mentioned above, argentina's micro and macroeconomic conditions "force" a strategic process whereby people must make consumption and spending decisions in the face of rapid income devaluation, high levels of inflation, and uncertainty about their future. therefore, although clear indicators of a positive attitude towards saving were found, this does not guarantee that people save in the traditional way directly, but rather that they may engage in a "spend to save" mechanism to maintain some of the value of the money they have earned while satisfying their needs. this effect has been described in different local sources (e.g., esteves, 2023; smink, 2022). 6.1. practical implications the covid-19 pandemic has had a significant impact on the global economy and the personal finances of millions of people around the world, however, evidence-based recommendations to address the economic and financial challenges at both the personal and global levels in the post-covid era. at a personal level, it is advisable that individuals engage in financial education since acquiring a solid understanding of basic financial concepts, such as credit management, investment, and long-term savings, is essential for making informed financial decisions and minimizing associated risks (lusardi & mitchell, 2014; mullainathan & shafir, 2013; ozgen, & baron, 2007). this is particularly true for females, those with previous debt records and for people of all ages, but especially for a younger audience. it is highlight that, despite in this study being older was associated to finding saving as something useless, a possible reason to this might be that lacking financial literacy has limited the younger versions of the adults assessed in this study to fulfill their desires and financial goals, particularly in an unstable and uncertain economy (fernández da lama y brenlla, 2023). the pandemic has highlighted the importance of having adequate health insurance to cover unexpected medical expenses. it is recommended to review available options and choose a plan that fits individual needs (chernichovsky, & zangwill, 2016; roșu & bacanu, 2021). further, the interdisciplinary work that should take place by the hand of psychologists and other professions involved is that of encouraging more responsible economic conducts and long-term planning goals such as emergency and retirement saving, particularly in individuals who are more present-oriented rather than future time-oriented. also, it is recommended to promote positive experiences to counterbalance negative expectations on future economic outcomes. this is particularly true in argentina, where different events that took place, such as the well-known "corralito" (economic measure taken during the mandate of former president de la rúa in 2001 together with the 63 asymmetric pesification of bank deposits and other financial instruments of users) have marked generations of citizens and left a trace of distrust towards banks and public institutions in general (ozarow, 2008; teubal & palmisano, 2013). at a global economic level, the pandemic stresses the need for cooperation and coordination among countries to achieve a robust global economic recovery. this implies the adoption of coordinated fiscal and monetary stimulus policies, as well as the facilitation of international trade (international monetary fund, 2021). other relevant aspects to cover are infrastructure investment, digital transformation, and sustainable development. investment in infrastructure can boost economic activity and create jobs. governments should consider sustainable infrastructure projects that promote productivity and long-term economic resilience (oecd, 2020; pilotti & micheletti, 2020). secondly, accelerating digital transformation has become a necessity in the post-covid environment. countries should promote the digitization of productive sectors, the improvement of digital infrastructure and digital skills training to foster innovation and competitiveness (musso, 2021; world bank, 2021). and lastly, it becomes vital to incorporate into this analysis amartya sen's theoretical approach to human development and economic behavior (sen, 1998, 2000; sen et al., 2020). unlike traditional theories that measure economic progress solely through growth of gross domestic product (gdp) or per capita income, sen argues that true development must focus on people's capabilities and freedoms to live a dignified and worthwhile life. this multidimensional perspective provides insight into how socioeconomic inequalities and constraints affect their wellbeing. in this line, a variety of socioeconomic and political factors might influence individual´s economic behavior, their development and collective wellness. on one hand, limited economic opportunities, such as lack of employment or low-paid jobs can restrict people's abilities to access basic services and meet their needs. this can lead to experiencing lower levels of wellbeing and the perpetuation of poverty. and on the other hand, consumption behaviors also play an important role in human development. access to essential goods and services, such as nutritious food, adequate housing, and medical care, can influence the health and well-being of adults. however, it is important to note that a focus on material consumption alone may overlook other dimensions of well-being, such as social and cultural participation. 6.2. limitations and future research recommendations the current study had several limitations. the variables selected through previous research accounted for a relatively small proportion of the variance in the different attitudes towards saving, which would suggest the existence of many additional variables that could influence saving behavior. future studies should account for other aspects of these economic conducts, such as personality factors, socioeconomic status, financial 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(2010), “the social responsibility of retailers and small and medium suppliers in international supply chains”, finanza, marketing e produzione, n. 3, pp. 32-61. 1. introduction 3.1. participants and procedure 3.2. measures 3.3. data analysis 4.1 descriptive results 4.2 comparative results 4.3 correlational results microsoft word 0 (17-00) editorial 1 editorial this issue of the international journal of economic behavior comprehend several topics that provide a special stimulus for future research on economic behavior and management. the international journal of economic behavior is multidisciplinary in nature and the papers collected in this issue comprehend nine contributes, among which six have been selected from the 8th euromed academy of business conference, held in verona, italy on september 16-18, 2015. three more papers followed a submission to the journal and a double blind review. the first paper by dimitrios a. chatzoudes and prodromos d. chatzoglou proceeds in developing and testing an original conceptual framework, which explores the impact of csr practices on various measures of consumer behaviour. the proposed conceptual framework was tested on a sample of 473 greek consumers. results underline the significance of csr practices in an economy under crisis, the effect of gender, and the shift from the classic paradigm of csr. the second paper authored by ulun akturan explores the consumer-brand love relationship via discourse analysis of 750 entries of consumer statements about their beloved brands. results propose differences between brand love and interpersonal love, highlighting brand related factors as well as consumer related factors that affect the development of love relationship with brands. the main objective of the third paper by maryem cherni, hanitra randrianasolo-rakotobe and nalini rakotonandraina is to propose and test an analytical model of the relevant factors which can help to better understand the adoption of agricultural practices by farmers. results emphasize a great importance of formal networks in knowledge transfer. the fourth paper written by davide pellegrini and francesca de canio investigates the effects of e-wom (electronic-word of mouth) of individuals through a netnography on 20 worldwide crowd-sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and reduce the distance between market and society. the fifth paper, written by shahina pervin, is focused on consumers transfer in their purchase decision of beauty products (the face concept). using factor analysis on data collected through a structured questionnaire survey, five factors were extracted. then, the authors compared the degree of face concept and its impact on decision making process of female consumers in the uk and bangladesh, finding differences just for one factor labelled as ‘brand link to personal satisfaction’. 2 the sixth paper, written by giovanni ossola, guido giovando and chiara crovini, aims at monitoring the role of net loans for banks in terms of impact on total assets. at the same time it investigates the correlation between loans and their related reserves for impaired loans. based on data extracted from bankscope during the period 2005 – 2013, findings emphasize a strong concern regarding the steady increase of impaired loans and consequently the increasing possibility of mergers as one solution for pursuing a more efficient risk policy. finally, in this issue of the journal, three regular papers have been included. the seventh paper by lukman raimi, bolaji cole, morufu oladimeji shokunbi and moshood adeniji bello is based on a qualitative research method aiming at shedding light on indigenous entrepreneurs and their battle for competitive edge with the multinational corporations (mncs) in nigeria. the authors suggest that indigenous entrepreneurs lost competitive edge because of unequal balance of power with mncs linked to lack of advanced technologies, poor managerial knowledge, low international social networks and inadequate institutional support from the government. the eight paper by tonino pencarelli and mauro dini is based on an empirical analysis aiming at investigating the relationships between travel agencies (ta) and tour operators (to) in the italian tourism intermediation system. results highlight that, although the products supplied by tos are fundamental to ta turnover, in most cases the channel relationships are of short duration and highly variable. finally, the paper by maria cecilia coutinho de arruda and mirian palmeira aims is to describe the customers and street retailers’ perceptions related to fast fashion. the results, through qualitative and quantitative research, show that one of the major differentials of fast fashion (f/f) in brazil could be credit conditions. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present positive perception of f/f quality, design and price. retail companies should focus on the timing of the collections. the issue is to show how important is the business schools’ role in a way to develop contents linked to fashion and its different categories, such as fast fashion retailing and to prepare the future professionals to deal with such different façades of fashion. the managing editors of the special section want to thank the editor-in-chief of international journal of economic behavior, fabio musso, the managing editor, barbara francioni and all the reviewers and authors involved in this journal issue. gisela alves, university of minho, portugal guest editor 0 musso editorial 1 editorial one of the most well-known theories on market functioning according to the firm’s perspective is that of transaction costs analysis (tca), proposed in its early versions by coase (1937)1 and then by williamson (1975, 1985)2 who formulated the most relevant statements about this theory. the tca approach supported the academic literature in explaining the criteria of organizational forms and strategic choices, among which are diversification, vertical integration, internationalization, and various forms of cooperation and interaction among firms. two key assumptions of human behavior support this theory: bounded rationality and opportunism. bounded rationality assumes that decision makers have limited cognitive capabilities and a not fully rational behavior. this is due to limited information processing and communication ability (simon, 1957)3. these constraints emerge in conditions of uncertainty, for which the context of an economic interaction cannot be specified ex ante and performance cannot be verified ex post (rindfleisch and heide, 1997)4. opportunism is defined as "self-interest seeking with guile. this includes but is scarcely limited to more blatant forms, such as lying, stealing, and cheating. ... more generally, opportunism refers to the incomplete or distorted disclosure of information, especially to calculated efforts to mislead, distort, disguise, obfuscate, or otherwise confuse" (williamson, 1985, p. 47). unfortunately, the tca literature lacks an understanding of what determines limited rationality and opportunism, and which are the factors that have an influence on these dimensions of human behavior. the papers collected in this issue of the international journal of economic behavior (ijeb) contribute in continuing the construction of the complex mosaic of concepts and tools that is necessary for the study of economic behavior. they provide different perspectives on interactions in which individual and organizations are involved, responding to influencing factors whose knowledge is still limited. the study of wei-bin zhang is focused on dynamic interactions among capital accumulation, environmental change, habit formation and preference change. the author proposes a model which integrates the economic, environmental and habit formation dynamics in the neoclassical growth theory and the traditional models of environmental economics. the study demonstrates some dynamic interactions among economic variables which cannot be predicted by the neoclassical growth theory or the traditional models of environmental change. silvio brondoni, margherita corniani and sabina riboldazzi analyze the approach followed by global retailers facing the dramatic growth in competition within the retail sector. the state of over-supply of global markets pushes mass retailers to adopt hard competitive policies based on market-driven management, which emphasize continuous product 1 coase r.h. (1937), "the nature of the firm”, economica, n. 4, pp. 386-405. 2 williamson o.e. (1975), markets and hierarchies, new york, free press. williamson o.e. (1985), the economic institutions of capitalism, new york, free press. 3 simon h.a. (1959), "theories of decision making in economics and behavioral sciences", american economic review, n. 49, june, pp. 223-83. 4 rindfleisch a., heide j.b. (1997), "transaction cost analysis: past, present, and future applications", journal of marketing, vol. 61, n. 4, oct., pp 30-54. 2 innovation in order to satisfy temporary demand opportunities (demand bubbles). the authors provide an overview of the main issues concerning market-driven innovation for global retailers, and they propose a framework of potential areas of innovation to compete in global markets. the communication of foreign products through retail stores in the chinese market is the subject of the paper from francesca checchinato, lala hu and tiziano vescovi. since stores can be an important starting point to communicate the country of origin image of foreign products, the authors conducted a research on italian products by analyzing through the mystery shopping technique whether italy is somehow recalled in the hard elements of products or during the shopping experience. results highlighted a relatively traditional, marginal, and iconic use of the country of origin factor in a market that is new, important, and highly dynamic. laurentiu mincu and thorsten gruber explored the factors of influence on the use of selfservice technologies in the east european markets. the empirical research conducted by the authors reveals similarities, but also differences compared to the extant literature on the use of self service technologies, most of which is referred to western countries. tonino pencarelli, barbara francioni and linda gabbianelli provide an analysis on the factors influencing consumers choices and purchasing intention towards sporting firearms, based on a research on hunters and firearms retailers in italy. the article from antonio iazzi, oronzo trio, monica fait and lea iaia focused on the role of web communication and customer relationship management for marketing strategies. the authors conducted an analysis on the wine industry, examining the contribution given by the social media in redefining firm-client relations within customer relationship management systems. in the same field of web communication is the article from marco cioppi, who pointed the attention on the ways in which websites are used by retailers. the analysis has been based on a model that identifies specific variables relating to websites, which can influence communication effectiveness at any phase of the purchasing process. john kolade obamiro’s work help us to understand which are the effects of waiting time on patient satisfaction in the healthcare centers. the author presents a study on a sample of outpatients of public and private hospitals in nigeria to ascertain their views as regards to waiting time and its influence on their level of satisfaction. an analysis on political and economic effects of citizen education policies if offered by edi puka and dilina beshiri, based on a literature review. the work of francesco petrucci focuses on consumer behavior deepening the effects of music on food preferences. through an experiment on food consumption in different musical background conditions, the study provides evidence that music influences subjects' response enhancing perceived liking and pleasure, and that expertise dimension do not influence individual perceptions. antonio coviello and giovanni di trapani developed their work on the concept of supply risk management and the adoption of proper risk mitigation strategies within firms. based on a literature review, the analysis provides guidelines for companies on the adoption of risk management solutions. heartfelt thanks are due to the authors, reviewers and the members of our editorial board for contributing with their competencies and efforts to the completion of this issue. fabio musso editor-in-chief jurnal eb 2012 completo finale.pdf 17vol. 2, 2012 abstract the construction industry is one of the more important economic activities that contribute towards the economic growth of any nation. the construction industry in libya faces serious current capacity of the libyan construction industry in order to meet national housing supply needs. recently, the country is witnessing a new construction boom that will bypass all other construction activity of the past decades. new houses, airports, ports, railways, and roads need of an expanding tourism industry. the main reason for conducting this study was to evaluate which critical success factors are most important in phases of construction projects. this study was in the wadi alhaya region in southern part of libya. a quantitative approach was selected. impact positively on construction projects if they are focused on by all the stakeholders and could be utilized in future work which examines different situations and environments. keywords: evaluation, critical success factors, construction projects, libya. 1. introduction the construction industry has been characterized as dynamic in nature as a result the increasing uncertainties in technology, budgets, and development processes. in recent time, building projects are becoming much more complex and require a careful integrated process management tools and techniques. research on the critical success factors (csfs) are considered to be a means to improve critical success factor (csf) an element of organizational activity which is central to its future success. critical success factors (csfs) may change over time, and may include items such as areas as production processes, employee and organization skills, functions, techniques, and an evaluation of the critical success factors for construction projects in libya abdelnaser omran, mohammed alnor abdulbagei, abdelwahab o. gebril university sains malaysia, malaysia. 18 technologies. facility team to manage, plan, design, construct, and operate the facility. the second is a series of contracts that allows and encourages the various specialists to behave as a team without design, construction, and operations of similar facilities. and the fourth is timely, valuable optimization information from the owner, user, designer, contractor, and operator in the planning management tools would enable the project managers to plan and execute their construction projects to maximize the project’s chances of success. variables in project managementrelated critical success factor include adequate communication, control mechanisms, feedback capabilities, troubleshooting, coordination effectiveness, decision making effectiveness, monitoring, project organization structure, plan and schedule followed, and related previous impact on success of project include the communication system, control mechanism, feedback capabilities, planning effort, organization structure, safety and quality assurance program, with regard to the procurement related factors, they play an important role in the success of in selecting the design team, contractor as well as the procedure adopted in selecting project however, the characteristics of client such as client type, experience, and knowledge, a well team, client team turnover rate, client top management support, client track record, client level of service. contractor related a factor is also a considerable factor which has an important role in evaluating the critical success factors in the construction industry. it can be stated management of sub-contractor and a proper supervision of work on site are all associated with contractor related factors that can impact on the success of construction project (dissanayaka business plan, work capacity, quality and experience of the technical personnel as well as project characteristics consisting of work schedule, type, value, duration, complexity, location of a project, contract type and variation between the contractor’s bid price and the next lowest delays in project completion time and increases in cost of construction projects are factors and their participation commence from inception till completion of the construction. stated that design team-related factors consist of 19vol. 2, 2012 project conception and project construction. several approaches and studies agreed success for any project in the construction industry. for instance, competency of a project construction projects. the reason is that competency is an attribute of an effective project success factors associated with project manager that can impact on the project success are his a project manager to facilitate team building among project players is an important factor that success. be characterized as economic environment, social environment, political environment, and variables related factors, job condition related factors, project characteristics related factors, environmental related factors and organizational related factors. factors such as materials, labour and productivity have also an important role in evaluating the success in the construction industry. according to impact on labour productivity. for example, work time can become no-productive or idle time due to lack or shortage of materials and tools at the right time and in the right place. in addition, quality and availability therefore can impact critically on the project success. as per labour and and execution continuity. organisational continuity encompasses physical components of weather, material and equipment availability, congestion, and out-of-sequence work. external projects. these factors included the nature of the industry, construction client knowledge of construction procedure, weather, and level of economic development. failing of any success factors caused by project participants are demarcated as external causes. slow process of building permit, government neighbour, problem with neighbour, unforeseen site condition and civil disturbance. those factors should be taken in account in order to avoid any problem within construction project process. thus, this paper is focused on determining the csfs in wadi alhaya region which is located in the southern part of libya. 20 2. research methodology additionally, the geographical areas selected include the locations where construction activities for collecting the data. the distribution of the survey instrument commenced on 1st august th the questionnaires were in prepared in english language and then the researchers have translated it into arabic language to ensure getting enough feedback because most of the contactors who are running their business there are mostly speaking the local language (arabic questionnaires. and then, this study was employed survey method to obtain the perceptions of the respondents toward the critical success factors for construction projects in libya. out of responds rate which is a quite high when compared with previous studies. the collected data were analyzed using descriptive statistics. followed by, indices the relative importance index (rii). wadi alhaya figure 1 – map shows the study area 3. analysis and discussion 3.1 respondents background of the respondents’ background where out of 44 employs who participated in this study, 21vol. 2, 2012 4.5% 38.6% 52.4% 4.5% diploma bachelor or equivalent master or above others the information of the respondents’ years of workers’ experience was also elicited. the 0% 10% 20% 30% 40% 50% 60% 1-5 years 6-10 years 11-15 years more than 20 years figure 3 – working experience of years respondents 3.2 critical success factors for construction projects in libya the data used for analysis of evaluate critical success factors were obtained from the questionnaire survey. ten main categories of factors were included in questionnaire were critical success factors which relates to project management consist of twelve items in the questionnaire. the result of the rii shows that eight items are very important to success of a project in libya. sixth critical success factor relates to procurement and consists of four items in the research 22 questionnaire. is evaluating and determining the priority to the requirements of project which was ranked at third critical success factor which relates to client consists of twelve items in the questionnaire. factor relates to contractor and consists of seven items. five from these items were scored higher than the others. consists of four items in the research questionnaire. all the items were scored high. the most eight critical success factors which relate to work environment consist of seven items in the survey questionnaire. five out of these seven are scored high by the respondent. the most materials consists of two items in the questionnaire. all items were scored high by respondents. the most important item in this factor was the shortage in materials where it was scored were related to labour and productivity and it was consisted of three items in the questionnaire. the entire three items were scored high but the most important item amongst them was the external factors and consisted of four items. all these items were scored high. the highest illustrates these factors with their ranks in term of their priorities. 23vol. 2, 2012 table 1 – critical success factors for construction projects in libya critical success factors rii ranking critical success factors related to project management feedback capabilities 1 2 training team work to skilled 4 control and mechanisms critical success factors related to procurement client experience 1 2 evaluate and determine the priority to the requirements of the project 4 critical success factors related to client allow adequate time to project& client’s ability to make decision 1 client’s experience 2 client’s knowledge of construction project organization 4 critical success factor related to contractor contractor experience 1 supervision 2 effectiveness of cost control system 4 site management critical success factors related to design team 1 design team experience 2 mistakes and delays in (producing) design documents 4 critical success factors related to project manager leadership skills of project manager 1 2 comfortable salary to project manager 4 critical success factors related to work environment adequacy of funding 1 2 24 commitment of all parties to the project human skill availability 4 technology availability critical success factors related to materials shortage in materials 1 2 critical success factors related to labour and productivity labour productivity 1 labour supply 2 equipment availability and failure critical success factors related to external factors regulatory changes and building code 1 weather condition 2 4. conclusions and recommendations on construction projects if they are focused on by all the stakeholders and it can be concluded future work which examines different situations and environments. for example one could look that the methodology used in this research should be applied to other areas or cities in libya so industry development in libya or even in the other arab countries. references achieving success, (2), , 25vol. 2, 2012 arabia utilizing , , factors in projects”. journal of construction engineering & management 125(3), 33 no-code development platforms: breaking the boundaries between it and business experts giorgia masili tor vergata university of rome, italy received: february 13, 2023 accepted: april 4, 2023 online published: april 10, 2023 abstract the importance of low-code and no-code technologies is increasing due to the lack of companies’ internal knowledge about traditional programming languages and the difficulty in recruiting professional programmers to speed up the applications’ development process. this study aims to understand the impact of low-code and no-code development platforms (lcdps and ncdps) on business dynamics as tools that potentially enable bridging the collaborative gap between business and information technology (it) experts. the topic’s novelty encourages an explorative research approach designed by following a case study strategy and adopting a qualitative semi-structured interview and the card-based game method to support data collection. two companies in different countries and sectors were involved, and four key informants were interviewed. the evidence of the analysis shows the primary reasons that have encouraged companies to adopt such tools. the reasons mainly reside in the possibility of speeding process automation and applications development and learning how to use the platform autonomously, empowering collaboration among business experts and it professionals, and increasing customer satisfaction. the study represents an additional contribution to the importance of lcdps and ncdps as tools that allow faster automation of processes and easier development of software and application in different sectors. keywords: no-code development platforms; low-code development platforms; lcdps; ncdps; digital technologies; process automation; apps development; cooperation. 1. introduction today, digital technologies strongly affect society and how companies run their businesses, encouraging the increasing adoption of new technologies to stay competitive. in this respect, implementing lcdps and ncdps (prinz et al., 2021; ihirwe et al., 2020; richardson & rymer, 2014) is important for those companies that aim to speed up the international journal of economic behavior, vol. 13 n. 1, 2023, 33-49. https://doi.org/ 10.14276/2285-0430.3705 34 software and application development process but lack knowledge about programming languages. lcdps and ncdps offer a development experience based on visual and dragand-drop techniques rather than traditional programming languages (outsystem, 2019), which is heavily reduced, favoring a faster deployment of software and applications and the predisposition of multi-level workflows (prinz et al., 2021). such technologies have the potential to democratize it by accelerating programmers’ activity and allowing the participation of several stakeholders in the software and applications development process. accordingly, users with little knowledge of traditional programming languages learn how to create the products they need without writing code. moreover, the progressive implementation of lcdps and ncdps accelerates the firms’ digital transformation process (outsystems, 2019). they increase companies’ flexibility in answering market requests supporting their quick adaptation to variable conditions and customers’ requirements and reducing the dependence on technical skills that are difficult to recruit (rokis & kirikova, 2022; bernsteiner et al., 2022). the current literature underlines that the importance of these technologies is directly related to their impact on companies’ experience in developing software and applications, as they encourage a more flexible process and, consequently, a significant change in the company’s daily activity. according to prinz et al. (2021), most literature focuses on the benefits of lcdps and ncdps and their challenges, mainly referring to technical aspects (e.g., specific lcdps/ncdps features, tools offered by specific lcdps/ncdps) more than the social ones. these authors highlight the need to develop more studies on the impact of these platforms on social aspects to provide “a more holistic view” (p. 7) of this emerging phenomenon. for instance, factors such as the impact of lcdps and ncdps on it and business experts’ collaboration and communication remain underexplored. therefore, there is a need for further empirical insights in the managerial literature to understand better the impact of these technologies on it and business units’ cooperation and the related changes triggered once they are introduced inside the company. by focusing on the impact of lcdps and ncdps on organizational dynamics, this study would like to answer the following question: how does lcdps/ncdps implementation affect the cooperation between it and business experts? more in detail, the research aims to understand the impact of lcdps/ncdps implementation on business dynamics with specific reference to the cooperation – meaning collaboration and communication between business and it experts in developing specific activities to reach their business goals. due to the topic’s novelty, the author was encouraged to adopt an explorative research approach by developing a case study strategy (yin, 2018) and implementing a purposive sampling technique (patton, 2002) that facilitated data collection from key informants. such an approach helped the authors to have a deeper understanding of the direct experience of using these platforms and the changes they have brought inside the companies allowing the contamination of knowledge between experts. the subsequent sections of this article review the literature on lcdps and ncdps by addressing the gap the study aims to fill. the methodology section describes the qualitative approach implemented through the development of the case study, including the firms’ profile description. the finding section shows the main results of the analysis conducted, and the discussion and conclusion explain the importance of the evidence that emerged from data analysis with suggestions for future research. 35 2. literature review 2.1. lcdps and ncdps characteristics today, it is critical for firms to adapt their strategy and way of working to the unpredictable environment in which they operate (yan, 2021; outsystems, 2019). the rapid development of it and the speed of digital transformation require new tools to face the volatility of the environment and support internal changes (yan, 2021; sanchis et al., 2020). digital transformation encourages companies to shift from a time-consuming working method to an agile approach based on digital technologies (alsaadi et al., 2021). such an approach suggests a more flexible way of working and favors seizing new market opportunities and satisfying customers’ requests by staying competitive (outsystems, 2019). moreover, the increased adoption of smartphones has led to an increased release of mobile-based applications (hyun, 2019). therefore, companies need to adopt tools that help them implement rapid changes according to users’ requests and business needs (rokis & kirikova, 2022). indeed, instead of adopting expensive tailored it solutions, companies can opt for disruptive technologies such as the lcdps and ncdps that help change the applications’ development process (moskal, 2021). such technologies are gaining popularity due to the increased digital transformation (beranic et al., 2020; outsystems, 2019) by registering a growth in their adoption during the covid-19 pandemic when remote working imposed the digitalization of several processes and workflows (chandran & abdulla, 2022). lcdps and ncdps are cloud or on-premises-based platforms (rokis & kirikova, 2022) that enable quicker development of applications avoiding the use of hand-coding languages, asking for less effort in the “installation and configuration of environments, and training and implementation” (waszkowski, 2019, p.376). they represent essential tools for those users that aim to automate processes and build software solutions without having it skills (rokis & kirikova, 2022). indeed, the pre-coded components, visual diagrams, declarative languages, modules, and templates allow users to create applications by dragging and dropping different elements (chandran & abdulla, 2022; beranic et al., 2020). in addition, costs and time spent on developing applications by using both lcdps and ncdps are lower if compared to traditional coding programming (moskal, 2021; rymer, 2017; khorram et al., 2020). for instance, software and applications development generally takes nine to twelve months using traditional programming languages, while lcdps or ncdps takes a few weeks (chandran & abdulla, 2022). despite the terms “low-code” and “no-code” are often used interchangeably, lcdps and ncdps present some distinctions (rokis & kirikova, 2022; marinković & avramović, 2021; vincent et al., 2019). more in detail, lcdps maintain the possibility of integrating lines of code using traditional programming (khorram et al., 2020). indeed, they ask for minimum usage of manual coding to complete (or tailor) and release the application, favoring the development of more complex software, therefore, asking for some programming skills (chandran & abdulla, 2022). for this reason, lcdps are mainly addressed to advanced users and skilled developers (marinković & avramović, 2021) or to companies with an it unit that can complete the customization of the product. in this case, the primary intent is to reduce developers’ repetitive activities due to adopting the traditional programming language, thus reducing the time dedicated to monotonous application development details (yan, 2021). 36 in contrast, ncdps represent a subsection of low-code technologies. they are generally adopted to create reporting, analytics, and tracking apps (chandran & abdulla, 2022), favoring quicker prototyping according to customers’ requirements and testing functionalities as they do not request programming skills to be used. ncdps are highly adequate when a company lacks it resources or when professional developers’ availability is lacking in the market (rokis & kirikova, 2022; yan, 2021). they are mainly suitable for the so-called “citizen developers” (e.g., business users, office managers, small business owners, and users without it background) (bernsteiner et al., 2022; prinz et al., 2021) as they enable an active contribution to the process of creation of software and applications (rokis & kirikova, 2022; marinković & avramović, 2021; beranic et al., 2020; wong et al., 2019) even lacking hand-coding programming skills. in addition, organizations are coupling lcdps and ncdps with workflow automation tools as complementary (lebens et al., 2021). such an approach facilitates the inclusion of unskilled it employees, such as business experts, in product and process development, enabling them to create what they need without writing code. this combination supports the inclusion of employees from different departments in the company’s digital transformation, making them active contributors. 2.2. citizen developers’ strategy due to the limited it resources in several companies, business units face difficulties in enhancing their processes quickly (lebens et al., 2021) and fulfilling the increasing need for web and mobile applications (bernsteiner et al., 2022). lcdps and ncdps are tools that accelerate companies’ digital transformation, improving the responsiveness of the business by decreasing the dependence on professional programmers that are difficult to hire (bernsteiner et al., 2022; outsystems, 2019). moreover, they facilitate a much faster and cheaper launch of digital products and applications (lebens et al., 2021), minimizing barriers to software development (silva et al., 2021). they allow business departments to make their employees create autonomously the products they need, lowering the pressure on the it department (lebens et al., 2021). in addition, professional programmers and it units can benefit from lcdps and ncdps to enlarge their portfolio of products by developing projects without spending months on a project (moskal, 2021). for this reason, such tools have the potential to accelerate the time of applications’ release (khorram et al., 2020), facilitate updates according to emerging requirements, and favor an agile software development process (bernsteiner et al., 2022). the inclusion of employees who lack computer programming skills in the process of apps and software development aims at exploiting different expertise, such as the ability to define the requirements (rokis & kirikova, 2022) and support the application creation according to customers’ needs (yan, 2021; alsaadi et al., 2021). indeed, these resources have “logical and abstract thinking” (moskal, 2021, p. 54) that allows them to quickly learn how to use lcdps/ncdps to create solutions operating through the graphical user interfaces, using the drag-and-drop technique instead of coding. they can “design and build powerful applications that efficiently scale the work of related departments without writing code” (hyun, 2019, p. 189) and focus more on “designing the aesthetics and functionality of the application” (waszkowski, 2019, p. 376). moreover, as previously underlined, the majority of research on lcdps/ncdps focuses on their technical aspects, neglecting others (bernsteiner et al., 2022; prinz et al., 2021). therefore, the lack of knowledge about the impact of lcdps/ncdps 37 implementation on specific social aspects has encouraged the author to explore further their impact on business experts and it professionals’ cooperation in different business realities. 3. methodology 3.1. qualitative research and case-based research strategy the topic’s novelty encourages a deeper analysis of the subject by applying a qualitative explorative research approach which “aims to achieve an in-depth understanding of a situation” (cooper & schindler, 2014, p. 144) through the key informants’ point of view (merriam & associates, 2002). the qualitative research approach was developed by adopting a case study strategy, which is appropriate when there is little knowledge about the topic under study (yin, 2018) and to answer how and why questions (eisenhardt, 1989; welch et al., 2011). indeed, such a strategy helps the researcher to investigate “a contemporary phenomenon (the “case”)” by going deeper into the analysis when “the boundaries between phenomenon and context may not be clearly evident” (yin, 2018, p. 15). adopting a case study strategy favors clarifying the context and its complexity and a holistic view of the phenomenon (creswell & creswell, 2018). moreover, in this study, resorting to a case study strategy has helped the researcher to develop a collaborative relationship with key informants to understand their interpretations and experiences (cooper & schindler, 2014) about the adoption of ncdps/lcdps technologies in two different contexts by enabling comparisons between the cases selected (yin, 2018). 3.2. case selection and data collection to achieve the reliability of the data, the author observed the suggestion of yin (2018) by developing a case study protocol describing the instruments and procedures the researcher should follow. accordingly, given the aim of the study, the researcher adopted a purposeful sampling technique to identify and select key informants who could provide descriptions of information-rich cases (palinkas et al., 2015; patton, 2002). two companies (alpha and beta) were involved in the analysis as part of the research process. they are located in two countries (italy and germany) and operate respectively in the software and bank sectors. data was collected by developing a semi-structured interview elaborated according to the study's research questions, objectives, and purpose (saunders et al., 2019; cooper & schindler, 2014). it was addressed to key informants (table 1) reached via e-mail to introduce the research and explain its purpose while asking for interview availability. four people were interviewed according to their willingness to describe their experience using lcdps/ncdps (palinkas et al., 2015) and collect information about their approach and the changes in collaborations between it and business experts. in company alpha, the key informants have different backgrounds in it and business areas. in contrast, in company beta, the author had the opportunity to interact directly with the head of the it department, who is responsible for the digitalization of the company’s processes and business model by directly managing the team of developers. the interviews were conducted virtually through microsoft teams in english and italian, and the purpose of the study was verbally repeated before starting the interview session. they lasted approximately 60 minutes to be completed and were recorded, 38 transcribed, and integrated with secondary data sources (e.g., reports on the companies’ websites, other documents gathered from the internet, and private documents provided by informants) to respect the data triangulation principle (yin, 2018). in addition, based on key informants’ requests, their profiles and those of their companies were anonymized by excluding any possible identifying information. table 1 – interviewees’ profiles key informants education role inside the company expertise interview duration 1° company alpha management engineer business process analyst collecting functional requirements to address specific customer needs and digitization projects consulting; approx. 60 minutes 2° company alpha computer scientist system architect software development; monitoring the job order throughout its life cycle; process analysis from the technology side rather than the information flow side. 3° company alpha degree in economics business process analyst analysis of organizational structures and business processes. 1° company beta computer scientist responsible for the processes’ digitalization digitalization of processes and company’s business model. managing teams of developers or app development projects. approx. 60 minutes source: author’s elaboration moreover, to collect relevant data, it was decided to support the semi-structured interview with the card-based game method (conrad & tucker, 2019; rowley et al., 2012; jones & rowley, 2012). such a method consists of creating game cards with concepts written on them and asking questions during interviews with key informants. according to the informants’ interpretation, the game aims to clarify the concepts’ importance, prioritization, and possible relationships between them (rowley et al., 2012). cards’ adoption encourages active participation and facilitates an in-depth gathering about proposed aspects around a topic (conrad & tucker, 2019). this research used the cardbased game method to gather in-depth information concerning lcdps/ncdps, understand the users’ reasons and intentions for using them, and their importance in favoring the cooperation between it and business experts. several concepts around the lcdps/ncdp topic were identified to implement this method. the concepts were selected by considering the literature review on the topic conducted in the previous paragraph (see paragraph 2). however, to refine the concepts on cards and better understand the lcdps/ncdps functioning, the author interviewed an lcdp/ncdp platform provider to reinforce the knowledge acquired and better understand the characteristics of these platforms. according to the above procedure, twelve lcdps/ncdps critical aspects were identified, such as process automation, time-tomarket, no technical skills, decreased costs, cross-platform functionality, vendor lock-in, customization, integration with other tools already adopted, easy changes, better customer experience, faster (digital) transformation, and collaboration between it and business department (see table 2). https://www.inderscienceonline.com/doi/full/10.1504/ijesb.2012.047614 39 table 2 – cards’ concepts explanation ncdps critical aspects explanation process automation operating the digitalization of business processes. time-to-market speed up the app development process thanks to graphical interfaces, not hand-coding. no technical skills no hand-coding knowledge or it background is requested. decreased costs ability to build more apps in less time, costs decrease, as well as the need for professional developers, reducing/eliminating hiring costs. cross-platform functionality applications can be deployed across a range of devices. vendor lock-in [platform providers’ dependency] the strict dependency on platforms’ providers (vendor lock-in) varies from vendor to vendor. it is sometimes complicated for users to maintain an application outside the vendor platform, as the vendor sometimes impedes making app/software changes once the user stops using its platform. customization customization options vary between platforms. lcdps generally offer less limited customization than ncdps, allowing users to customize some aspects of their app/software using hand coding. in contrast, ncdps do not provide this possibility. integration with other tools already adopted the easy integration of new apps/software developed with lcdps/ncdps with other apps and software adopted by the user. easy changes the quick adaptation of apps/software to suit new requirements facilitates immediate modifications when necessary, according to market changes or customer needs. better customer experience the effects of increased speed in innovating business processes and apps deliver favor better customer experience. faster digital transformation removal of complexity from building great, modern business apps/software accelerating the adoption of useful technology. collaboration between it and business departments lcdps and ncdps can make everyone in the organization more productive. accordingly, it can help bring it and business departments closer, intensifying dialogue and mutual support. source: author’s elaboration therefore, twelve cards were developed and adopted to conduct the game (figure 1) during the semi-structured interview with the key informants. 40 figure 1 – cards adopted during the interviews with key-informants source: author’s elaboration 3.3. data analysis before starting the data analysis, the two case stories were written, and each case study report was shared with the interviewees to confirm the accuracy of the information and proceed with data analysis (ghauri, 2004). after the interviewees confirmed data accuracy, the author started data analysis by reading each case as a single case and coding the content to provide a first idea of relevant aspects to consider. at the same time, potentially irrelevant aspects were highlighted to be removed after the cross-case analysis, which was made to identify similarities and differences between the two cases (eisenhardt, 1989) and remove the irrelevant aspects. 4. companies’ profile short description 4.1. alpha company alpha is a cooperative society founded in 2006, counting ten employees and several external collaborations with freelancers. since 2017 it has become a private research center whose primary purpose is to carry out industrial research or experimental development activities independently, disseminating the results through teaching, publication, or knowledge transfer activities. the company was born within a university’s ecosystem in southern italy. it represents the result of the combination of different academic and work experiences of a group of researchers who decided to develop their business outside the university by exploiting the know-how acquired. indeed, they integrated skills and knowledge in heterogeneous fields to offer high-value-added services to public and private actors nationally and internationally. the company’s expertise mainly concerns business process analysis, ranging from fundraising, including the identification of possible subsidized finance products, to research projects promoted by the ministry of economic development, but also supply and software engineering. 41 4.1. beta company beta was founded in 1825 as an independent savings bank willing to create value for clients. the company counts approximately 1,100 employees, providing its 400,000 private customers with financial and consulting services on asset management, retirement, and real estate matters. it strongly supports approximately 25,000 small and medium-sized enterprises in their growth, focusing on its clients to constantly reinforce the existing relationship. accordingly, the customers’ preferences expressed to the company represent an important non-financial performance indicator that collocated the company as a leader in the relationships with corporate customers if compared to other competitors. in 2019, the company transformed its hierarchical organization into a network organization to continue providing customer benefits in an environment affected by digitalization and intensive competition. moreover, in 2020, the company moved its head office inside a university campus, developing interdisciplinary cooperation and eliminating teamwork boundaries between departments. in addition, according to future strategic measures, beta is implementing new interventions aiming at the comprehensive digitalization of processes, products, and services to adapt to customers’ requirement changes. 5. evidence from the case study analysis 5.1. speeding process automation and applications development the key informants of both companies underlined the importance of digitalization according to their customers’ needs. however, the increasing volatility of the environment and customers’ requests put more pressure on them to accelerate the introduction of digital tools that could facilitate communication with customers and colleagues, reducing the effort to reach valuable results. the customers’ requests frequently change according to the pervasiveness of digitalization. such a situation requires flexibility and the ability of companies to make changes easily according to new requirements. both companies opted for implementing an ncdp according to the respective necessities and due to the idea of having tools that facilitate changes in the solutions’ development process by allowing its speediness compared to traditional approaches and reduction of costs of the process and projects’ management. company alpha adopted an ncdp to have a flexible and fast enough tool to show results to customers immediately. the starting point for evaluating the ncdp as a valuable tool was an order that started simply as a process analysis and required the creation of mock-ups. the team identified several critical issues that could be solved by adopting a business process management suite (bpms). however, before providing a specific solution, the company evaluated different technologies and identified an italian platform as the best solution in terms of functionality and speed of development. the speediness offered by this platform represented the main reason to implement it in the process. the adopted ncdp favors the creation of business process management cloud applications within a short time by meeting the customers’ needs, going quickly into the development process, and skipping the design process. with respect to company beta, the clear strategy based on the digitalization of the company’s business model triggered the research of tools helping the complete automation of processes and the development of solutions that could be quickly deliverable to 42 customers. it aimed at reducing the time and costs associated with the regular manual management of several activities. to do this, the company needed to set up the correct environment, as it lacked an integrated system to channel the flow of information. indeed, in the period in which the interview was conducted, the employees still had to insert data from excel files into the central system manually. to speed up process automation and digitalization, the company has started automating its processes by adopting the “microsoft power automate” platform, which enables users to build low-code/no-code workflows to automate applications with robotic process automation (rpa). such a tool allows the company to create and manage automated workflows through a guided experience and to develop chatbots to perform routine tasks efficiently, managing several processes to settle customers’ requests satisfactorily on a case-by-case basis. 5.2. autonomous training and platform providers’ support as some of the interviewees underlined, “to become a software developer is a very long journey. you need experience! it is very complicated”. on the contrary, adopting an ncdp allows process automation and application development without having software developers inside the teams, contrasting these professionals’ lack of availability. ncdps were described as “easy to learn” platforms that allow employees to learn how to use them autonomously. company alpha has a strict and direct relationship with the italian platform provider of the ncdp, which provides constant support. in general, the platform provider shares frequent updates with the company about the product by including the extension of the ncdp’s potential to guarantee its usefulness according to customers’ new necessities. moreover, the platform provider supports the learning activity of its users by providing a series of technical documents and training courses with videos lasting a few hours, which give access to the main functionalities of the ncdp. such support allows them to understand better how to develop a complete solution in just a few days. in addition, the company has the opportunity to ask for consultancy on the application’s various functionalities and additional training sessions to solve specific problems the employees meet while using the platforms (e.g., errors or bugs). it can also resort to dedicated professionals who train its employees about the more complex functionalities of the platform according to the company’s needs. considering the experience of beta with microsoft, the company allows employees to train with the power automate platform through the supporting programs offered by microsoft-certified partners that started introducing the topic with several workshops. moreover, by adopting such a tool, the company wants to completely transform its business model from the typical on-prem into the microsoft azure cloud. therefore, adopting the microsoft power suite, which includes power bi, power automate, and power apps, represented a real advantage for the company. as described by the interviewee, “we decided to use it [microsoft power suite] because it has a very good licensing model. i think it is very easy to scale, and it provides many services such as monitoring the process, application lifecycle management, version control, and so on”. 43 5.3. empowering business users and collaboration between departments the possibility of accelerating the development process by including unskilled it team members, making them active contributors to the digitalization of operations, was essential for both companies. in company alpha, the ncdp implementation enabled more significant involvement of business experts in activities usually delegated to the it experts, fostering greater collaboration. indeed, generally, the company’s consultants collected all the information “and poured it over to the [it] development team.” thus, there was unidirectionality from the standpoint of knowledge and requirements. then the it development team then reported back to the consultant what had been done, asking to verify if the requirements were correctly translated into functionality according to customers’ needs. on the contrary, with the adoption of the ncdp, the consultants can autonomously include the requirements inside the platform, making them understandable to the customers that can easily and quickly interact with the solution provided. therefore, there is no longer unidirectionality as the part of the project run with the ncdp is developed entirely by the consultants, who defer to the it unit only to create the tailor-made software part. this has fostered bidirectionality by enriching the consultants’ knowledge regarding the technological and vertical sphere of it and, in the opposite direction, fostering greater knowledge of business processes in the it department. such an approach favors the “dispersion of common knowledge, strengthening cooperation between consultants and it developers.” involving several non-it skilled resources in the use of the ncdp favors a more concrete and strict collaboration between it and business experts. indeed, employees with a better knowledge of algorithmic and computer-based logic and those with knowledge about business dynamics started a collaboration that favors compensating for each other’s limits and sharing knowledge within the company. concerning company beta, the impact of ncdps brings essential improvements in collaboration between the it unit and the other departments. first, to proceed with process automation, two people were identified to start working with the platform considered “very easy to be used to automate any process” to prepare the ground for implementing a “citizen developers' strategy.” indeed, the center of excellence guiding the automation of processes started dialoguing and interviewing employees in different departments to collect ideas concerning potential processes to automate. it started asking them to show their work process, asking, for instance, “how often they are doing that [work/activity]” to understand the complexity of the process and organizing dedicated meetings to collect data about repetitive activities. the intent to reduce repetitive manual activities was described as the main company’s priority, as they make employees frustrated. therefore, the center of excellence has started digitalizing processes. accordingly, encouraging employees to describe processes and activities they consider tedious and repetitive increases the it unit’s understanding of the processes and the possibility of automating them. such an approach puts the it department in contact with the other department favoring a deeper dialogue and making employees proactive collaborators. 5.4. lcdps limits and potential resistances ncdps’ implementation has been demonstrated to speed up flows’ digitalization by making changes more easily than a classical software development solution. moreover, the 44 cross-platform functionality of the ncdps adopted by the two companies allows the applications to be run on multiple devices. however, as described by company alpha, the most critical part of implementing the ncdp has been the difficulty in integrating it with tailor-made software developed with traditional technologies. in that case, the initial difficulty was obtaining a common language for both software, which used different programming languages. in addition, the customization of solutions according to specific client’s requests is not allowed by using an ncdp, representing a limitation compared to traditional development technologies. as one of the interviewees of company alpha said, “with this technology [ncdps], sometimes we had constraints because the set of interfaces is limited anyway, precisely because the interaction buttons are limited.” furthermore, in company alpha, “the resistance is something that cannot exist” as it has never faced any negative experience. as the interviewees underlined, “those who have vertical skills, which means knowledge of computer systems and programming languages, may disagree with using this modality.” however, no concrete technical barriers exist to adopting the ncdp or real opposition. in company beta, the company’s idea was to start making employees able to automate processes by themselves and develop chatbots. therefore, the center of excellence started automating some processes and creating chatbots, intending to involve in this activity other employees very soon. however, the automation of processes and chatbots’ adoption made some employees afraid of losing their work “because it [chatbots] can do their work, maybe by 100%”, but this way of thinking did not represent a concrete resistance experienced by the company at the moment of the interview. 6. discussion of findings low-code and no-code technology allowed companies to make changes more easily and quickly than a classical software development solution. the frequent changes in customer requests that guide the companies’ orientation can be challenging to manage without flexibility. adopting digital tools that help make changes quickly according to new requirements was extremely important for them. adopting an ncdp made the analyzed companies more likely to develop solutions autonomously and rapidly. moreover, these solutions were easily integrated with other external tools, thus making them more valuable and particularly suited to companies’ business purposes. even describing the advantages and critical aspects of ncdps’ by following different storytelling (figure 2), with the adoption of such strategic tools, the companies aim at accelerating the company’s digitalization to offer a better customer experience to their clients. all the aspects described during the interview, also thanks to the application of the card-based game method, are factors linked to customer satisfaction achievement. indeed, it emerged that ncdps not only favor facing customers’ requests made volatile due to the pervasiveness of digital technologies, but they also ensure the possibility of quickly accessing the required functionalities due to rapid prototyping. 45 figure 2 − lcdps/ncdps critical aspects described by companies source: authors’ elaboration on the card-based game method results moreover, involving resources with different backgrounds and expertise in digitalization and application development has been fundamental. in both companies, these platforms have been easily implemented, allowing employees to learn how to use such tools autonomously. indeed, the interviewees described the adoption of ncdps as an essential tool to reach the objectives of digitalization, process automation, and employee inclusion. due to the easiness of learning and using the platform, and the possibility of involving dedicated internal resources in developing solutions, digitalization and process automation goals have been possible even when the company lacks specific it resources. involving unskilled it resources in solution development triggered a series of changes for the two companies, favoring a faster transformation due to the low complexity that characterized these platforms and reducing repetitive activities and their manual management. in addition, including business experts in activities usually delegated to professional developers encouraged deeper communication and collaboration among employees, favoring knowledge contamination. indeed, business consultants and it professionals started collaborating according to the idea of speeding up process automation. business experts support clear workflow descriptions and learn how to use the ncdp to support application development, eliminating departmental boundaries. this has also reduced dependence on professional software developers hired as external collaborators and the efforts of internal ones used to develop software and applications entirely with traditional hand-coding methods. in addition, automating processes with less effort than traditional technologies and developing software and applications in a few weeks has made companies and employees more flexible thanks to the automation of services via workflow, thereby reducing the time and costs associated with their manual management. the ncdps have also decreased costs and implemented quicker application development and process automation by reducing the time and effort on a single project. 46 7. theoretical and managerial implications. the analysis of the outcomes suggests some theoretical and managerial implications. from the theoretical point of view, the study contributes to the managerial literature by confirming the importance of low-code technologies, with specific reference to ncdps as tools that support companies’ process automation and digital transformation. moreover, according to the study’s objectives, it has been possible to contribute to analyzing the impact of ncdps implementation regarding social aspects. indeed, they represent inclusive tools that allow companies to implement a citizen developer strategy. such strategy is sometimes a goal that the companies set up at a certain point in their lives to start a transformation that can help them to maintain their competitiveness and respond to context changes. other times, it is a step to make departments/units inside a company closer to developing projects and improving communication. accordingly, ncdps favor the involvement of resources with different skills in the process of solutions’ creation representing tools that encourage cooperation and a stimulus for knowledge contamination. therefore, the results of this study contribute to the literature dedicated to the impact of no-code technologies on social aspects related to the work of human resources employed in the firms. from the managerial point of view, the article’s evidence shows the importance of these technologies in the cooperation between employees, especially concerning it and business experts. such technologies stimulate dialogue between the two units, favoring knowledge contamination. indeed, these two units generally speak a different language due to the lack of it knowledge on the business side and the lack of knowledge about business processes on the it one. by implementing the ncdps, firms have the opportunity not only to introduce a tool that increases the competitiveness of the firms by facilitating speediness in application and software development but to positively affect the employees’ daily activities creating synergies between different roles. 8. conclusion, limitations and future research suggestions the analysis contributes to the managerial literature on lcdps/ncdps in which the topic is emerging. it also provides a better understanding of the business and it departments/units’ cooperation in companies belonging to different sectors. despite the elements of novelty, this article is not free of limitations that can be considered points of departure for further analysis of the topic. the first limitation relates to the focus on a specific social aspect, which gives some hint about the impact on it and business experts’ cooperation changes triggered by ncdps introduction, without providing a broader contribution due to the limited number of cases involved in the analysis. indeed, the second limitation concerns the implementation of a qualitative methodology by focusing on a limited number of cases. implementing a case study strategy based on interviews and the card-game-based method represented an innovative methodology that has never been applied to lcdps/ncdps adoption studies. this methodology has been instrumental in identifying the most critical aspects of the phenomenon according to the key informants’ points of view. in addition, the rigor in developing (and describing) the detailed procedure for implementing the case-study strategy has favored data collection transparency and interpretation. however, the limited number of cases involved in the analysis does not favor the generalization of results. 47 building on the limitations of this article, future researchers should extend the analysis of lcdps and ncdps’ impact from a social point of view, considering benefits and clarifying criticalities in their implementation. moreover, developing a case study strategy should be supported by incrementing the number of cases and integrating with a mixedmethod approach to increase the possibility of the results’ generalization. acknowledgment this research was financed by the yerun research mobility awards (yrma), won by the author in 2021. the author would like to thank the “young european research universities network” (yerun) for providing financial and network support for the project development. references 1. alsaadi, h. a., radain, d. t., alzahrani, m. m., alshammari, w. f., alahmadi, d. & fakieh, b. 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(2010), “le nuove frontiere del marketing internazionale fra approccio strategico, contestualizzazione e interculturalità”, mercati e competitività, n. 4/2010, pp. 15-19. doi: 10.3280/mc2010-004002. 1. introduction 2. literature review 2.1. lcdps and ncdps characteristics 2.2. citizen developers’ strategy 3. methodology 3.1. qualitative research and case-based research strategy 3.2. case selection and data collection 3.3. data analysis 4. companies’ profile short description 4.1. alpha 4.1. beta 5. evidence from the case study analysis 5.1. speeding process automation and applications development 5.2. autonomous training and platform providers’ support 5.3. empowering business users and collaboration between departments 5.4. lcdps limits and potential resistances 6. discussion of findings 7. theoretical and managerial implications. 8. conclusion, limitations and future research suggestions acknowledgment 123 enterprise success: does entrepreneurship education matter in nigerian small and medium enterprises? abdulazeez a. lawal lagos state university of science and technology, nigeria hameed o. ojodu lagos state university of science and technology, nigeria received: april 25, 2022 accepted: august 24, 2022 online published: august 27, 2022 abstract developed and developing countries have demonstrated commitment toward nationwide enterprise culture. success in entrepreneurship depends on many factors, including entrepreneurship education (ee). in nigeria, research studies on factors affecting the success of small and medium enterprises (smes) are devoid of a comprehensive theoretical framework. many smes owners are interested in discovering these critical success factors. the bulk of research on ee concentrates on its effect on entrepreneurial intentions (ei). the efficacy of ee in enterprise success (es) is still uncertain. this study surveyed randomly selected 325 smes operating in lagos using adapted research instruments adapted from previous studies. correlations and multiple regression analysis were applied to analyze the data. the analysis revealed the non-significant relationship between most personal business demographics and the es. however, the contribution of ee to es was statistically significant. the study’s findings revealed that ee is the prime driver of es. ee positively affects es significantly. the implication is that a well-designed and implemented ee program will enhance business success. therefore, entrepreneurs need to acquire knowledge relating to business management and the identification and exploitation of investment opportunities. keywords: entrepreneurship; entrepreneurship education; enterprise success; entrepreneurial intentions; small and medium enterprises. international journal of economic behavior, vol. 12 n. 1, 2022, 123-144. https://doi.org/ 10.14276/2285-0430.3395 124 1. introduction entrepreneurship is the development of sustained applications and solutions that collectively address grand challenges to improve the world (markman, waldron, gianiodis and espina 2019). consequently, entrepreneurship is regarded as the backbone of any economy. as stated by co and mitchell (2006), employment generation and revitalization of the economy are achievable through the rediscovery of entrepreneurs who take risks, break new grounds and innovate. hence, entrepreneurship worldwide remains a priority if not in actions but in words (de carolis and litzkey, 2019). maliranta and nurrai (2019) maintained that early business dynamics research has shown that entrepreneurship activities have a sustained impact on economic growth. entrepreneurial activities are crucial for sustainable economic development in several aspects. first new businesses have an impact on job creation. second, a dynamic process of creating new ventures ensures economic welfare and augments efficiency and productivity. third, new firms act as the engine for promoting innovation and realizing business ideas. fourth, the revitalization of depressed neighbors and communities is attainable through new venture creation. fifth, business owners’ economic and noneconomic lives improve by creating new businesses. sixth, youth unemployment and poverty can be reduced through new venture creations. (ghavidel, farjadi, and mohammadpour,2011; de carolis and litzkey, 2019; maliranta and nurrai 2019 and lawal, akingbade, and williams, 2017). the idea of unemployment and poverty were alien to nigeria in the eighties. therefore, the successive government did not consider the menace of unemployment, poverty, and recession in the agricultural market as issues of concern (ojeifo, 2013). recently, poverty and unemployment have become nigeria’s significant challenges and have maintained a rising trend. nigeria remains the only member of the organization of petroleum exporting countries (opec) among the world’s poorest countries and has high rates of unemployment in africa (ayandike, emeh and ukah, 2012). therefore, nigeria’s unemployment crises are more critical than other developing countries. the world bank report (2018) statistics revealed that almost half of the nigerian population lives below the international poverty line, and unemployment reached its peak level of 23.1%. developed and developing countries have realized the vital contribution of enterprise development to the economy’s health. subsequently, they have demonstrated commitment to nationwide enterprise culture (lawal et al., 2017; sbs, 2003 alarape, 2008). globally, governments at various levels provide policy and institutional support to stimulate, support, and sustain entrepreneurship development. furthermore, government efforts focus on improving collaboration with international organizations such as international labour organization (ilo), united nations development programme (undp), etc., to strengthen entrepreneurship skills and competence of the nation’s industrialists for enterprise success (alarape, 2008). in addition, the growing importance of entrepreneurship for sustainable economic progression, innovation, and job creation has concerned decision-makers and researchers. (amreen et al. 2019). enterprise success (es) is often defined in terms of economic performance and is sometimes used interchangeably with growth and performance (katongole, ahebwa and kawere,2014; rahim,2021). es is influenced by several formal and informal factors (makhbul, 2011). personal characteristics of entrepreneurs, such as education, training, and experience, have been demonstrated as predictors of an entrepreneur’s success (genty, idris and pihie, 2014). intrapersonal resources such as formal schooling, formal 125 entrepreneurial training and education and informal entrepreneurial training and education have been demonstrated as predictors of enterprise success among micro and small entrepreneurs in uganda (katongole et al.,2014). formal financial, technology, and strategic partnership support are also considered critical success factors in business ventures (carrier, raymond and eltaief, 2004). studies conducted in lebanon also identified environmental factors, psychological and prior experience as the main factors affecting the success of social entrepreneurs. (raimi, 2019) meanwhile, entrepreneurship education (ee) is increasingly becoming an essential strategy for entrepreneurship development because of its perceived impact on enterprise success. ee has developed parallel with that entrepreneurship (nabi et al., 2017). entrepreneurship as a course started at harvard business school in 1947. subsequently, entrepreneurship education programs in higher education institutions (heis) have grown rapidly globally (nabi, linen, fayolle, kruege, and walinsley, 2017; genty et al., 2014). nigeria’s government renewed its effort in promoting entrepreneurship education in tertiary institutions focused on encouraging the students to develop the required knowledge, skills and motivation for a positive attitude toward entrepreneurship (ojeifo, 2013). furthermore, to address unemployment and the high level of poverty in the country, the nigerian government initiated a program titled “national economic empowerment development strategy (needs)” in 2004 (genty et al., 2014). the program was designed to ease the country’s wealth creation, employment generation and poverty reduction goals. in addition, the small and medium enterprise development agency of nigeria (smedan) was established in 2004. the aim was to promote and develop efficient and effective micro nigerian smes through an effective entrepreneurship education (ee) that will enhance enterprise success among the smes in nigeria. ee programs are premised on a range of entrepreneurial outcomes. for example, enhanced job skills and knowledge, stimulation of entrepreneurship intentions (ei), motivation to entrepreneurial success, and ultimately a contribution to sustainable economic growth and development (ojeifo, 2013; genty et al., 2014; nabi et al., 2017). generally, assessment of the impact of ee usually focuses on ei. consequently, the bulk of the research on ee concentrated on its effect on ei. meanwhile, few studies examine the question of enterprise success (foyette, 2011; nabi et al., 2017). ei is the selfacknowledged conviction by a person who intends to establish a new business venture and consciously plans to manage it at some point in the future. the theory of planned behavior (tpb) is undoubtedly one of the most extensive models used to demonstrate the efficacy of ee. tpb has three independent constructs: attitudes, subjective norms, and perceived behavioral control (ajzen, 2002). according to this theory, ei is contingent on the perceived ability to perform entrepreneurial behavior, individual attitude toward becoming an entrepreneur, and the perceived pressure to perform or refrain from that behavior (nabi et al. 2017). research studies on the relationship between various factors and the success of small and medium enterprises (smes) are devoid of a comprehensive theoretical framework, and many smes owners are interested in discovering critical success factors (simpson, tuck, and bellamy, 2004). tpb has remained a useful framework for the assessment of entrepreneurship development. however, scholars such as genty et al. (2014) and panda (2002) have demonstrated the significant role of ee and other demographic factors on es. 126 the demographic characteristics of small business owners are important for many reasons. sociologically, they are important determinants of social stratification and the social class to which an individual belongs (ritzer, 2016). demographic profiles of entrepreneurs such as age, marital status, sex, religion, and occupation determine access to the scarce resources of the society, in this case income and social status (giddens, 2016). empirically, it is uncertain that demographic characteristics affect achievement in all facets of life. the sociological theories only serve as guides to explaining enterprise success. the idea that demographic factors are determinants of success in business is subjective. (micah, 2022). in nigeria, academic research demonstrating the relationship between demographic profiles of small business owners, entrepreneurship education and enterprise success remains nascent, despite the proliferation of studies on entrepreneurship, therefore, there exists a literature gap in entrepreneurship education. given the foregoing development, a more specific approach is needed to assess the relevance of ee and the demographic characteristics of small business owners in the enterprise success of nigerian smes. a major point of debate is: rq1. how effective are ee and business owners’ demographics in achieving enterprise success? this paper, therefore, explores whether ee and other demographic variables affect enterprise success. our objective is grounded on the notion of relevance. there is growing interest in the nature, content and relevance of entrepreneurship development programs. our study differs from the previous study because we explore how entrepreneurship education and other personal and organizational variables can lead to enterprise success based on human capital theory and the theoretical framework adapted from earlier studies (e.g. indarti andlangenberg, 2004). the paper integrates the knowledge of the existing studies on ee with the hope of making a substantial contribution to the literature by analyzing and interpreting this relatively neglected area. 2. literature review 2.1 conceptual framework entrepreneurship education (ee) research shows differences in objectives and meanings associated with the construct, mainly based on educational programs and initiatives (alberti et al. 2004). furthermore, there is a lack of consensus regarding the definition of entrepreneurship education (e.g. maina, 2014; alarape, 2008; alberti et al., 2004). in addition, there is little evidence to indicate whether institutions are teaching relevant skills to future entrepreneurs (e.g. edelman, manolova and brush, 2008). moreover, there is a need to believe that entrepreneurship education is essential and, if properly delivered, will enhance the probability of start-up. traditionally, ee is a course of study that provides students with the knowledge to start a new business venture (omoniyi and bongani, 2022). ee refers to education for entrepreneurial attitudes and skills (bae, qun, miao and fiel 2014). it deals with establishing competencies in identifying new business opportunities and addressing 127 ambiguous decision-making (martin and brown, 2013, p. 35). according to them, ee is “any pedagogical program or process of education for entrepreneurial attitudes and skills, which involves developing personal qualities”. in conceptualizing ee, it is important to distinguish between education about entrepreneurship and education for entrepreneurship. the former focuses primarily on raising awareness about entrepreneurship, while the latter deals with preparation for setting up a business for potential entrepreneurs and usually focuses on practice and action-oriented learning philosophy (rauch and hulsink, 2015). the term entrepreneurship education is perceived differently depending on the research contextit is generally used in the usa and canada but less commonly applied in europe (e.g. alarape, 2008; gibb, 1993). on the other hand, it is usually known as enterprise education in the uk (alarape, 2008). thus, some researchers clearly distinguished the two constructs (alarape, 2008; gibb, 1993). entrepreneurship education focuses on developing functional management skills and abilities that train individuals to start, manage, and develop a business. in contrast, enterprise education is the advancement of personal enterprising attributes and attitudes that prepare the individual for selfemployment. entrepreneurship education is the capacity to connect the right quantity, quality and combination of resources consistent with profit making under risks and uncertainty (ojeifo, 2013). it is a lifelong process (ojeifo, 2013; essien, 2006), starting as early as elementary school and progressing through the levels of education, including adult education. however, some experts argue that the emergent body of knowledge in entrepreneurial education was affected by conceptual and contextual consideration, which tends to limit its broader applicability and generalization (e.g. matlay, 2008; matlay and carey, 2006). furthermore, the divergent opinions in the field of entrepreneurship polarize the concept leading to the emergence of different theories (matlay, 2008). hence, this has led to an oversimplification of the construct and evolution of increasingly complex models of entrepreneurship theory (matlay, 2008; matlay, 2005), none of which mirrors the complexity, heterogeneity and intensity of entrepreneurial practice. in other words, these trends negatively influenced the development of and research outcome in entrepreneurship education (matlay, 2008; matlay; 2005; matlay, 2006). the effective mode of delivery ee on the other hand, has been a subject of debate. according to ee can be delivered based on the goals (hytti and o'gorman.2004).ee that focuses on improving the level of understanding entrepreneurship will adopt public outlet techniques such as lectures, seminars, and the media. these techniques are effective for timely dissemination of information to a wide number of target audience. ee directed towards entrepreneurial skills acquisition will utilize industrial training is the greatest option. ee for creation of entrepreneurs requires experimental designs such as role-play or business simulation. (omoniyi and bongani, 2022). irrespective of the methods used educational institutions have a role in entrepreneurial education. in summary, ee builds the competence of small business owners and eventually enhances their competitive advantage. (reynoso,2008). ee provides the knowledge (know what), skills (know-how), social skills (know who), appropriate attitudes and motives (know why), and know when. (katongole et al., 2014). meanwhile, ee can be learned gradually designed, and implemented through formal and informal entrepreneurial training and education. 128 entrepreneurship success (es). success is a subjective concept and differs from one person to another. definitions of entrepreneurial success depend on the personal ideas of entrepreneurs. beaver (2002, p.88) once remarked: …… there are very real problems with the term “success” and its various interpretations and perceptions in the small firm sector. the propensity to become self-employed through ee may guarantee entrepreneurship success (es). entrepreneurship literature is replete with attempts to determine the best measures of success. researchers either advocate the use of financial and non-financial indicators to measure success (ahmad, 2013). recent studies have recommended the use of both financial and non-financial indicators to measure success because measures are complementary and describe the concept comprehensively and clearly. the present study acknowledges the need to measure enterprise success from both financial and non-financial perspectives for effective measurement of entrepreneurial success. barreto (2013) considered es as the success rate of an entrepreneur over a set of firms and during a given period. in differentiating enterprise success from failure, previous research studies associated entrepreneurial success with continued trading, and entrepreneurial failure is linked to unrewarding or ceased trading (dafna,2008; watson et al.,1998). a successful enterprise is a venture that is not bankrupt or liquidated (watson, 2007). conventional theorists challenged this position on the premise that the decision to remain in business is not exclusively based on profitability but could be due to the characteristics of the entrepreneur (harada, 2002). an enterprise may cease operation due to failure and diversification of resources to pursue more profitable investment opportunities (katongole et al., 2014). the indicators of es adopted include tangible elements such as revenue, personal wealth creation, profitability, sustainability, turnover, customer satisfaction, productivity, number of orders and contracts, number of employees and competitiveness, business ethics, and development of the good image. (alkusanmi and rida,2021, makhbul, 2011, wiklund, patzelt and shepherd, 2009; walker and brown, 2004). meanwhile, dafna (2008) associated entrepreneurship success with survival by supporting the notion that a successful business is a venture that has been operating effectively for at least three years. for this study, es is assessed based on a self-reported smes scorecard on financial performance relative to competitors. this approach has a wider application and validity (yang, 2008). small and medium enterprises (smes) smes in nigeria are heterogeneous. there are found in a wide variety of industries, ranging from the single artisan producing leather, weaving traditional dress “aso oke” in the rural areas, the retail shop owners, the cybercafé shops to small sophisticated engineering software firms exporting its product overseas and a medium chemical firm selling its product to multinational pharmaceutical companies. the owner may be poor or rich. the firms may operate in different markets (urban, rural, local, national, and international). the business may embody different skills, capital, sophistication, and growth orientation levels and operate in the formal or informal sector. (oyelaran-oyeyinka, adelaja and abiola 2007). over the years, there have been attempts at defining what constitutes a small business. scholars, experts, and institutions looking for an objective definition of small business have 129 used a variety of qualitative and quantitative indicators, including legal status, ownership structure, level of technology, number of employees, investment, sales volumes, net worth, profitability, and so on (lawal and akingbade,2018; lawal et al. 2017). statistical definitions of smes vary by country. due to its ease of collection, the most commonly used variable is the number of employees. in nigeria, definitions of smes have not been stable. however, despite these variations, various definitions adopted by respective agencies provide the necessary framework for administering policy measures to promote this subsector. for this study, msme is defined as enterprises employing not more than 100 staff with a total investment ceiling of 1 billion naira (smedan/fos 2021). 2.2 theoretical background and hypotheses development this research is quantitative. therefore, a helpful framework for examining the effect of ee on es is the human capital theory popularised by becker (1993; 2002). the theory was developed in relation to personal and educational investments. the human capital theory is based on the notion that education plays a crucial role in boosting economic growth. thus, gilles (2015) argues that the more the investment in education, the better the economy. subsequently, human capital was widened to include knowledge, skills, competencies, attributes and attitudes (becker, 2002). education is the key factor in human capital and remains critical for economic success. human capital theorists proposed that investment in training and education improves enterprise performance (zhao et al., 2005). the general human capital of the business owners is achieved through education, training, experience, and specific human capital of self-experience and leadership experience (becker, 2002). therefore, it can improve the enterprise’s success (stone, 2008). although the general proposition of this theory is that education increases performance, from an entrepreneurship perspective, general education has little impact on the entrepreneur’s competence. (morrison, 2000). only ee affects the entrepreneur’s competence because of its efficacy in developing skills and values that help enterprises succeed. (wikland et al.,2009). the main components of smes are entrepreneur characteristics, the characteristics of smes, and the type of strategy associated with growth (e. g. indarti and langenberg, 2004; storey, 1994). this study’s theoretical framework was adapted from previous studies (e.g. indarti and langenberg, 2004). however, unlike the contextual component of indarti and langenberg, we explored the efficacy of ee as depicted in figure 1. furthermore, the justification for each of the variables included in our model is also explained in the next section of this paper. 130 figure 1. proposed research model 2.3 personal demographics, organizational demographics and enterprise success previous research examined the impact of personal and organizational factors on enterprise success. (e g. genty et al,2014; makhbul, 2011 and indarti and langenberg, 2004). results have been mixed. genty et al., 2014 showed that some demographics are negatively regressed on es while others are positive. however, the entrepreneur’s experience is the most predictor of entrepreneurial success among msmes in lagos state, nigeria. studies on the relationship between formal education and enterprise success have generated mixed results. however, there is agreement that experiences gained from family business ventures will likely contribute to enterprise success (katongole et al., 2014). prior experience is effective if the entrepreneur can learn from such experience. research findings have demonstrated that novices and experts perceive and exploit opportunities differently (sarasvathy, 2008), implying that experience is essential but insufficient for enterprise success. in a similar study, indarti and langenberg (2004) found that education significantly affected es. other demographics such as age, gender, and previous employment history had little impact on es. on the other hand, studies by reynold et al (2000); kristiansen, furuhot, and wahid (2003) found age to influence es. these studies demonstrated that older entrepreneurs are more successful than younger ones. progression in age is strongly and positively related to work experience, fostering the development of entrepreneurial skills until diminishing results associated with old age sets in. late commencement of business may imply the absence of the energy and resilience required during the start-up of the business (ucbasaran et al., 2010). gender was also found to be one of the predictors of es. for example, mazzorol et al. (2009) found that females were generally less likely to be founders of successful new businesses than males. in addition, women have been predicted to possess lower levels of human capital with fewer opportunities to develop appropriate experience and h1 h2 h2 h3 personal demographics age gender qualifications profession business demographics . type of business . industry . age of business exposure to entrepreneurship entrepreneurship education and training enterprise success 131 consequently have more difficulty identifying and exploiting investment opportunities (ucbasaran et al., 2010; martinez, mora and vila, 2007:102). tkachev and kolvereid (1999) found that individuals with prior experience had significantly higher entrepreneurial intentions than those without such experience. business owners with greater previous experience will have higher entrepreneurial quality because the experience would have entailed a learning process that assists in identifying opportunities, reducing initial inefficiency, and improving the capacity to perform various tasks. previous experience includes work experience, business management experience, and industry-specific experience (tustin, 2003:88; ucbasaran et al., 2010). studies conducted by mullion et al (2014) extended the education and success interface by examining the value of education for individuals and the population. the findings reveal that not only the individual level of education positively affects enterprise performance, but also a higher educated population also positively influences entrepreneurship success. the implication is that education and higher education policies should be in tandem to each other for entrepreneurship success. similarly, studies on smes support the suggestion that company demographics such as the size of the firm, age, organizational structure, company’s network, and product competitiveness may affect enterprise performance (panco and korn, 1999:2). kristiansen, furuhot and wahid (2003) found that age of the business was significantly linked to es. some research findings also support this position by demonstrating that the age of an organization may affect the growth and decline of business ventures (panco and korn, 1999:2). the challenge of newness makes new smes face a greater survival risk than older firms because new firms do not have limited access to external resources in comparison with older firms that have the experience, access, links and reputation (davila et al., 2003:700). smes exist in a highly competitive environment, with unique and different challenges when compared with larger competitors in the same environment (van den berg, 2004:2). smallness of these ventures is negatively related to survival rates, owing to the limited resources that constitute a fundamental liability (gruber et al., 2010:194; davila et al., 2003:700). meanwhile, business ownership, organizational structure, and strategic choices are factors that may affect growth and survival of smes (gundry and welsch, 2001:458; kangasharju, 2000:29). smallbone, leig and north (1995) found that smes characterized by the combination of ownership and management were likely to develop a high level of commitment to the growth of the business. in addition, makhbul’s study of entrepreneurial success considered the entrepreneur’s independence, ability to make decisions and control of the organization as critical determinants of es. based on the above submission, this paper proposes that: h1: personal characteristics of nigerian small business owners significantly affect enterprise success (es). h2: characteristics of the nigerian small business ventures significantly affect enterprise success (es). 132 2.4 entrepreneurship education and enterprise success previous studies revealed that entrepreneurship education produces self-sufficient enterprising individuals (indarti and langenberg, 2004). moreover, ee increases the formation of new ventures, the likelihood of self-employment, the likelihood of developing new products, and the likelihood of self-employed graduates owning highly technology businesses. (libecap,2000). education, training, and experience are the predictors of es, but experience has significantly predicted es among msmes in lagos, nigeria (genty et al. 2014). similarly, studies conducted by saganthe, 2007; van gelderen et al.,2005; ucbassan et al.,2010 also supported the significant impact of ee on es. finally, an exploratory study by makhbul (2011) argued that ee that focused on leadership, human relations, communication, and networking significantly affected es. there is an ongoing discussion on the appropriateness of the course content, technology-driven pedagogy, and effectiveness measures (solomon, 2007). similarly, earlier discussions on entrepreneurship education had questioned whether entrepreneurship courses were not simply traditional management courses with a new label (e.g. solomon, 2007; king, 2001). meanwhile, there is a general agreement that the core management courses offered in traditional business education programs are essential for success in any business endeavor. (solomon, 2007; block and stumpf, 1992). however, there are differences between business principles applied to new ventures and those applied to the large organization (see solomon, 2007; davis, hills and laforge, 1985). in summary, we propose that: h3: entrepreneurship training and education (ee) of small business owners significantly affect enterprise success (es). 3. methodology 3.1 research method the study adopted a descriptive research design to examine the effect of ee on es. therefore, the survey was considered suitable. small business owners from lagos state in southwestern nigeria were selected. the selection of lagos was based on the cosmopolitan nature of the state. lagos state has a diverse population, including foreigners and nigerians from different tribes. religious diversity is also rich; the state has many muslims, christians, and other faiths. its small landmark does not encourage exclusive agricultural activities. according to the 2017 small and medium enterprises development agency of nigeria (smedan) and national bureau of statistics (nbs) collaborative survey, the number of msmes as of 2020 stood at 39,644,385 as against 41,543,028 indicting a decrease of 4.5 percent and lagos state had the highest number of msmes across all classes (smedan and nbs,2017). the state is the commercial nerve centre of the country. with its vintage position, it has the largest concentration of different industries. the reason for the decrease could be attributed to the negative effect of covid 19 pandemic in 2020 133 3.2 population and sampling plan respondents were business owners operating in lagos. the study population comprised registered business enterprises under the small and medium enterprises development agency of nigeria (smedan). as of 2020, the population of smes registered with smedan was estimated at 8395 businesses. the sample size was determined using cochran’s (1977) formula. four hundred business owners were randomly selected from different industrial centers in the state. enumerators were appointed to distribute the threesection questionnaire. the researchers monitored the process of data collection.326 questionnaires were properly filled and subsequently used for analysis. respondents were adequately informed about the purpose of the research, and given the opportunity of anonymity, and their responses were treated confidentially. 3.3 instrumentation in view of the exploratory nature of the research, existing measurement scales were adapted to gather the requisite data. the scale for measuring entrepreneurship education was adapted from maresch et al. (2015). the items were measured on a 7-point likert scale ranging from 1 – 7. enterprise success was measured with five-item statements similar to makhbul (2011). the items were measured using a 7-point likert scale (coded 1 as 1 = total disagreement and 7 = total agreement). the seven-point likert-type response style was used across the research instrument to preserve consistency and make the administration easy. part a measured respondents’ demographics. questions included were age, gender, educational attainment, profession, type of industry, type of business, and age. the 5 questions relating to entrepreneurship education were listed in part b. we measured respondents’ exposure to 5 different entrepreneurship education programs: entrepreneurship, small business management, enterprise growth, new venture management, and business organization. part c contained 5 questions relating to enterprise success. they included financial performance, revenue growth, and return on sales of responding firms relative to competitors. 3.4 analytical tools an exploratory data analysis process preceded actual data analysis to verify that the data gathering process satisfies the requirements of normality and linearity (makhbul, 2011). correlation analysis was also carried out to determine the relationship between ee, other demographic characteristics, and enterprise success. multiple linear regression analysis was used to determine the impact of independent variables on the dependent variable and clarify the most significant factors that influence enterprise success. 3.5 internal reliability of scales cronbach reliability test was conducted using ibm spss statistics version 19. the internal reliabilities of scales used in the study: ee and es, were examined and found to be greater than the benchmark of 0.70. 134 table 1 − internal reliability of scales name of the scale indicator cronbach alpha no of items entrepreneurship education (ee) exposure to ee programs like edp, business planning 0.888 5 enterprise success financial performance, revenue growth, roi etc 0.906 5 source: author’s analysis 3.6 descriptive statistics of variables descriptive statistics provide some information concerning the distribution of scores on continuous variables (skewness and kurtosis). this information is required since the study’s main variables are subjected to parametric statistical techniques. the skewness value provides an indication of the symmetry of the distribution. on the other hand, kurtosis provides information about the “peakedness” of the distribution (pallat, 2010). table 2 provides the output from the descriptive analysis. table 2 − descriptive statistics of entrepreneurship education and enterprise success (es) variables n min max mean std dev. skewness kurtosis stats std dev stats std ers entrepreneurship education 325 5 35 22.53 7.35 -0.264 .135 -0.271 .136 enterprise success 325 5 35 23.50 6.39 -0.467 .270 -0.496 .270 source: author’s analysis from table 2 presented above, the negative skewness values of ee (-0.264) and es (-0.496) indicate moderately skewed data with clustering scores at the high end. the kurtosis values of ee (-0.271) and es (-0.496) are below 0. this implies a platykurtic distribution that is relatively flat (pallat, 2010). 4. results and discussion 4.1 analysis of demographics table 3 shows the detail of demographics. the majority of the respondents belonged to 2040years. 216 of the respondents representing 66.5%, were males, while others were females. the majority of respondents representing 62.5%, belonged to the managementrelated profession. similarly, 65% of respondents were graduates. perhaps, because of the nature of responding smes, most firms were sole proprietors (75.4%), followed by the private, partnership, and public companies. responding firms are primary services 64.6%, manufacturing 13.2%, ict 13.2%, and have been in existence for more than 5 years. 135 table 3 − demographics analysis of respondents variables frequencies percentage age: below 20 20-40 41-60 61 and above 1 212 97 15 .3 65.2 29.8 4.6 gender: male female 216 109 66.5 33.5 qualification: ssce: hsc/gce bsc/hnd profession mba other 85 29 169 17 15 10 26.2 8.9 52.0 5.2 4.6 3.1 profession: engineering/technology/science-based business based 122 203 37.5 62.5 type of business: sole ownership partnership private company public company 245 26 52 2 75.4 8.0 16.0 .6 type of industry: management services agriculture property ict based others 43 210 11 15 36 10 13.2 64.6 3.4 4.6 11.1 3.1 age of the business: 1-5years 6-10years above 10years 131 102 91 40.3 31.4 28.0 source: author’s analysis 4.2 correlation analysis of demographics, entrepreneurship education (ee), and enterprise success (es) table 4 shows the means and standard deviations for demographics, ee and es. in addition, the correlations among all the study variables are displayed. based on the table, age, gender, qualifications, profession, type of business, type of industry, and age of the business have meant xs of 2.39, 1.34, 2.62, 1.62, 1.42, 2.45, 1.88, 22.53, and 23.53 136 respectively. the respondents’ standard deviations sds are 0.58, 0.473, 1.23, 0.485, 0.76, 1.28, 0.83, 7.35 and 6.39. the correlations between demographics, ee, and es, are also displayed in table 4. again, it is apparent that some independent variables have a significant relationship with es. the most significant is ee (0.629), followed by the age of respondents (0.202) and the age of the business (0.117). table 4 − analyses of mean, standard deviations, and correlations among dependent and independent variables variables mean sd 1 2 3 4 5 6 7 8 9 age 2.39 0.58 1 -.003 -0.12 0.25 .022 -.003 0.455 .170 .202** gender 1.34 0.47 1 -.213 .362 -.165 -.066 .168 -.004 .073 qualification 2.62 1.23 1 -.133 .197 .107 -.046 .064 .019 profession 1.62 0.49 1 -.229 -.170 .148 -.024 -.006 type of business 1.42 0.78 1 .043 .125 .082 .057 type of industry 2.45 1.28 1 0.061 0.055 0.072 age of business 1.88 0.83 1 .074 .117** ee 22.53 7.35 1 .629** es 23.50 6.38 1 n= 325 **p<0.01(2-tailed) *p(<0.05(2-tailed) source: author’s analysis 4.3 multiple linear regression analysis to test the study’s hypotheses, demographics: age of respondents, profession, gender, qualification types of industry and age of the business were entered into the regression analysis (model 1). next, the independent variable of ee was also entered into the regression analysis to determine the contribution of ee to es (module 2). module 1 showed that demographics explained only 5.8% of the dependent variable (es) variance. only the age of respondents had a significant and positive effect (b 0.184, p<0.01), indicating that the age of respondents had a significant effect on es r2 increased subsequently to 41.5% and was significant when the independent variable of ee was added into the regression. contribution of ee to es in the prediction of es (b = 0.61 p<0.01). hypothesis iii was therefore confirmed; implying that exposure of small business owners to entrepreneurship education is likely to result in a high level of enterprise success. 137 table 5 − results of multiple regression analysis variable model 1 model 2 age 0.184* 0.077 gender 0.105 0.90 qualification 0.025 -0.06 profession -0.015 -0.010 type of business 0.054 0.012 type of industry 0.069 0.040 age of business 0.039 0.047 entrepreneurship education 0.610** r2 0.058 0.415** coefficients above are standardized regression coefficients *p<0.05, **p<0.01 source: author’s analysis 4.4 discussion of findings this study proposes that smes operate in a strategic environment and for sustainable success, a combination of biography and business culture is essential. (fissaeha, 2011 and aremu, 2019). the current study verifies the assumption. the primary purpose of this study was to analyze the impact of demographics and entrepreneurship education on enterprise success. first, we determined the impact of personal factors on es. in analyzing the impact of personal demographics on es, hypothesis i was tested. the results show that the business owners’ age was the only determinant factor that significantly affected enterprises’ success. the finding corroborated reynold et al. (2000) and kristiansen, furuhot, and wahid’s (2003) suggestion that the age of the entrepreneur in the field had significantly predicted entrepreneurial success. furthermore, it underscores the importance of maturity for entrepreneurship educators and policymakers seeking to enhance enterprise success through ee. although, studies conducted by micah (2022) found sex, age, marital status, education, and religion interplay in the biography of sme owners, and these factors differentiate them. however, the difference was not a determinant of enterprise success. except for religion, other factors did not independently predict the enterprise success. the second hypothesis predicted a significant relationship between the firm characteristics and es. however, the hypothesis test did not reveal any impact of these variables. age, type of business, type of industry, and age of the business have a relatively lower influence on entrepreneurial outcomes. thus, hypothesis ii is rejected by our findings. this confirms the assertion of gruber et al., 2010:194; davila et al., 2004 that smallness nature of smes constituted a significant challenge to growth and survival. hypothesis iii predicted a significant positive impact of ee on es. the study’s findings revealed that ee is the prime driver of es. furthermore, ee seems to affect es significantly positively. this may indicate that a well-designed and implemented ee program will enhance business success. previous studies have confirmed the efficacy of ee in es. (gonozatez-lopez et al, 2019, makbul, 2011). for example, harada (2002) corroborated the findings of this study by suggesting that there was evidence that entrepreneurs’ previous experience in the industry, previous knowledge of the market and related business experience positively affect turnover. similarly, aldrich and martinaz 138 (2001) concluded that a certain amount of prior knowledge is required through training, experience or formal education. meanwhile, our results may be useful for institutions responsible for ee programs by offering the idea that could be used to strengthen the lecturing of entrepreneurship in the competitive global environment. entrepreneurs need to acquire knowledge relating to small business management, business ,planning and feasibility studies, leadership, and new business ventures to succeed. additionally, the ee should focus on attitude change rather than knowledge acquisition because the effect could be more significant to the business creation process and overcome the perceived barriers to ee. 4.5. contribution to knowledge our study contributes to knowledge by providing empirical evidence on the positive impact of ee on es. ee is quite a contemporary and significant phenomenon in nigeria. this study provides a valuable resource of knowledge and information as studies and literature on the efficacy of ee in nigeria are scanty. from a human capital theory perspective, the evidence that ee is effective in attaining es provides the reason to support opportunities for small business owners of all ages to acquire ee. the implication is that it is increasingly important and necessary to promote entrepreneurship competence through entrepreneurship education.ee has never been more important than it is now. reinforcing ee in institutions will enhance the nigerian economy’s entrepreneurship and dynamism. indeed, besides contributing to creating new ventures, ee will make young people more employable and more entrepreneurial in the work environment across the social, public, and private sectors (eec, 2014). 5. conclusion and recommendations 5.1 conclusion management scholars have a growing consensus that ee can increase the quality and quantity of graduate entrepreneurs (matly, 2006). the main reason for this is the ability of ee to positively influence entrepreneurial intentions and equip nascent entrepreneurs with the required business management skills. consequently, ee programs encourage nigerian education institutions to institutionalize an entrepreneurship culture. empirical studies on ee have concentrated on its impact on entrepreneurial intentions. there is a paucity of conclusive and empirical research linking ee and es in nigeria. the present research has demonstrated the significant impact of ee on es. hence, effective institutionalization of ee will require exposure of prospective entrepreneurs to a new approach and paradigm of entrepreneurship education that can encourage practices and participation, reciprocity, adaptability and rational selection of business ventures. 5.2 recommendations globally, the importance of ee has been recognized. early scholars have highlighted the relevance of ee in the post-industrial age from different viewpoints. some development economists have recently proposed the institutionalization of entrepreneurship culture as a viable means of promoting sustainable development rather than capital accumulation. (omoniyi and bongani, 2022). 139 finally, the findings of this research present some crucial requirements for ee institutions and entrepreneurship support agencies. the findings of the study suggested a number of initiatives to achieve effective ee. establishing a training environment that simultaneously encourages learning and the creation of small business ventures through teamwork will facilitate creativity and self-confidence. (lawal and williams,2018).ee should move from abstract teaching to more practical knowledge dissemination through case studies, simulated enterprises, brainstorming, workshops, business planning, mentoring on leadership, shadowing and profiling entrepreneurs, meeting graduate entrepreneurs, and networking with enterprise development agencies (fenton and barry,2014). moreover, the effectiveness of ee is also contingent on the dedication and commitment of entrepreneurship lecturers. essentially, these lecturers are instrumental in arousing students’ interest in ee. the credibility of such persons depends on the ability to match theory with experience. effective ee requires collaborations with real-world entrepreneurs. contemporary ee regards networking as a vital component of successful ee. development of entrepreneurship requires both formal and informal networks between students and sme owners. these lecturers facilitate links between students, local and national entrepreneurs, and entrepreneurship support agencies (lawal and akingbade,2017). 5.3 suggestions for future studies finally, our study has certain limitations. first, the empirical study was limited to smes in lagos, nigeria. this limits the generalization of the study. there is a need for more detailed research covering the entire states of the federation. second, the measurement of es focused mainly on financial performance using the personal judgment of responding business owners. this was attributed to the paucity of information, particularly the audited financial statements of smes. therefore, a balanced performance appraisal that combines financial and non-financial indicators is recommended. third, regression analysis was used in testing the study’s hypotheses, a more advanced data analysis such as structural equation modelling (sem).sem will allow for simultaneously modeling the multiple independent and dependent constructs and analyzing the more complex model compared to this first-generation technique. fourth, the measurement of ee focused mainly on formal entrepreneurial training and education. indeed informal ee is equally important; therefore, ee should be measured by combined formal and informal entrepreneurial training because of more robust and predictive of es. references 1. ahmad, s.z. 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demographics 4.2 correlation analysis of demographics, entrepreneurship education (ee), and enterprise success (es) 4.3 multiple linear regression analysis 4.4 discussion of findings 4.5. contribution to knowledge 5. conclusion and recommendations 5.1 conclusion 5.2 recommendations 5.3 suggestions for future studies references microsoft word 2 (20-01) akingbade c 15 service differentiation strategy and organizational performance of nigerian small and medium enterprises in lagos state waidi adeniyi akingbade lagos state university, ojo, lagos, nigeria received: october 29, 2019 accepted: march 12, 2020 online published: may 27, 2020 abstract organization differentiate is service to achieve competitive advantage by providing a service that consumers perceived to be useful, unique and generally superior. many organizations use service differentiation strategy to be profitable, competitive and to survive but many others neglect this strategy hence their low performance. this study empirically explored the relationship between service differentiation strategy (sds) and organizational performance of nigerian small and medium enterprises (smes) in lagos state. a survey of 249 registered smes with lagos state ministry of commerce and industry across the six small scale industrial zones of the state were undertaken, while both yamani (1967) sample size scientific formula and sekaran (2003) population to sample size table was used to determined sample size of 152. meanwhile, questionnaires were distributed to two executives that is owner and manager from each of the selected 152 smes which makes the numbers of distributed questionnaire equal to 304. three hypotheses were tested to determine whether: channel of distribution improve customer satisfaction; a superior and more reliable aftersales service increase market share & a quality service increase organizational profitability. questions were formulated based on the hypotheses and 304 questionnaires were distributed to two executives from each of the selected smes, out of which 280 of the respondents which is 92% returned duly completed and properly filled questionnaires. the research findings show that smes that used sds recorded substantial progress, while those that did not had low performance and market share. the implication of the study is the need for smes to adapt sds for superior results. the study recommends that sds should be used by smes for improved performance, customer’s satisfaction, loyalty and retention. further, smes managers, owners and executives should engage in sds to enable their enterprises have an edge over their competitors in dynamic, turbulent and highly competitive nigeria business environment. key words: service differentiation strategy; organizational performance; nigerian small and medium enterprises; lagos state, nigeria. international journal of economic behavior, vol. 10, n. 1, 2020, 15-35 16 1. introduction the success causing power of clear direction, good strategy and effective implementation of an organization’s action plan is now generally recognized and appreciated. it is widely acknowledged today that the rate, the magnitude, and complexity of changes that impact organizations are accelerating (parnell, 2012). strategic management process is based on the belief that an organization should continually monitor key internal and external events and trends. organizations should also pursue strategies that capitalize on internal strengths, take advantage of external opportunities, mitigate internal weaknesses and avoid or nullify the impact of external threats (oyedijo, 2013). this is the whole essence of strategic management. strategic management is the current term used in the description of decision process employed to achieve the long-term predetermined objectives of an organization. it is the process of specifying an organization’s objective, development policies, plans and allocating resources so as to implement the plans. it is the highest level of management activity, usually performed by the company’s chief executive officer (ceo) and executive team. strategic management provides overall direction to the whole enterprise (silvestrelli, 2018 & thompson, strickland & gamble, 2014). an organization’s strategy must be appropriate for its resource, circumstances and objectives. the process involves matching the company’s strategic advantage to the business environment the organisation faces. one objective of an overall corporate strategy is to put the organisation into a position to carry out its mission effectively and efficiently. thus, a good corporate strategy should integrate an organization’s goals, policies, and actions sequences (tactics) into a cohesive whole (porter, 1985; adeoti, 2013). in recent years, there have been great increase in the level of competition in virtually all areas of business and that of smes is not an exception. the ability to outperform competitors and to achieve above average returns lies in the pursuit and execution of an appropriate business strategy (yoo, lemak & choi, 2006). this has resulted in greater attention to analysing competitive strategies under different environmental conditions. porter (1985) states the three generic strategies that are required for different resources, organizational arrangements, control procedures, styles of leadership, and incentive systems could translate to improved organizational performance and competitive advantages. the three generic competitive strategies are overall price leadership, differentiation and focus i.e. cost or differentiation in a narrow market segment (porter, 1985). the bedrock of any nation’s industrial take-off especially in a developing country like nigeria is undoubtedly the smes. unfortunately, nigeria industrial sector as a whole has remained undeveloped after a period of over two decades of adopting an industrial policy based on large scale industries. meanwhile, the nigeria economy unlike its counterparts like japan, hong kong, indonesia, singapore, taiwan and malaysia that is asia/industrial tigers has only witnessed weak industrial development (adeoti, 2004). further, a lot of industries established and supported by the government have tended to be large scale industries, which are capital intensive. in spite of all these, it is very glaring and most obvious that though, successive governments in their attempt to develop the nation industrially, had channeled huge amount of money to large scale industries with little or no result. thus, there is need for urgent development of smes for the country to attain economic growth and development. recently, the role and contributions of smes to the growth and development of the world economy has been recognized as a result of increased in the volume of its trade (osuagwu, 2006). graham (1999) noted that smes constitute a large part of the world economy, and numbering up to half to two-thirds of all business all over the world (tuteja, 2001). this has result in the establishment of many smes in nigeria by entrepreneurs with the aim of making profit, providing 17 employment opportunities, customer satisfaction, self-employment, increased in market share, among others. in other to achieve these objectives has led to competition among smes and each of them use various service differentiation strategies that will enable them to survive and more profitable. meanwhile, the extent to which the uses of service differentiation strategies by the selected smes from six small scale industrial zones of the lagos state have led to improved performance (kimura & mourdo-ukoutas, 2010; leiblein, 2013; parnell, 2012), and to what extent customers have responded to the smes service differentiation strategies have not being sufficiently examined. it is necessary to find out the extent to which channel of distribution improve customer satisfaction; a superior and more reliable aftersales service increase market share & a quality service increase organizational profitability. the relationship between service differentiation strategy and organization performance have been a tropical research topic in the field of strategic management (parnell, 2012). the aim of this paper is to critically examine the extent to which application of service differentiation strategy could influence the performance of smes in lagos state. fig.1 – conceptual and operational model of service differentiation strategies and performance of smes. source: developed by author source: developed by the researcher 1.1 hypotheses ho1: there is no significant relationship between channel of distribution and customer satisfaction of smes in lagos state, nigeria. ho2: there is no significant relationship between a superior and reliable after sales services and increase in the market share of smes in lagos state, nigeria. ho3: there is no significant relationship between service quality and profitability of smes in lagos state, nigeria. 2. literature review and theoretical framework 2.1 strategy defined strategy is about winning, success, broad statement and a means to be employed in achieving organization objective, while the actual methods used constitute the tactics (dauda, akingbade & akinlabi, 2010). a strategy denotes a blue print of action to be carried out to do something and implies the deployment of emphasis and resources to attain comprehensive objective. it can be seen in essence as a grand plan i.e. statement of objectives to be pursued, together with resource to be used and path to be followed to archive them (yaşar, 2010; & akingbade, 2007). service differentiation strategies  channel of distribution  superior after sales service  quality service smes performance  customer satisfaction  market share  profitability 18 strategy is the determination of the long term goals of an organization, the choice of the method, and an organizational form and resource to be used to achieve the goal. oghojafor (2000, 2013), noted that strategy is any means of using resource which are expected to provide superior results in spite of otherwise equal or superior capabilities of competitor. in operation terms strategy is a comprehensive, integrated plan designed to guarantee the actualization of the basic objectives of an enterprise. strategy is unifying theme that gives coherence and direction to the individual decisions in an organization or a person (akingbade, 2016). every organization, whether profit-making or non-profit making, is established for a purpose which may be implicit or explicit and critical elements of the organizational strategies are organizational mission and vision (adebisi & oghojafor, 2015). 2.2 benefits of developing and implementing a strategy the benefits of developing and implementing a strategy for a business organization as identify by porter (1980), oyedijo (2013), lawal & bello (2014), david (2010), wheeleen & hunger (2012), lawal (2011) are as follows: it provides guidance to the entire management of an organization by making clear what the company wants to achieve and what it has to do and the pathways it needs to follow to be where it will like to be in the market place. also, it facilitates a disciplined identification and appraisal of business opportunities and directs the changing and evolving relationship of the organization with its environment. it enables a company to be proactive, to maintain a healthy balance with its environment and to carry out some breakthrough advances for competitive advantage. further, it provides a basis for the clarification of individual responsibilities thereby contributing to the motivation and commitment of organization members to the attainment of long term organizational goal. 2.3 product differentiation this is a strategy where a company seeks to achieve a competitive advantage by creating a product or service that is perceived industry wide and by customers to be unique and generally superior in some important ways. product differentiation can take the form of a different taste, a unique design or brand image, a superior quality and distinctiveness, a quicker service, a superior and more reliable after sales service, a better engineering design and styling, special features, convenient payment terms, among others (oyedijo, 2013; porter, 1985 & 1980). as with cost leadership, successful differentiation creates lines of defence for dealing with the five competitive forces identified by porter (1980). the strategic advantages of product differentiation as identified by akingbade (2016); oyedijo (2013); porter (1985 & 1980); are: it enables a company to be insulated from the strategies of rival firms because it is able to establish customers’ loyalty or preference for its brand or model and quite often such customers are willing to pay a little (perhaps a lot) more for the product. such a customer’s preference becomes a hurdle or constraint for potential substitute products and a barrier to new entrants. because of strong customer loyalty, product differentiation reduces the bargaining power or leverage of large buyers because they may be forced to buy a product they used to rather than those of competitors which are considered less attractive (porter, 1985 & 1980). differentiation creates and raises the costs of switching to other brands or substitutes thus putting a firm in a better position to ward off threats from substitutes to the extent that it has built a loyal clientele who find it hard to abandon the product for substitute brands (thompson, stickland, 2001, oyedijo, 2013; porter, 1980). while bhasin (2017) outlined the following means to achieve product differentiation, form, features, performance quality, durability, reliability, style and service. 19 2.4 service differentiation service is any act of performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. its service may be or may not be tied to a physical service (kotler, 2004 & onuong'a, 2009). bhasin (2017) argued that services may be offered individually to the customer or they may be bundled with a product. for example, tours and travels are independent services offered to customers. where products are tangible in nature and easily differentiated on the basis of features, form, performance and quality, service differentiation is quite challenging and needs out of the box thinking. service differentiation can be achieved on the basis of the following unique service characteristics outlined by kotler (2004), palmer (1999), onuong'a (2009) & bhasin (2017) for organization to differentiate its services from that of its competitors: ordering ease, delivery, installation, customer training, consumer consulting, maintenance and repair, returning of goods to sellers after delivery. ordering ease is the act of demanding or arranging for procurement, purchase, or delivery of organizational product by the user or final consumer through the organization website, online, whatsapp, email, instagram, facebook, twitter, mobile app among others. this has led to increase in the smes consumer purchases because consumer use to do window shopping when they have time via browsing of their smartphones. that is why e-commerce services are on the rise in developing country like nigeria. bhasin (2017) noted that this is the reason why most businesses are preferring online marketing as the mode of selling their products, like konga and jummai among others. delivery which is a major tactic to differentiate organization services is the act of taking goods or services or make it available to the people they have been sent to within stipulated period of time (bhasin, 2017). fast and accurate delivery time of services or products help the organization to differentiate its services from that of its competitors. the company normally state stipulated period of time in the advertisement for the customer to know when they should be expecting the product. installation is the fixing of organizational equipment or product in position to be used by the consumer. for example, smes that sell dstv, gotv, startimes decoder or technical equipment like cold rooms, ducting equipment among others, have to differentiate their service through their efficient and reliable after sales services like fixing of the product or equipment. customer training is necessary and an important aspect of differentiating organization services. this is the act of impart proper training on customer when organization are selling products which are new in the market so that the customer does not misuse the products. many smes understand that customer training is necessary and hence they have imparted the training as a norm in their installation procedures (bhasin, 2017). for instance, when customer order for an equipment, a manual can be send along with the delivery. this is a ways to instruct the smes customer on using the machine properly so that he is happy with organizational service. even some smes train their customers on how to make online order for their products. consumer consulting, firms like ibm and accenture have made big bucks through their consultation offers. customer consulting includes numerous infrastructure or operation related 20 consulting which can be offered in the form of data management, information systems and service advisory (bhasin, 2017). maintenance and repair, repair services need to differentiate themselves with the response time. many technical products like computer printer have online knowledge bases which users can refer to, so as to solve their problems immediately. some companies offer fast services to their corporate and enterprise customers (bhasin, 2017). the faster organization response time, and the more quality work organization do, the more easily organization will differentiate their services when it is a maintenance or repair service (bhasin, 2017). returning of goods to sellers after delivery is a major hurdle to e-commerce sales as well as retail sales. ever bought a product which just didn’t work? it happens to all the buyers, irrespective of the product they buy. the nuisance is even worse in e-commerce, where ecommerce portals are actively advertising easy returns, to the disappointment of the sellers selling products online (bhasin, 2017). 2.5 after sales services this is the treatment of customers in the aftermath of a sales or the processes which followed post sales of the product (pettinger, 2017 & bhasin, 2019) and it does not generate any revenue for the company but increase the goodwill of the organization in the market and among the customers (bhasin, 2019). the term aftersales service is as important as sales not only to retain the customers but also to bring back lost customers, to convince consumers to trust the firm and buy the service in the first place, it improve firms long-term brand image and brand loyalty, also firm incur extra cost and become an opportunity to sell related products (pettingers, 2017). pineda (2019) noted that an after-sales service corresponds to the activities and processes undertaken by an organization or business to ensure customers are satisfied with their purchased good or service. in other words, it pertains to any services provided after a product has been sold. the purpose of after-sales service is to enhance the attractiveness and sales value of a product, provide product differentiation, build and maintain relationships with the customers, create loyalty, encourage repeat sales from these loyal customers, promote further the image of the business or its brands, and encourage customers to refer the business or its products to others. they collectively form part of a strategy aimed at making products attractive to the customers (pineda, 2019). after sales service is a significant aspect of non-price competition like oligopoly and it depends on the industry and the product and (bhasin, 2019) identified the following seven of its most common types. pre-installation services are the services that organization offered to their customers whenever a product is bought before installation like manual. some products installation steps are specific while others are customer friendly. dstv dish, ceiling fan, etc requires technical expertise for installation. user training, company organize training for final consumer or end user of technical products like industrial machinery, surgical equipment among others are example of after sales service. warranty services is after sales services provided by company for most of their products which include repairing and replacement of some parts with any problem for a selected period of time. online support, ecommerce companies provides online support for any of the product related problems. company dedicated helpline for customer service wherein complaints were resolved according to the company standard procedure. return/replacement, companies provide free replacement of the product for a limited period of time in case of any problem. 21 features and benefits, companies provide feature which benefits customers like replacement of a part for a lifetime, for free counselling for the entire duration of the product. upgrades, it is applicable to software and electronics for the device for a limited period (bhasin, 2019). 2.6 service quality this is the value of a service to customers and inherently subjective as it is driven by the needs, expectations and perceptions of customers as such, it is typically measured by quantifying customer survey (spacey, 2017 & adebiyi, oyatoye, & amole, 2015) he further stated the following types of service quality: reliability, responsiveness, empathy & tailoring, competence and diligence, consistency, safety & security, environments user interfaces, tangibles, experience. service quality measures how well a service is delivered, compared to customer expectation. meanwhile, businesses that meet or exceed expectations are considered to have high service quality. service quality is a global judgment relating to the overall superiority of the service of an organization compared to others. it is also the customers overall service quality evaluation by applying a disconfirmation model, the gap between service expectation and performance (amole, oyatoye & kuye, 2015, abiodun, adeyemi, osibanjo, 2014). the magnitude at which service quality are used to determine the rate of customers satisfaction has been on the high side in the last two decades most especially with the development of service quality scale (servqual), (parasuraman, zeithaml, & berry, 1988). therefore, servqual which has been applied to different sectors in developed countries to measure or determine the gap between customer service expectations and performance. however, oyeniyi & abiodun (2012) argued that theoretical foundation of servqual has been criticized (cronin & taylor, 1994) besides its wide application in different countries of the world. this criticism led to the development of service performance scale (servperf) which restricted to performance dimension of service quality. further, retail service quality scale (rsqs) was developed by dabholkar, thorpe & rentz (1996) for adequate measurement of service quality in retailing and small business due to the failure of servqual and servperf. rsqs is a five dimensional hierarchical factor structure scale namely: physical aspect, reliability, personal interaction, problem-solving and policy. 2.7 channels of distribution these are the means by which organizations get their products to the final consumers or end users either through direct (producer → consumer), modern (producer → retailers → consumer), traditional (producer → wholesalers → retailers → consumer). learnloads (2010) noted that distribution strategies are influenced by the cost of distribution methods, the nature of the market and the extent to which the manufacturer wishes to control how products are marketed. channel of distribution comprising of a set of institutions which performs all of the activities utilized to move a product and its title from production to consumption (bucklin, 1966). lamb, hair and mcdaniel (2011) noted that retailing and wholesaling intermediaries in marketing channels perform several essential functions that make the flow of goods between producer and buyer possible. they argued that the three basic functions of intermediaries are transactional, logistics and facilitating. transactional functions involve contacting and communicating with prospective buyers to make them aware of existing products and explain their features, advantages, and benefits. logistics functions is the efficient and cost-effective forward and reverse flow and storage of goods, services, and related information, in to, through, and out of channel member companies. logistics functions typically include transportation and storage of assets as well as their sorting, accumulation, consolidation and allocation for the 22 purpose of conforming to customer requirements, while, facilitating function includes research and financing (kotler, 2004). 2.8 porter’s theory of generic competitive strategies according to porter (1985), there are three routes to superior performance: you either become the lowest-cost producer in your industry, or you differentiate your products or service in ways that are valued by the buyer to the extent that he or she will pay a premium price to get these benefits or you choose a focus in which case you apply either of these strategies to a broad market, or to a narrow, focused market. thus, according to porter (1985), there are three basic generic strategic approaches to competing in the market place and outperforming other firms in an industry from which a company can choose namely: overall cost leadership, differentiation, and focus. a fourth strategy for competing which has been identified by kim and mauborgne (2005) is blue ocean strategy. this strategy involves finding and establishing in markets that are not competitive. entering such markets early enables a firm to get an edge over its rivals and because the market is not competitive a firm can charge a price that will enable it to reap superior returns. the generic strategy typologies proposed in the late 1970s and 1980s became the theoretical basis for identifying strategic groups in industries. porter’s (1985) generic strategy typology is the most widely referenced. according to porter (1985), a business can maximize performance either by striving to be the low cost producer in an industry or by differentiating its line of products or services from those of other businesses; either of these two approaches can be accompanied by a focus of organizational efforts on a given segment of the market. 2.9 small and medium enterprises although, there seems to be no precise and consistent definition of small and medium enterprises now, some experts in the subject use the limit of capital investment to define it, while other use the number of employees to adjudge their definition. whichever method is used there is ambiguity in the definition, in the sense that a firm that is producing below capacity due to some critical economic constraints could claim to be a smes, even where it holds capital above the limit advocated (adeoti, 2005). the table 1 below provides a summary of some smes definitions by various agency in nigeria. from the table statistical definitions of nigerian smes vary. the upper limit of investment is n1.5 billion and number of employees is 300 (lawal, & akingbade, 2018). 3. research methods the study adopted a survey design with the aid of structured questionnaire. while research design is a blue print or road map to the research. it involves the study setting, data collection methods and the variables that was measured and analyzed to test the hypotheses (chikwe & ozuru, 2017; sekaran, 2003; saunders, lewis & thornhill, 2012). this study empirically explored the relationship between service differentiation strategy (sds) and organizational performance of nigerian small and medium enterprises (smes) in lagos state. there are 249 registered smes with lagos state ministry of commerce and industry across the six small scale industrial zones of the state, while both yamani (1967) sample size scientific formula and sekaran (2003) population to sample size table was used to determined sample size of 152. meanwhile, questionnaires were distributed to two executives that is owner and manager from each of the selected 152 smes which makes the numbers of distributed questionnaire equal to 304. 23 therefore, questions were formulated based on the hypotheses and 304 questionnaires were distributed to two executives that is owner and manager from each of the selected smes, out of which 280 of the respondents which is 92% returned duly completed and properly filled questionnaires. the registered smes were selected from the following industries which their profiles are shown in appendix 2: courier service, building and construction, food and beverages, carpentry/wood works, household material, leather products, printing press, welding works/fabrication, fashion and design, poultry feeds, nylon bags and plastics. three hypotheses were tested to determine whether: ordering ease improve customer satisfaction; a superior and more reliable aftersales service increase market share & a quality service increase organizational profitability. 4. data analysis and results data were collected through a structured questionnaire administered personally to participating respondents. the questionnaire focused on demographic characteristics of respondents, and responding firms, involvement of responding firms in sds and organizational performance. the instrument developed by onuong'a, (2009) was adapted for sds while organizational performance was measured subjectively by adapting a scale of measurement from kwandwalla (1995). respondents were requested to rate performance of their firms relative to competitors on a scale ranging from 1 (low) to 5 (high) performance. respondents were asked to rate service differentiation strategy of their smes on a five-point scale anchored from the scale very large extent (5) to no extent (1). data gathered were ordering ease, delivery, installation, customer training, consumer consulting, maintenance and repair, returning of goods to sellers after delivery, product quality and other variables related to service differentiation. the cronbach alpha for this scale was 0.83. responses were coded and converted to data from which statistical packages for social sciences (spss) was employed for the analysis. 4.1 hypothesis i h0: there is no significant relationship between channel of distribution and customer satisfaction of smes in lagos state, nigeria. this hypothesis was tested using regression and correlation analyses. table 3 – result of correlation test between channel of distribution (cd) and customer satisfaction (cs) correlations channel of distribution customer satisfaction spearman's rho channel of distribution correlation coefficient 1.000 .704 sig. (2-tailed) . .030 n 280 280 customer satisfaction correlation coefficient .704 1.000 sig. (2-tailed) .030 . n 280 280 source: researcher’s computation using spss *. correlation is significant at the 0.05 level (2-tailed) 24 table 3 above presents the correlation test between channel of distribution (cd) and customer satisfaction (cs). the pearson’s correlation coefficient (0.704) indicates that there is a substantially high positive correlation between channel of distribution (cd) and customer satisfaction (cs). this test of correlation is also significant since the p-value (0.030) is less the 5% (0.05). regression analysis between channel of distribution (cd) and customer satisfaction (cs): the regression function is stated as follows with customer satisfaction as the dependent variable and channel of distribution as the independent variable: cs = f (cd) the regression model is stated as follows: cs=a0+a1oe+u where: cs = customer satisfaction a0 = constant intercept cd = channel of distribution a1 = slope coefficient u = error term table 4: result of regression analysis coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.687 .468 7.883 .000 channel of distribution .098 .047 .085 2.085 .043 source: researcher’s computation using spss dependent variable: customer satisfaction table 4 above presents the result of the regression analysis using spss. the intercept coefficient (a0) is 3.687 with standard error, t-stat. and p-value of 0.468, 7.883 and 0.000 respectively. the slope coefficient (a1) of cs (customer satisfaction) with respect to cd (channel of distribution) is 0.098 with standard error, t-stat. and p-value of 0.047, 2.085 and 0.043 respectively. the slope coefficient (a1) is positive. this implies that channel of distribution has positive influence on customer satisfaction. with the p-value less than 5% (0.05), channel of distribution is statistically significant to enhance customer satisfaction. this position is in agreement with that of bucklin (1966) and coughlin, anderson, steven, and elansary (2017) that organization that makes it services and products available at appropriate time to the final consumers directly and indirectly through retailing and wholesaling intermediaries satisfy and retain their customers than their competitors that do not. therefore, both correlation and regression analysis indicate the rejection of the null hypothesis (h0). this implies that there is a significant relationship between channel of distribution and customer satisfaction of smes in lagos state, nigeria. that is, channel of distribution has significant effect on customer satisfaction. 4.2 hypothesis ii this hypothesis was tested with t-test using regression and correlation analyses. 25 h0: there is no significant relationship between a superior and reliable after sales services and increase in the market share of smes in lagos state, nigeria. correlation test between a superior and reliable after sales services and increase in the market share of smes. table 5: result of correlation analysis correlations after sales services market share spearman's rho after sales services correlation coefficient 1.000 .540* sig. (2-tailed) . .016 n 280 280 market share correlation coefficient .540* 1.000 sig. (2-tailed) .016 . n 280 280 source: researcher’s computation using spss *. correlation is significant at the 0.05 level (2-tailed) table 5 above presents the correlation test between payment methods and customers’ satisfaction. the pearson’s rank correlation coefficient (0.540) indicates that there is a moderate positive correlation between after sales services (ass) and increase in the market share (ms) of smes. this test of correlation is also significant since the p-value (0.016) is less the 5% (0.05). regression analysis between a superior and reliable after sales services and increase in the market share of sme. the regression function is stated as follows with market share as the dependent variable and after sales services as the independent variable: ms = f (ass). the regression model is stated as follows: ms=b0+b1ass+v where: ms = market share b0 = constant intercept ass = after sales services b1 = slope coefficient v = error term 26 table 6: result of regression analysis coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.305 .336 9.841 .000 after sales service .196 .084 .228 2.321 .022 source: researcher’s computation using spss a. dependent variable: market share table 6 above presents the result of the regression analysis using spss. the intercept coefficient (b0) is 3.305 with standard error, t-stat. and p-value of 0.336, 9.841 and 0.000 respectively. the slope coefficient (b1) of ms (market share) with respect to ass (after sales service) is 0.196 with standard error, t-stat. and p-value of 0.084, 2.321 and 0.022 respectively. the slope coefficient (b1) is positive. this implies that a superior and reliable after sales services leads to an increase in the market share of sme. with the p-value (0.022) less than 5% (0.05), ass (a superior and reliable after sales services) is statistically significant to influence ms (market share of sme). therefore, both correlation and regression analysis indicate the rejection of the null hypothesis (h0). this implies that a superior and reliable after sales services has a positive significant effect on market share of smes in lagos state, nigeria. this finding is in line with that of pettinger, 2017, bhasin, 2019 & futrell (2016) that superior and reliable after sales services like installation, warranty, online support, helpline, return/replacement, upgrades, features and benefits increases organization customers, coverage and market shares. it is evidence that smes that provides superior after sales service to their customers is more to have more customers and control larger percentage of the market than its competitors. 4.3. hypothesis iii h0: there is no significant relationship between service quality and profitability of smes in lagos state, nigeria. this hypothesis was tested using regression and correlation analyses. correlation test between service quality (sq) and profitability (pft). table 7: result of correlation analysis correlations service quality profitability spearman's rho service quality correlation coefficient 1.000 .681 sig. (2-tailed) . .000 n 280 280 profitability correlation coefficient .681 1.000 sig. (2-tailed) .000 . n 280 280 source: researcher’s computation using spss *. correlation is significant at the 0.05 level (2-tailed) 27 table 7 above presents the correlation test between quality of service (qs) and profitability (pft). the pearson’s correlation coefficient (0.681) indicates that there is a high positive correlation between quality of service (qs) and profitability (pft) of smes. this test of correlation is also significant since the p-value (0.000) is less the 5% (0.05). regression analysis between quality of service (qs) and profitability (pft): the regression function is stated as follows with profitability as the dependent variable and quality of service as the independent variable: pft = f(qs) the regression model is stated as follows: pft=c0+c1qs+u where: pft = profitability c0 = constant intercept qs = quality of service c1 = slope coefficient, u = error term table 8: result of regression analysis coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.008 . 247 12.194 .000 quality of service .140 .060 .022 2.333 .021 source: researcher’s computation using spss dependent variable: profitability table 8 above presents the result of the regression analysis using spss. the intercept coefficient (c0) is 3.009 with standard error, t-stat. and p-value of 0.247, 12.194 and 0.000 respectively. the slope coefficient (c1) of pft (profitability) with respect to qs (quality of service) is 0.098 with standard error, t-stat. and p-value of 0.140, 0.060 and 0.021 respectively. the slope coefficient (c1) is positive. this implies that quality of service has positive effect on profitability. with the p-value less than 5% (0.05), quality of service has a statistically significant effect on profitability. therefore, both correlation and regression analysis indicate the rejection of the null hypothesis (h0). this implies that there is a significant relationship between quality of service and profitability of smes in lagos state, nigeria. this submission is in agreement with oyeniyi & abiodun (2012) and parasuraman, zeithaml, & berry, (1988) that quality service (reliability, physical aspects) and product rendered to the end users improves smes profitability. that is, the final consumers enjoy and value reliable, uninterrupted quality service and products irrespective of the price or charges. 4.4 discussion of findings the findings of the study have important practical implications and recognize the overriding fact that there is growing concern for sds activities in the smes in lagos state, nigeria. the 28 sds issues that attract the attention of participating firms are ordering ease, delivery, installation, customer training, consumer consulting, maintenance and repair, returning of goods to sellers after delivery. however, most of the responding firms reported their least involvement in sds. this finding is consistent with the results of previous studies bhasin (2017) and onuong'a (2009). this study reveals that there is a significant relationship between channel of distribution and customer’s satisfaction. it shows that smes that makes it services and products available at appropriate time to the end users directly (producer to consumers) and indirectly through intermediaries (distributors, agent, wholesaler and retailer) satisfy and retain their numerous customers than their competitors that neglect this act. this study has revealed prominent attributes of sds in nigerian smes. also, it has established the adoption of sds in this subsector. further, the study establishes significant relationship between quality service and quality differentiated product (reliability, durable, last long, physical) rendered to the end users improves smes profitability. this is an indication that final consumers enjoy and value, reliable, durable, uninterrupted quality service and products irrespective of the price or charges. in a similar study, onuong'a, (2009) established a positive relationship between sds and organizational outcomes and indicated that channel of distribution by smes might be affected by the elements of sds. studies have also revealed that quality and aftersales service have a higher level of performance (bhasin, 2017). in addition, superior and reliable after sales services like installation, warranty, online support, helpline, return/replacement, upgrades, features and benefits increases organization market shares. it is clear that smes that provides superior after sales service to their customers is at the advantage of having more customers and control larger percentage of the market than their rival. the study justifies the need for effective service differentiation strategy for attaining organizational performance. however, ineffective sds by smes is most likely to result into low patronage, bad service quality and low organizational performance. the positive relationship between channel of distribution and improve customer satisfaction implies that owners and managers of nigerian smes can therefore improve customer satisfaction by making channel of distribution very easy for their customer through the following medium: organization website, online, whatsapp, email, instagram, facebook, twitter, mobile app among others. organization need to makes it services and products available at appropriate time to the final consumers directly and indirectly through retailing and wholesaling intermediaries to satisfy and retain their customers than their rivals in the same industry. 29 obamiro, (2013) share similar view in his study on effects of waiting time on patient satisfaction in nigerian hospitals. nigerian smes need to proactively eradicate all forms of discrimination and create a climate that supports service differentiation. the pearson’s correlation coefficient (0.704) indicates that there is a substantially high positive correlation between channel of distribution (cd) and customer satisfaction (cs). therefore, findings shows that both correlation and regression analysis indicates the rejection of the null hypothesis (h0). this implies that there is a significant relationship between channel of distribution and customer satisfaction of smes in lagos state, nigeria. that is, channel of distribution has significant effect on customer satisfaction. from hypothesis two, the pearson’s rank correlation coefficient (0.540) indicates that there is a moderate positive correlation between after sales services (ass) and increase in the market share (ms) of smes. this implies that a superior and reliable after sales services leads to an increase in the market share of sme. with the p-value (0.022) less than 5% (0.05), ass (a superior and reliable after sales services) is statistically significant to influence ms (market share of sme). while hypothesis three shows that the pearson’s correlation coefficient (0.681) indicates that there is a high positive correlation between quality of service (qs) and profitability (pft) of smes. with the p-value less than 5% (0.05), quality of service has a statistically significant effect on profitability. therefore, both correlation and regression analysis indicate the rejection of the null hypothesis (h0). this implies that there is a significant relationship between quality of service and profitability of smes in lagos state, nigeria. 5. conclusion and recommendations the study reveals that service differentiation strategy enhances organizational performance in the nigeria smes in lagos state. the answers to the tested hypotheses confirmed that there is a significant relationship between channel of distribution and customer’s satisfaction. it is discovered that organization that makes it services and products available at appropriate time to the final consumers directly and indirectly through retailing and wholesaling intermediaries satisfy and retain their customers than their competitors that do not. the reason for this are not farfetched, their customers are comfortable with the products and service they enjoyed which are provided as at when due. further, superior after sales services like installation, warranty, online support, helpline, return/replacement, upgrades, features and benefits increases organization market shares. it is evidence that smes that provides superior after sales service to their customers is more to have more customers and control larger percentage of the market than their competitors. also, quality service (reliability, physical aspects) and product rendered to the end users improves smes profitability. that is, the final consumers enjoy and value reliable, uninterrupted quality service and products irrespective of the price or charges. meanwhile, smes that uses appropriate and reliable channels of distribution, superior after sales services and effective & efficient quality service will earn customers’ satisfaction, increase in market share and improved profitability respectively. therefore, in view of the foregoing, it was recommended that management of smes in lagos state, nigeria should make use of appropriate and reliable direct (producer to consumers) and indirect (producer to wholesaler to retailer to consumers) channels of distribution to render their unique delivery services of getting the product to their final consumers at stipulated time which can lead to satisfactions, retention and loyalty of customers. second, smes management should put in place for their customers superior and reliable after sales service like warranty, online support, upgrades features and benefits, installation, helpline among others which can enhance more customers, wider coverage and increase market share. third, owners and managers of smes should differentiate their services and products in terms of best quality that 30 cannot be matched by their rivals and competitors in the same industry which lead to increase in the number of customers, sales and profitability. forth, smes management should use direct channel of distribution of their product and service to the final consumers. this can eliminate unscrupulous role of middlemen (agent, wholesaler and retailer) in nigeria which include delay in making the product and service available to the end users, creating artificial scarcity, hoarding of the product, increase in price among others which lead to customer satisfaction, loyalty and retention. fifth, smes owner and manager should use indirect channel of distribution that involve intermediary (agent, wholesaler and retailer) for the bulk produce, sell, distributed and deliver services and products that a consumer cannot directly buy from the company which lead to convenience, satisfaction and retention of customers. sixth, smes management should be encouraged to use sds to enable them have an edge over there competitors in the same industry. 5.1 limitations and suggestion for future research this study was limited to smes in lagos state, nigeria, hence further study should be carried out on other sectors of nigeria economy like manufacturing, banking, telecommunication among others. further studies should be conducted on comparative analysis between large scale indigenous enterprises and multinational corporations in manufacturing, banking, telecommunication industry. meanwhile, this study centered on few smes owners and managers in lagos state, however similar study can be conducted on all registered smes in nigeria. this study should be replicated in other states of nigeria and other countries of the world. future research that are related to this study should include intervening variables to explain the dependents and independent variables. 5.2 contributions to knowledge this study has contributed to knowledge and added to existing literature on sds and op by empirically validating that using a direct and indirect channel of distribution can enhance customer satisfaction, loyalty and retention. further contribution to knowledge by this study was the demonstration that superior and reliable after sales service is positively and statistically correlated with smes market share and it also rationalize that significant relationship exist between after sales service and increase in smes number of customers and coverage area. in addition, this study has make important contribution to knowledge and confirmation that differentiated service quality improves organizational profitability. also, the study makes important contributions to theory and practice. meanwhile, this study will serve as reference point to support future studies on sds and op. finally, relevant literatures has been gathered and in-depth analysis and knowledge has been given on sds and op in smes along with the attached benefits. references 1. abiodun, a.j., adeyemi, k.s., osibanjo, a.o. 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(2000), economie distrettuali e canali di distribuzione all’estero. varietà di percorsi delle imprese pesaresi del mobile, ins-edit, genova. 34 appendix i: definitions of smes by number of employees, turnover and assets value. source: adapted from lawal, a. a, & akingbade, w.a. (2018). n a g en cy y ea r n u m b er o f e m p lo y ee s t u rn ov er a ss et v al u e m ic ro s m al l m ed iu m m ic ro s m al l m ed iu m m ic ro s m al l m ed iu m 1 s m al l an d m ed iu m e n te rp ri se s d ev el op m en t a g en cy ( s m e d a n ) 2 0 09 < 10 1 0 -4 9 50 -1 9 9 n a n a n a n < 5 m n 5 -< n 50 n 50 -< 5 0 0 2 m ic ro , s m al l an d m ed iu m e n te rp ri se s d ev el o pm en t f u n d (c b n ) 2 0 13 < 10 1 1 2 00 n a n a n a < n 5 m n 5 m < n 50 0 m 3 s m al l an d m ed iu m e n te rp ri se s g u ar an te e s ch em e (c b n ) 2 0 10 n a 1 1 3 00 n a n a n a n a n a < n 50 0 m 4 c om p an ie s an d a ll ie d m at te rs a ct 2 0 14 n a n a n a n a < n 2 m n a n a < n 1m < n 50 0 m 5 s m al l an d m ed iu m i n d u st ri es e qu it y in v es tm en t s ch em e 2 0 03 n a 1 0 < 3 00 n a n a n a n a n a < n 20 0 m 6 n at io n al c ou n ci l o n in d u st ry 2 0 01 < 1 0 1 1 -1 00 1 0 1 -3 00 n a n a n a < n 1 .5 < n 50 m n 5 0m < n 2 0 0m 7 s m al l an d m ed iu m e n te rp ri se s d ev el op m en t a g en cy ( s m e d a n ) 2 0 15 < 10 1 0 -4 9 5 0 -1 9 9 n a n a n a < n 1 0 m n 1 0 m < n 10 0 m n 1 00 m -< n 1 b 8 c en tr al b an k of n ig er ia 2 0 05 < 1 0 1 1 -1 00 1 0 1 -3 00 n a n a n a < n 1. 5m < n 50 m < n 20 0 m 9 c en tr al b an k of n ig er ia 2 0 06 n a n a n a n a n a n a n a n a < n 1 .5 b 35 appendix 2: profile of selected smes industries sn industry number of employees capital 1 courier service 15-45 n10m-n32m 2 building and construction 14-80 n15m-n45m 3 food and beverages 20-73 n18-n38m 4 carpentry/wood works 12-64 n11m-n44m 5 household material 11-45 n13m-n38 6 leather products 13-48 n19m-n47m 7 printing press 12-51 n20m-n40 8 welding works/fabrication 14-69 n22m-n43m 9 fashion and design 11-50 n9m-n32m 10 poultry feeds 39 n25m source: field survey (2019) d:\prof\ijeb nr. 1\final_ijeb.pdf ���������� � ����� �������� �� ������� ����� ����� ������ �� � �������� ���� ����������� � ������� 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���e/&;)4.=@%2��f.''%-%%/��0//�67##w8�����$(144�g@1/,%�e/h�/2.'.�/14�g1=@�9*1/=n%*=�1=�1�3%=&�/=%�'��0h;'%�5��2�?/=%h;*.'c��1�<%=h*.&'.�/��n�ran1(p=� *�e%h'=�./�k141t.�1/2�|1().1�n*�(���-%()%*�7##y�d�k1*h@�7##w��f�*j=@�&>�}$�h.14�&*�'%h'.�/�./.'.1'.-%=�n�*�g@.42*%/��f�(%/�1/2�51(.4.%=>�0/�0/14c=.=��n�3%h%/'�za&%*.%/h%=��rh'�)%*�q#!q���ttt�;/.h%n��*,v;/h�2.'.�/14~h1=@~'*1/=n%*~1=~1�~*%=&�/=%~'�~1h;'%�n��2~./=%h;*.'c�&2n��3%'*.%-%2�./���k1c�7#�� microsoft word 6 (20-20) palmeira m c.docx 65 recovery marketing for economies after devastation a multi-case research mirian palmeira pp&mzee consulting co., brazil elder semprebon ufpr federal university of parana, brazil fabio musso carlo bo university of urbino, italy received: september 27, 2020 accepted: november 18, 2020 online published: november 10, 2020 abstract the aim is to identify if recovery marketing is a fresh start tool for economies after devastation. through multi-method study, with a qualitative study based on a multi-case research with emphasis in historic method and content’s analyses, and secondary data analyses of some cases of devastated economies, the results show that there are the use of some marketing tools and features, however without a holistic marketing approach and either no recovery marketing concept as a fresh start tool to renew the place identity after catastrophes. a theoretical contribution of this paper is to produce a new marketing framework as a fresh start approach for places after destructions, such as recovery marketing, including the analyses of locals and visitors. the managerial implication is the contribution for public and private organisations to help positioning/repositioning a place after devastation, using recovery marketing as a fresh start tool. keywords: recovery marketing; fresh start; devastation; economy. 1. introduction if the concept of fresh start mindset (price et al., 2018) is useful for people, why not for places such as cities, states, countries, regions and continents? especially on the occasions after very serious problems that cause devastation. there are different causes of devastation and several possible solutions combined to help local and visitors. however, it is very difficult to find out the use of the concepts of marketing to the positioning/repositioning of the place brand/identity/image after devastation. the usual intervention is through political approach, as well as humanitarian. some cause of devastation can be natural catastrophes – flood, international journal of economic behavior, vol. 10, n. 1, 2020, 65-78 66 earthquake, tsunamis, drought; war and terrorism; political and economic problems; accidents caused by organisations’ incompetence and/or greed – the so called “announced catastrophes”, and diseases, epidemics, pandemics caused by famine or lethal viruses, alone or combined. in this study, through a multi-case method, historic, secondary data and document analyses, the concept of recovery marketing is created, which is the use of marketing approach to fulfil a fresh start for economies after destruction. how can one make people believe that it is possible “to start life again” even after huge causes of devastation? according to this context, the research problem of this study is stated: is recovery marketing a fresh start tool for economies after devastation? main objective: to identify if recovery marketing is a fresh start tool for economies after devastation. operational objectives: a) to describe the economies subject of this study (local characteristics before/after devastation, the environment, the causes of devastation, the types of interventions); b) to identify the use of marketing tools (imcs, brand repositioning, marketing research, etc.); c) to identify stakeholders (spokesperson, influencers, locals and visitors); and d) to identify the use of recovery marketing as a fresh start tool. in the next section, the literature review is presented. 2. literature review the subjects of this research are presented in four groups: marketing concepts including recovery marketing, marketing mix, and branding; fresh start concepts; devastation and its causes; and economy. 2.1 marketing concepts marketing is about identifying and meeting human and social needs (kotler & keller, 2012). in the literature there is the concept of recovery service (gohary et al, 2016), which is the process of bringing former customers back to the company as loyal ones. on the other hand, recovery marketing is a new concept, developed in this article, and it is the holistic use of marketing approach as a fresh start tool (price et all, 2018) for the brand positioning/repositioning of a place identity, after some kind of devastated catastrophe or human event of different causes. it is a set of activities related to the market whose aim is helping economies that should have been re-structured after some serious problems, such as crisis and/or catastrophes. destiny marketing organisations can play an important role to help places recover their identity using a sustainable tourism perspective (ritchie & crouch, 2003). one of the tools is to create an integrated marketing team to manage the recovery marketing and a financial group to manage the prospect and the use of funds during the whole process of recovering. one example of this procedure is the malaysia case (de sausmarez, 2003), when the local government had create a fund of 40 million dollars in a recovery marketing campaign. the concept of marketing mix (figure 1) is the same for companies and places, even if it is holistic (kotler & keller, 2012). however, it is necessary to adapted it for a more complex 67 situation due to the characteristics of the places, especially after the event of catastrophes. and it turns out to be recovery marketing mix (figure 2). figure 1 – marketing mix source: kotler & keller, 2012 instead of a set of product, price, promotion and place parts, the recovery marketing mix includes the concept of branding, the prospect of financial resources, the adapted imc, distribution and logistics, and focus on locals and visitors. 68 figure 2 – recovery marketing mix branding the concept of positioning /repositioning “expected sacrifice” prospected financial resources locals and visitors adapted imc rp propaganda social media spokesperson stakeholders distribution logistics source: adapted from kotler & keller, 2012 finally, there is a marketing concept related to brand, which is a “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” (kotler & keller, 2012). it produces elements of differentiation. it represents the identity of a product, service, experience, and even of a place, city, region, state, country, or continent. it presents tangible and intangible elements. when a catastrophe happens in a place, its image, symbolized by its brand, probably is jeopardized by controllable and incontrollable elements of the devastation. a company or a government should lead the process of repositioning its brand. when a government is dealing with its brand, it is carefully dealing with the process of branding, which is a way to create adequate suitable strategies of positioning/repositioning for the place, involving locals and visitors. marketers can apply branding virtually anywhere a consumer has a choice. it’s possible to brand a physical good (ford flex automobile, or lipitor cholesterol medication), a service (singapore airlines or blue cross and blue shield medical insurance), a store (nordstrom or foot locker), a person (actress angelina jolie or tennis player roger federer), a place (the city of sydney or country of spain), an organization (u2 or american automobile association), or an idea (abortion rights or free trade) (kotler & keller, 2012:242). to apply recovery marketing is necessary to follow some kind of protocol to guide the sequence of actions in case of devastation. a tentative approach can be as follows: 69 (1) to hire a marketing team to coordinate the efforts with international experience with broader realities and complexities, such as marketing for public organisations. this group could be formed by marketing/media professionals of higher standards, scholars, a professional from local community, a politician and a staff of specialists on the case of devastation, using the concept of recovery marketing. the ceo should be the marketing person. this group should be subscribed at some international organisation, such as un, fao, unicef, ocde, wto, who, etc.; (2) to choose a spokesperson that is recognised by local and visitors, immediately after the cause of devastation takes place. it is recommended not to choose politicians, because sometimes they are not very welcome by local people and/or international community. one can be a celebrity, a famous actor/actress, a philosopher, a priest. an example is the spontaneous choice of brad pitt and his project of house reconstruction after katrina in new orleans, usa. unfortunately, a couple of years after the beginning of the reconstruction project, the houses have shown problems of rotting and have collapsed (business insider, 2019); (3) to use transformative consumer research (mick et al, 2012; crocket et al, 2013) on locals and visitors to find out their perspectives to design a future identity for the place. it is important to know their profiles and willingness towards a fresh start approach for their lives. it is common that just one of the players is considered in the intervention, sometimes only the locals, sometimes the visitors. “transformative consumer research is a movement […] that seeks to encourage, support, and publicize research that benefits consumer welfare and quality of life for all beings affected by consumption across the world” (acr, 2020); (4) to customise a recovery marketing mix to the situation, developing a new branding identity for the place (aaker, 2012), plans and campaigns to prospect resources. it is also important to improve the use of mass media to reach as much people as possible, with a very clear motto, such as “dobbiamo stare lontani, ma uniti”, a saying in italy during the covid-19 quarantine (ansa, 2020). and to develop and maintain a very effective distributions and logistics network; and (5) to design follow-up procedures to guaranty that the recovery process will be effective and/or making amendments if they are necessary. 2.2 fresh start concepts “fresh start mindset is defined “as a belief that people can make a new start, get a new beginning, and chart a new course in life, regardless of past or present circumstances” (price et al, 2018). it affects people’s concepts of their social world, the nature of human characteristics and their consuming underlying conceptions (devezer et al, 2014). it is based in the american culture and it is anchored that consumption can transform lives. the elements that can improve the fresh start mindset are the internal locus of control, the belief that the individuals can start a new chapter in their lives (landau, 2017) and the hope that marketers, public policy official, and organisations can help individuals start a new beginning in their lives. also optimism, future goal focus, self-efficacy, resilience and perseverance are linked with a strong fresh start mindset (john & park, 2016 and price et al, 2018). some elements that can decrease fresh start mindset are the lack of social mobility, high unemployment (putnam, 2015), and some religions and beliefs that set fate or destiny control people’s lives (bielo, 2007). fresh start concepts can be applied by the use of recovery marketing mix and its protocol. 2.3 devastation and its causes devastation is the process and/or state of complete destruction (macmillan, 2019). devastated economy is the condition of having its social systems and the production and distribution of 70 means and services completely ruined and destroyed. elements can trigger devastation in economies. sandroni (2016) classifies them in two groups: endogen and hexogen crisis. the first one states that the country economic disequilibrium can be cause by over production, trade problems, credit and speculation. the latter involve non-economic, non-controllable factors, such as natural disasters, wars and epidemics. sandroni’s classification, however, limits the analyses of devastated economies. for example, if the focus of analyses is a city, economic problems in a neighbour city can be classified as external, but if the region is considered, it turns to be an endogen one (figure 3). for this reason, this classification is not used in this study. the causes of devastation are listed: 1. natural catastrophes – flood, earthquake, tsunamis, drought; 2. war and terrorism; 3. political and economic problems; 4. accidents caused by organisations’ incompetence and/or greed – “announced catastrophes”; and 5. diseases, epidemics, pandemics caused by famine or lethal viruses. figure 3 – some examples of devastated economies cases type of causes natural catastrophes war and terrorism political and economic problems organisations’ incompetence and/or greed diseases germany (1914-1945) x x x japan (1945) hiroshima and nagasaki x x mexico (1986) earthquake mexico bay (2010) environment crime – oil spill in mexico gulf africa (2013) drought x x x ebola italy (2016) earthquake venezuela (2019) x x x brazil (2019) brumadinho land slide brazil (2019) northeast coast environment crime – oil spill on seaside iraq (2020) x x x source: survey, 2019. 2.4 economy the word “economy” derives from greek “oikonomia”, which means the management of a house or state. “economy is the social science that studies how individuals and society decide how to use scarce resources in the production of means and services and to distribute them for 71 people and groups in order to fulfil their needs” (vasconcellos & garcia, 2008; sandroni, 2016). economy is a set of production, trade and financial activities, added to logistics to provide means and services to a society (mankiw, 2001, and dornbush, 2003). kotler (2000) states that the economy of each country is a complex interactive marketing system that provides possibilities of exchange among organisations and individuals to fulfil their needs, desires and demands. in synthesis, the main concepts of this research can be seen in figure 4. figure 4 – main concepts recovery marketing it is a set of integrated marketing activities which aim is to improve societies that have their economies jeopardised by any cause of devastation, such as natural disasters, war/terrorism, diseases, political and/or financial problems, greed and/or incompetence. recovery marketing mix it includes the concept of brand management, the prospect of financial resources, the adapted imc, distribution and logistics, and focus on local and visitors. fresh start it is the process of starting a new course in life regardless past and present circumstances, looking forward to a new future (price et al, 2018). devastation it is the process and/or state of complete destruction (macmillan, 2019), through natural disasters, war and terrorism, political and economic problems, organisations’ greed and/or incompetence, diseases and epidemics. economy economy is a set of production, trade and financial activities, added to logistics to provide means and services to a society (mankiw, 2001 and dornbush, fischer and begg (2003). source: adapted from price et all (2018) and kotler & keller, (2012). in the next section, the methodology is presented. 3. methodology in order to identify if recovery marketing is a fresh start tool for economies after devastation, four research questions have been considered: (1) which are the features of the economies subject of this study (local characteristics before/after devastation, the environment, the causes of devastation, and the types of interventions)? (2) is there the use of marketing tools (imcs, brand repositioning, marketing research, etc.)? (3) which are the stakeholders (spokesperson, influencers, locals and visitors)? and (4) is there the use of recovery marketing as a fresh start tool? the methodology included some aspects (creswell, 1998; gil, 2002; malhotra, 2012; and mattar, 2007): the nature of the research and the population and sampling. 72 3.1 nature of the research the methodology adopted was a multi-method approach, with a qualitative study (creswell, 1998) based on a multi-case research with emphasis in historic method and content’s analyses, and secondary data analyses of the economies focus of this study (gil, 2002). multi-case study (figure 5), which was originated in political science, sociology, urban studies and other social sciences, is developed to analyse in-depth case or multiple cases (creswell, 1998). it uses multiple sources, such documents, archival records, interviews, observations, and physical artifacts, here to analyse the devastated economies, focus of this study. figure 05 – focus of multi-case study source: creswell, 1998. 3.2 population and sampling the population is devastated economies around the world, from the last 20 years, from 2000 up to 2019. sampling by convenience is the set of cases with available information, such as, iraq, greece, japan and china. the survey had taken place in 2019. 4. results the findings are developed to meet the operational objectives of this study. for each of four cases, it is presented the analyses of all of those objectives. 4.1 war/terrorism – iraq (2003-2011) iraq was a country under the rules of saddam hussein, considered as a dictator by western countries. the main religion was islamism. the economy was sustained by gas trade. there were limited human rights. the format of education was designed to prepare people to serve the country under the president’s view. the environment was mainly desertic, the weather with warm to hot temperatures, almost all the year, formatted the people’s way of life, normally indoors (chambers, 2020). after sept 11th, 2001, the usa had attacked and had invaded iraq, with an official aim of combating countries with means of mass destruction (onion, sullivan & mullen, 2020). the 73 result was a complete devastation of basic structures of the country. after the major combat operations, a coalition provisional authority (cpa) was established. un had tried to develop a new government format after the deposition of hussein, sending diplomats to redesign the political, economic and social structures. however, a terrorist bomb had exploded the un temporary headquarters in baghdad and it had killed officials, such as sergio vieira de mello, a brazilian expert in political and humanitarian reconstruction, appointed as the special representative of the un secretary general (power, 2008). after all these years, the country was still in a delicate situation. the focus was on petroleum trade to recover the economy (usip, 2020). it seemed that there wasn’t the use of marketing tools to help in the process. fresh start approach could be used, however it looked none of it had been done and there had not been concern with locals and visitors. it was still considered a wrecked country. 4.2 political/economic and financial factors – greece (2008-2011) greece was a parliamentary republic, with a prime minister as the head of the government, also with a president as the head of the state. 90% of the population was christian-orthodox. greece was a founding member of un in1952, became part of eu in 1981 and adopted the euro in 2001. the population was greek and minorities of albanians and ethnic macedonians and this fact had leaded to some conflicts (has, 2013). the main industries were tourism and shipping sector (oecd, 2020). the country has adopted some welfare state policies, such as, public healthcare and free education, without collecting enough taxes to pay for them, leading to huge depts making the country financial situation got worse during the credit crunch period of 2008 to 2011 (reuters, 2020). in order to improve the economy, greece had searched international agreements and loans, it had increased interest rates and taxes as new sources of revenue. there wasn’t the use of marketing tools to help improving the market conditions and its focus was on visitors, such as investors and tourists. with the increase of taxes that the population should pay more, it seemed that there was not too much concern with locals. the country was in a recovering status. the rates or unemployment were the lowest in 2016. and the focus was on the tourist activities. 4.3 natural disaster – japan (2011) it was an island country in east asia bordered by the pacific ocean, comprising an archipelago of more than 6,800 islands. the country was densely populated (stat, 2020). full religious freedom was guaranteed by constitution. health care was provided by the government. despite of some economic depression, japan was still a great power and a member of numerous of international organisations, such as un since 1956, the oecd and the g7. the main activities were fishery (fao, 2020), electronic and automotive industries, service sectors, such as, banking, insurance, real state, retailing, transportation and telecommunications, and tourism. japan was a leading nation scientific research, especially in natural science and engineering (cia, 2020b). on march 11th, 2011 an unexpected “magnitude-9 earthquake shook northeastern japan, unleashing a savage tsunami (oskin, 2017), making it the costliest natural disaster in world history. until 2017, many residents were still recovering from the devastation (ra, 2019). the phenomena had caused the death of more than 16,000 people. it also had caused the destruction of the basic structures of the region of tohoku, and the meltdown of fukushima nuclear power plant. the main recovery had happened in 4 months, both infrastructures and private plants (o estadao, 2011). the government had incentivised rescue programmes as well have helped volunteers’ programmes. there has been intense participation of locals in the recovery process. 74 the regional economies have been improved quickly, using the v model of recovery through the expansion of offer. the outcomes have showed improvement in industrial production, for instance, automobile manufacturer together with the reconstruction process, after devastation. and in consumption in emergency demand through the replacement process of consume products, showing concern with locals and visitors. fresh start tools could have been applied; however, it seems the government had not used them. 4.4 disease – china (2019) china, the world’s fourth largest country, is a historical civilisation that had alternated periods of unity and disunity through many imperial dynasties. after world war ii, the chinese communist party had been established. in the seventies’, the country had started pursuing a more market-oriented approach in the economy. since 1990s, “china has increased its participation in international organisations” (cia, 2020a). in the political sphere, there were a chief of state, a head of government (premier) and a state council appointed by the national people’s congress which also indirectly elected the president who chose the premier. china was located in eastern asia, with extremely diverse climate, from tropical in the south and subarctic in the north. its natural resources were very diverse, such as, coal, petroleum, natural gas, manganese, selenium, to mention some, as well as arable land. the majority of its population of 1.4 billion people was found in the eastern half of the country. officially atheist, although 18.2% of the inhabitants were considered buddhist and 5.1% christian. the chinese government had formally recognised 56 ethnic groups; however, the main group was han chinese with 91.6% of the population. china had experienced some environment hazardous, such as air pollution, water shortages, water pollution, landslides, soil erosions and many others challenges (cia, 2020a). some of its major crops were rice, wheat, corn, tea, tobacco. it was a world leader in mining, iron, steel, aluminium and other metals, besides consumer products (especially footwear, toys and electronics), food processing, transportation and telecommunications equipment. in december 2019, china had announced a new virus, considered extremely lethal, called coronavirus (covid-19) that have been spread very quickly from wuhan market, causing huge levels of contamination and fatalities, through the country and it had taken worldwide in months. “various crazy conspiracy theories have been circulating that the virus somehow escaped from a chinese lab, either by accident or design. however, this is categorically untrue and scientists studying its genetic code have linked it to bats. it probably then jumped to another animal, which passed it on to humans” (newey & gulland, 2020). to face the consequences of the disease, the chinese government had decided to improve the hospital capacities for covid-19 treatment and it had also decided for lock down of labour activities, due to its concern with the locals. the borders have been closed and the army had helped to sanitise the roads. some marketing tools have been used, such as, propaganda to communicate campaigns for the local and the use of the president as a spokesperson. however, tools of fresh start have not been applied, although they were feasible for the situation. there had been an initial recovery in 5 months’ time, but still a challenged situation due to a second wave of contamination. the findings, summarised in the table 1, provide some information about the possible use of recovery marketing as a fresh start tool for devastated economies. 75 table 1 – results cases causes of devastation type of intervention marketing tools allowed fresh start? results iraq (2003) war/terrorism usa had attacked iraq to combat terrorism due to sept 11th 2001. a complete destruction of basic structures. focus on petroleum and trade to maintain economy. none yes. fs hasn’t been used. ‑ nowadays it is still a wrecked country. ‑ focus on petroleum and trade as a chance of economy recovery. ‑ not concerned with locals and visitors. greece (20082011) political/econo mic and financial credit crunch ‑ international agreements ‑ increase of interest rates ‑ new taxes ‑ search for new sources of revenue none yes. fs hasn’t been used. ‑ country in a recovering status ‑ lowest rate of employment (2016) ‑ focus on the central activity (tourism). ‑ not concerned with locals. japan (2011) natural disaster earthquakes, tsunamis ‑ government rescue programmes ‑ volunteer programmes ‑ locals’ intense participation in recovery process. ‑ emergency demand ‑ consumptio n products replacement yes. fs hasn’t been used. ‑ recovery in 4 months. ‑ concerned with locals and visitors. china (2019) disease pandemic coronavirus (telegraph, 2020) ‑ hospital improvement ‑ lock down of labour activities ‑ quarantine ‑ borders’ closure ‑ army to sanitise the roads ‑ propaganda to communicat e campaigns ‑ the president as spokesperso n yes. fs hasn’t been used. ‑ initial recovery in 4 months. ‑ concerned with locals. ‑ still a challenged situation. source: survey, 2019. 5. conclusion, theoretical contribution, managerial implication, proposal, research limitations and future studies the main conclusion of this study, according to the analyses outputs and based on the cases, was that there was the use of some marketing tools and features, however without a holistic marketing approach and either no recovery marketing concept as a fresh start tool to renew the place identity after devastation. 76 a theoretical contribution of this paper is to produce a new marketing framework as a fresh start approach for places after devastations, including the analyses of locals and visitors, such as recovery marketing. the managerial implication is the contribution for public and private organisations to help positioning /repositioning a place identity after devastation, using recovery marketing as a fresh start tool. a tentative approach proposal can be presented: (1) to use recovery marketing as a fresh start tool from the beginning, as long as the catastrophe happens; (2) to hire a marketing team to coordinate the process of recovery just after devastation, the most recommended one by international organisations, such un, fao, unicef, oecd, wto, who, etc.; (3) to choose a spokesperson, (4) to use a transformative consumer research on locals and visitors to produce a profile of their aims for the future related to the devastated place and their willingness towards a fresh start approach for their lives; (5) to develop the recovery marketing mix and to apply it; (6) to develop a renewed brand image for the place, through branding; and (7) produce a follow-up protocol to make amendments in the process of recovery, if they are necessary. this study has some limitations. first, the concept of fresh start mindset is based on the american culture, with the focus on consumption, demanding extra efforts and adaptation in economies where their focuses are in some different mindset. second, multi-case is a qualitative study that helps to highlight trends in order to subsidise more complex and quantitative research. third, the cases that have been studied use some marketing tools, without a holistic marketing approach. and finally, the concept of recovery marketing does not appear in the literature, so the authors have developed a new definition of their own. future research on the analysed field could be addressed to deepen the research on recovery marketing as a fresh start tool. furthers studies could be extended to other countries, in order to better identify differences depending on culture and norms. also to analyse more cases of devastated economies and to apply transformative consumer research (crocket et 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(2013), "is industrial districts logistics suitable for industrial parks?", acta universitatis danubius. œconomica, vol 9, no 4, pp. 221-233. jurnal eb 2012 completo finale.pdf 3vol. 2, 2012 adaptive and rational expectations hypotheses: reviewing the critiques lyman mlambo institute of mining research, university of zimbabwe, zimbabwe abstract on the merits and demerits of the two main expectations formation hypotheses, adaptive and rational expectations. this paper gives concise outlines of the two hypotheses and reviews their respective critiques to assess their validity. we outline that the two hypotheses have essentially been regarded as antitheses of each other in economic discourse. in this discourse, exaggerated theoretical intents and criticisms are evident. inconsistencies among the advocates of rational expectations are also evident, with many of these inconsistencies manifesting themselves in spirited attempts to defend the hypothesis. in the end rational expectations and adaptive expectations are both based on some historical data and learning from experience. while evidence on the usefulness of the models is mixed, it is concluded that both models more appropriate for short-term expedient analysis when data and information are scanty. rational expectations, being based on broader and longer learning experience and data, may be considered appropriate for more comprehensive and longer-term planning. it remains that the rational expectations hypothesis is not per se a model of expectations formation, but a concept pointing to the need for more systematic modeling. keywords: adaptive expectations; rational expectations; forecasting; belief; uncertainty 1. introduction macroeconomics. expectations are unobservable – they exist or are formed in the mind and are abstract. expectations formation models are arbitrary assumptions and their use is categorized as a ‘positivism’ approach. this methodology does not seek the truth about a hypothesis (assumption or model), but whether or not it works. there are various expectations models; however, the two most common ones are adaptive expectations and rational expectations, with the latter being the standard in mainstream economics. there was a radical shift of inclination in 4 economic discourse from adaptive expectations hypothesis to rational expectations hypothesis, to test models of expectations formation some kind of measured expectations surveys responses were conducted by joseph livingston over a period of over thirty years. application of livingston’s data in applied studies as well as in the actual testing of expectations models has yielded mixed results regarding what the data shows of expectations formation, with some concluding that it supports rational expectations, some adaptive, yet some extrapolative expectations. figlewski and wachtel attribute the contradictory results to the fact that most studies did not utilize individual expectations responses, but average expectations, which formation hypotheses. critiques have touched both the theoretical constructs and empirical this paper is to give a brief outline of the theoretical constructs, review the main theoretical and empirical arguments for and against the hypotheses and assess the validity of those arguments. the paper shows that the two hypotheses have stood in opposition to each other in economic formation? however, it is also clear that in this discourse some authors have gone beyond initial intent to ascribe greater purpose to these hypotheses than they theoretically could claim. 2. an outline of the adaptive and rational expectations hypotheses 2.1 adaptive expectations in which the future value of the variable of interest is solely dependent on its past values. from e tt e t e t pppp 11 (1) e tt e t ppp 1 1 (2) 1111 2 2 1 tttt e t ppppp ...11 4 4 ttt ppp where t p is actual current price (we shall use price as the variable of interest in this section for demonstration purposes), e t p is the future expected price (price expectations) held in the current period (t) and 5vol. 2, 2012 three equations. expanding the rhs of (1) and factoring out the lagged expected price variable we get e tt e t ppp 1 1 (2) e ttt e t e ttt e t pppp pppp 2 2 1 21 11 11 e tttt e t ppppp 2 2 1 111 e tttt e t ppppp 2 2 1 111 e ttttt e t pppppp 42 2 1 1111 e ttttt e t pppppp 4 4 2 2 1 1111 11111 4 4 2 2 1 ttttt e t pppppp ...1 4 4 tt pp the equivalence of the three adaptive expectations equations can also be proved (in reverse) thus, under adaptive expectations the expected value can be viewed as a sum of the immediate past expectation and the weighted expectational error (equation 1). in this formulation, it is clear that the individual is making his new expectations by using his current progressive expectation or error learning hypothesis. note that this formulation implies that if there was perfect foresight in the previous period’s forecast (that is, zero expectational error), the previous forecast would sum of the current value and the previous expectation (what it was expected to be), with the expected value is formed as a weighted sum of all the past values of the variable, with the weights geometrically decreasing as we look further into the past. the economic agent in this 6 of the variable of interest are embodied in its current expectations, a rather different and more prices. it is impossible for the agent to be sensitive to all the past prices individually; rather it is that the past prices are already embodied in the current expectations through previous of expectation, since it is the one that relates both past prices and past expectations to current expectations. using equation (2), variants of adaptive expectations can be obtained by assuming that the e t e t pp 1 (4) = 1, t e t pp 1 , e tt e t ppp 1 1 (2) induced expectations are the general formulation of adaptive expectations, and therefore the rest of the paper shall use adaptive expectations to refer to induced expectations. 2.2 rational expectations that captures all the variations of the concept in economic discourse. conceptual diversity is as made of all available and relevant information that eventually eliminates systematic forecasting errors. this then makes expectations correct and equivalent to the prediction of the relevant expectations use information on all relevant variables. assuming that, besides the variable of interest (say, y), other relevant (related) variables ttttt uzaxayaay 11211 where t u is a random variable. the values of all the lagged variables are known at the time of forecasting, which is at the end of period t-1, while the value of the random variable is only known at the end of period t. ttttttt uezaxayaaye 1112111 tt ue 1 u 112111 ttttt zaxayaaye 7vol. 2, 2012 thus, rational expectations are the true mathematical expectation of the variable of interest conditional on information on all other related variables known (lane, n.d.; tend to be distributed, for the same information set, about the prediction of the theory (or represents surprises or news (something that agents did not anticipate). its value is actually tttt uyey 1 the rational expectations hypothesis does not argue that the random variable will always have a value of zero – that is, there is not always perfect foresight (lane, n.d.; see levine, it means that on average the expectations will be correct. (lane, n.d.) argues that the random variable has the least variance compared to other forecasting models, which makes rational the hypothesis implies that expectational errors can be eliminated by more information, hence the argument that theories based on rationality are inconsistent with actual phenomenon to the what the relevant economic model would predict. two, the individuals’ subjective probability distributions concerning the future are homogeneous and equal to the objective distribution. and processing information by acquiring and processing information up to the point where the claiming that equivalence between expectations and model prediction will be achieved, leaves that systematic expectational errors are eliminated over time because rationality embodies expectations an imperative for rational economic agents. it states that a rational economic agent, 8 variables, formulate a subjective joint probability distribution. the implication of this position and that uncertainties render economic theory of no value in explaining social phenomena. the expectations is an equilibrium state. 3. reviewing the critiques of the hypotheses 3.1 adaptive expectations critique other variables. however, this very assumption that expectations are formed based on historical data on the variable of interest has been found to be less logically satisfactory than alternative assumptions that have formed the basis of the competing hypothesis of rational expectations. individual’s rationality, the hypothesis of rational expectations has gained predominance over it. so that to assume that they affect reality is simply to assume that history, and not expectations, affects reality, which removes the forward-looking attitude. however, this criticism loses its validity in two respects. expectations are thoughts, and thoughts cannot be divorced from rather than a process of estimating the future. expectations formation models focus on how the is formed. to argue otherwise is to say that when expectations about the future are gloomy rational economic agents have purposed to achieve a gloomy future. however, two very valid criticisms of adaptive expectations are highlighted by gertchev ad hoc in that it exogenously postitulates the value of that the errors of expectation may be correlated and the expectations may lag behind actual phenomenon when trends change. changes in the trend of a variable of interest may emanate from the behavior of related variables, which variables may be affected by broader factors, for depend on its own past values, but also on the past, present and expected future values of other related variables. strong empirical arguments for adaptive expectations (versus rational expectations) are of rational expectations in mainstream economics has no empirical basis. he sets out to show that the adaptive expectations hypothesis is supported by theoretical statistical reason and econometric evidence. the statistical reasoning is that, in time series data, a mean in which observations that are more recent are given greater weights is used to estimate a future value 9vol. 2, 2012 of the variable. thus, the adaptive expectations hypothesis is simply assuming that apparently has little merit because it is based on the assumption that statistical methods cannot be questioned, and that on average economic agents are experts in statistics. model in which log stock price is a linear function of log dividend and expected rate of growth of dividends. he uses the mean of the rates of growth over the last three years for the expected rate of dividend growth. the results obtained (by retrospective prediction) are found to be price modeling, all of which strongly support adaptive expectations. however, the induced agents know the probability distribution of the variable to be predicted is an extreme position. using a variable’s past values to predict its future values is a more moderate position, for example expectations will result in an expectation time path that is similar in dynamic characteristics to that of the actual values. second, if the initial expectation value and the initial actual value coincide (that is, there is initial equilibrium) the expectations and the actual path will also coincide. third, the time path of expectational errors from this application also exhibits the same dynamics. fourth, the time path of expectational errors has a mean of zero – if the actual time path is convergent towards the intertemporal equilibrium, the expectational error path will also converge, but towards zero. in the adaptive expectations model, this implies, when the market is in disequilibrium, expectations are wrong in a clear systematic way. an intelligent agent can identify the pattern and then adjust his expectations accordingly. demonstrates how present expectations are linked to past expectations and eventually to past values. it is clearly shown that all past expectations and past values of the variable are embodied in present expectations, but does not imply that the agent is sensitive to them individually as suggested by some literature. some critics have regarded expectations as a created unnecessary criticism of the adaptive expectations as merely a statement that history affects reality. the argument of adaptive expectations is, instead, that history affects thoughts implies that adaptive expectations are at maximum equal to static expectations. however, there is no objective reason to postulate such a limit. this suggests the need to allow the value of a theoretical perspective by the argument that they are consistent with the way statisticians estimate future values from a time-series of past values. besides assuming that all agents are good statisticians, this argument also assumes without testing that conventional statistical methods of estimating the future are a correct representation of the forward-looking behavior of agents. 10 3.2 rational expectations critique expectations and not adaptive expectations. empirical support is also found in the study of rationality in the estimation of supply and demand for chicken broiler. however, cumulative hypothesis ahead of other expectations formation hypotheses, as some evidence is supportive while some clearly show violation of the hypothesis. several authors have tested rational denotations have been changed slightly). they then use regression equation (11) to test if the forecasts are unbiased (that is, if )( t ue t e tt 1 t e tt uba 1 (11) where t e t 1 period t, t and t u are essentially the same as the actual values except for some random error. to test for rational using average expectations data the rational expectations hypothesis is rejected. when individual responses are used and panel data approaches applied, still they conclude existence of forecast bias. they go on to test whether readily available and relevant information was used 12,11, t e tit e ti (12) was not fully used. this section has so far shown that empirical evidence on rational expectations has been inconclusive. however, much debate is centred on theoretical arguments. there are contradictions in the understanding of the concept of rational expectations among its advocates. for example, the general understanding that rational expectations is an optimal process that eventually eliminates systematic errors does not seem to be consistent with the other view in levine that uncertainty is a pervasive feature of economics carries the implication that it is perpetual. hypothesis, for learning involves making errors and learning from them. thus, it is next to 11vol. 2, 2012 adaptations; and (b) the variable scope. in adaptive expectations, the learning time is shorter and adaptations are more frequent, while rational expectations may be regarded as more long-term adaptive processes. lane (n.d.) argues that agents do not automatically know the variable generating process, but learn it through experience over some period and eventually know it so that the hypothesis is best regarded as a long-run concept. however, because of different learning abilities and starting points some agents will be in the long-run while others will be in the short-run. at any given point in time, some expectations will be rational while others will be non-rational. the average of rational and non-rational expectations is not exactly equal to rational expectations. this is further complicated by the fact that rationality itself, hence the optimality of outcomes, are subjective (vary from individual to individual and from group to group). economic theory, or there will be information arbitrage. however, we may note that arbitrage by the fact that price-forecasting services continue to exist in the form of business and economic consultancies. the argument of the equivalence of expectations to the predictions of economic theory apparently turns every individual in the economy into an economist. that is, it assumes that on average economic agents can analyze the complex economic relationships among various economic variables consciously or subconsciously and produce the same results that a trained economist would produce using economic models. if this were true, there would be no value in economic training. this is refuted by the fact that such training continues to exist. the premise behind the theory’s assertion that there will always be equilibrium (that expectations will always be correct) has been refuted in that such correctness cannot always exist for two reasons it is an ‘eventual’ outcome of learning from systematic errors, and same argument that correctness of expectations is not necessarily equilibrium would imply that even when they are correct. this apparently would amount to saying that correct and optimal expectations are not important in making optimal decisions, and by extension, in achieving optimal economic outcomes. this is contrary to the essence of holding expectations in general, and correct expectations in particular. expectations are information, or more precisely, an used in planning, accuracy matters for optimality of decisions and outcomes. if on average agents are correct in all expectations (all variables that they are forecasting), equilibrium must be inevitable. lack of equilibrium must be an indication that expectations were not rational enough. forecast it will be true’. however, we may note that in this formulation the hypothesis is merely it defeats the whole idea of expectations modeling, if all that will be required is to hold just any belief we want. why then, as rational economic agents, do we not just agree to believe the advocates of the rational expectations hypothesis ultimately claim that thoughts become 12 equivalent to intentions. a valid criticism is that the rational expectations hypothesis has little to contribute to economic discourse in that at the end it hinges upon the existence of some other model that describes objective reality – the actual model that does the prediction, which means that economic theory says is that the future will conform to the predictions of the relevant economic model, what does the hypothesis itself really add to our understanding of expectations formation? does it not become redundant, since the relevant model implicitly makes the same claim? where we have two competing models, the hypothesis does not tell us which one is better. the rational expectations context equilibrium is maintained in the face of changes (in policy) because the changes are assumed to be anticipated accurately so that behavior adjusts accordingly. he argues that uncertainty which faces agents in free markets, dynamism of the market and the existence of competition make the achievement of equilibrium an impossibility – certainly, some agents’ plans will not be realized and there will be readjustments (disequilibrium). a market in disequilibrium cannot convey the correct information and this further frustrates rational expectations. thus, with rational expectations assumed, for policy to be effective (that is, for change to happen), the policy maker must make it impossible for agents to anticipate policy, that is, to keep them guessing, which ultimately means no optimal policy is made. the policy maker must not only anticipate the actions (responses) of other agents but also their anticipations of him or her, and so on. in such a situation, there will be incentive on the part of each individual to hold non-rational expectations. the effect of public predictions that are believed can be viewed similarly with those of policy announced in advance of implementation lane (n.d.) comes out as a strong defender of the rational expectations hypothesis. he argues that since expectations play a major part in economic decisions, which decisions are assumed answer is whether the rational expectations hypothesis is the best way to model expectations. when we talk of the best way to model an actual phenomenon, of which expectations is one, we are in the positive side of economics. we are not asking if it would be the best way for agents to formulate their expectations (we are not putting value to it), but if it is the best way to describe how they actually formulate expectations. lane responds to a number of criticisms leveled against the rational expectations hypothesis. regarding the criticism that the hypothesis assumes all economic agents are endowed with the ability to understand and use complicated economic models to formulate their expectations, economic agents, though the hypothesis still argues that the two groups arrive at the same and with differential access to relevant information, can process whatever information they have to arrive at an identical expectation outcome. the question is if the agents are not using, for example, the statistician’s model, which model are they using to achieve the statistician’s outcome? rational intentions do not necessarily translate into ability. it is further argued (by lane) that the hypothesis is not claiming that every individual will 13vol. 2, 2012 those who do it for them, for example the central bank, trade union appointees, specialists and consultants, have full information. however, this makes the unreasonable assumption that professional forecasters have full information. this is also an acknowledgement that economic agents are not as good as relevant economic models, and that there is room for professional forecasters to sell information. all this seems to go against the fundamental claims of the hypothesis, or at least show that there is no unity in the understanding of the hypothesis among its advocates. lane defends the rationality of rational expectations as being consistent with the core argument of economics that individuals are rational. however, the criticism against the hypothesis is not on its claim that people are rational, but that rationality is bounded by constraints of expertise and information. rationality speaks of intention only, not also ability. that people seek the best does not mean that they achieve it, as individuals or on average. criticism against the theoretical construct of the rational expectations hypothesis remains valid and much of the defense against the criticism amounts to claiming that the critics have misconstrued its claims. the latter argument may be regarded as an indication of lack of clear consensus on the claims of the hypothesis among its advocates. predictions of economic theory and that any discrepancy will be eliminated by arbitrage is refuted by the fact that price-forecasting consultancy services continue to exist. this implies that arbitrage is never complete. an implicit acknowledgement of this fact is the argument by some advocates that not every individual needs to gather information and formulate expectations since many have it done for them by central banks, trade unions, specialists and consultants. the assumed eventual equivalence of expectations to predictions implies that at some point economic training becomes of no value, which is refuted by the fact that such training continues. the learning of the variable generating process assumed by rational expectations implies that, because of different learning abilities and starting points, some agents will be in the long-run while others will be in the short-run, and some expectations will be rational while others will be non-rational. the average of rational and non-rational expectations is not exactly rational expectations. the reduction of the hypothesis to the statement that if a model is believed it becomes correct is too simplistic. it implies that rational expectations are at best just a belief, regardless of the basis of belief. thus, correctness (or lack of it) is no longer an intrinsic attribute of the object of belief (the model) but one of any belief about it. while the hypothesis relies on the existence of other relevant models that explain variable formation process, in cases where there is more than one relevant model, the hypothesis does not tell us which one is best. inevitably be an optimal outcome that is consistent with equilibrium. however, because such ideal. 4. general conclusion it is concluded that in practical estimation of models with adaptive expectations, the 14 should be allowed to vary among groups of economic agents (for example, buyers and sellers) and to vary without an upper bound. this would allow the characterization of expectations than 1 to manifest. while, statistical models can be very useful, care must be taken to test each model for its validity rather than assume that all statistical models are correct representations of forward looking behavior. there is need for clear consensus on the claims of rational expectations, as the ambiguities and inconsistencies can easily hamper practical application. instead of assuming that rational expectations will always be correct, it is important to consider ways of making correctness a function of available information and skill level. thus, there must be consideration of levels of rationality in rational expectations as a compromise between the extreme assumption of rational expectations (which almost amounts to perfect foresight) and the obvious limitations of a pure adaptive expectations approach. this would bring the claims of rational expectations in the real world. in studies of expectations there is need to benchmark the learning process and to consider surveys and models that take the existence of various points on the learning curve and their distribution into account rather than regard experience as uniform among all agencies. it would also be necessary to understand the various perceptions of agents of the concept of rationality and optimality rather than assume them to be uniform. assume some high level of analytical abilities on the part of economic agents; and (2) they both make use of historical data and learning from experience. the long time needed to learn the variable generating process makes the rational expectations hypothesis some form of long-term concept, while the adaptive expectations hypothesis is a short-term concept. that is, in the short-term there is the tendency to look at few past values of the variable of interest, while in the long-term a more holistic understanding of processes must develop. thus, both models are useful, but differently adaptive expectations hypothesis is a short-term and ad hoc approach appropriate where there is scanty information, while its antithesis is a suitable pointer for the need for more comprehensive economic modeling in long-term planning. references jos journal of economics 4(1), 24-42. econ 351: the stock market, the theory of rational expectations, and the lecture notes. review of economics and statistics, 71 china’s economic transformation usefulness of adaptive and rational expectations 15vol. 2, 2012 economics notes no.8, libertarian alliance the review of economics and statistics, 63(1), quart j austrian econ 10, the review of economics and statistics, 64(4), basic econometrics journal of political economy, 85 lane, c. (n.d.). the rationality of rational expectations why economists are right: rational expectations and the uncertainty principle in economics—part i why economists are right: rational expectations and the uncertainty principle in economics—part ii the american economic review, 76(1), studies in business-cycle theory the quarterly journal of economics, 75(2), 330-335, oxford journals jstor.org international journal of management, it and engineering, 2 1-23. www.ijmra.us journal of econometrics, 16 econometrica, 29 the dictionary of modern economics vercelli, a. (n.d). from adaptive to rational expectations: the empirical, methodological and theoretical reasons of a fundamental change of perspective in macroeconomics. retrieved microsoft word 5 (19-14) christo 67 appraising the efficacy of the national economic empowerment and development strategy (needs) as policy intervention in nigeria (2003-2007) sunday abayomi adebisi university of university of lagos, nigeria abiodun adebowale oyedele university of university of lagos, nigeria christo gbenga adelakun university of university of lagos, nigeria received: july 23, 2019 accepted: october 21, 2019 online published: november 16, 2019 abstract this study appraised the efficacy of the national economic empowerment and development strategies (needs) as policy intervention in nigeria. the study adopted mixed methods. using convenience sampling method, 240 citizens were randomly selected public and private institution in ogun state. comparatively, mean analysis was adopted in analyzing the percentage mean of the secondary data collected while self-designed questionnaires were used to elicit responses as primary data for the study. the instrument used for data collection was a self-designed questionnaire with a test-retest correlation coefficient of 0.86 for the reliability test. the study generated four research questions and four hypotheses were tested at 0.05 level of significance. the result of the hypotheses indicated that: (i) needs policy was not effective objectively on the targeted growth and development indicators (gdi). (ii) the study also revealed that there were no significant differences after the intervention of needs. (iii) based on the findings of the study, it was inferred that needs produces no significant differences on gdi. it was therefore recommended that thorough appraisal of the previous and existing policies should be undertaken before the formulation of new one in order to ascertain the reason for its ineffectiveness, failure, need for replacement and sustainability methods for subsequent policy after implementation. key words: efficacy; appraisal; gdi; sustainability; needs. international journal of economic behavior, vol. 9, n. 1, 2019, 67-83 68 1. introduction in nigeria, the term public policy (pp) is not alien. every successive government either military or civilian at one time or the other formulates and implements various policies during their administration. because it is perceived as an instrument for responding to the public issues or problems. one of the unique features of pp is that it is an action-oriented governmental instrument targeted at addressing general problems of the people. this conforms to egonmwan (1991) who noted pp as government programmes of action. therefore, pp could also be used interchangeably with public programmes. statistics revealed quite a number of government programmes have been introduced of which needs was inclusive. examples of such programmes are national programme on immunization (npi), structural adjustment programmes (sap), national poverty eradication programme (napep), and national transformation agenda which was introduced after needs. nigeria as a nation has never been in short supply of public policy or reforms either during military or civilian government but the lingering problem has always be inefficiency and poor management of the implementation (ugoani, 2017). in terms of both human and natural resources, the rich endowment of nigeria as a nation is not debatable. but the reason why over 70% of her citizenry live below poverty level of less than $1 a day had resulted in avalanche of government intervention policies. before 1999, the level of decay in all sectors of the economy was underestimated by the successive administrations and this led to loss of economic fortunes for decades. the economic decadence engendered loss of value, abject poverty, poor economy and astronomical increase in unemployment rate. after four years of critical evaluation and diligent study of the economic situation of nigeria, the olusegun obasanjo led administration (2003-2007) designed and introduced an home grown intervention policy called national economic empowerment and development strategy (needs) to improve the economy which was centered on four cardinal objectives of poverty reduction, generation of employment, creation of wealth and valueorientation. needs as a policy was fashioned not only as a plan but a strategic systematic process of reforming the economy from decades of economic decadence. the policy was welcomed with a widespread commitment from all the stakeholders because of its unique feature of being the first national developmental plan that integrates the efforts of the three-tiers of government. it focused on the big picture of addressing the specific challenges in all sectors of the nation as noted by okonjo-iweala (2014) who lamented that all sectors of the economy are ripped for urgent reformation. before the advent of needs, there have been several reformation measures launched and implemented by the government which indicated that nigeria has never at any time either under the military or civilian run short of policies. there was operation feed the nation during the military rule of olusegun obasanjo and followed by green revolution of civilian shehu shagari in the 70s, while structural adjustment programme (sap) was set up by ibrahim babangida military administration (akpobasah, 2004) and general sanni abacha famous vision 2010 which died as soon as its progenitor died. but none of these was able to rescue nigeria out of the economic perdition she was subjected into and consequently, the quality of lives of nigerians continues to wane unabated. needs was posed differently from previous policies because it relied on its holistic approach to social and economic challenges facing nigeria growth and development. needs policy was saddled with the goal of rediscovering a new nigeria free from economic woes such as poverty, unemployment, corruption, poor economy and so on and so forth. 69 as highlighted by various publications on the concept of needs, the challenges that limited the impact of the policy involves resistance to change, lack of continuity culture, inability to translate the policy benefits of reforms to citizens, dwindling standard of living, non improvement of the domestic investment climate, integration and extension of the reform program to the state and local government levels, macroeconomic volatility and illiteracy. the impact that needs intervention made on the nation in relation to its designed objectives are two sides of a coin. that is, needs policy came with both merits and demerits. this correlates with okonjo-iweala and osafo-kwaako (2007) assertion that needs significantly impacted the nigeria economy positively but not without the demerits and they noted that the demerits were more than the merits. okonjo-iweala and osafo-kwaako (2007) admitted both the good and bad side of needs after its implementation but concluded that the usefulness of needs rests on the way it is being viewed, and advised that needs should not be viewed as the panacea but as initial steps toward future recovery and growth. before needs, there were reforms such as commercialization, privatization, the petroleum trust fund (ptf), the directorate of food, road and rural infrastructure (dfrri), and all these were meant to achieve the very objectives that engendered the introduction of needs in 2004, because the reforms have ended with the tenure of the progenitor but the economic challenges they were meant to address subsist. the focus of this study is to appraise the efficacy of needs policy as intervention in addressing the national challenges from its inception to extinction (2004-2007). and also to examine how effective needs was able to deliver on its cardinal objectives of reforming all the sectors of the economy. 1.1. purpose of the study the main purpose of the study is to examine the efficacy of needs as policy intervention in nigeria. specifically the study intends to: i. examine the significant difference in poverty reduction rate before and after the intervention of needs as policy in nigeria. ii. unveil the significant difference in employment creation before and after the intervention of needs. iii. determine the significant difference in the level of wealth creation before and after the intervention of needs. iv. ascertain the significant difference in value re-orientation in nigeria before and after the intervention of needs. 1.2. significance of the study findings of this study will be useful to policy administrators in public sectors and managers in private organizations, because it will serves as a guide before making a policy and also as an evaluation tool after making the policy. 1.3. research questions in order to guide this study, four research questions were raised. these are: research question 1: what is the significant difference in poverty reduction before and after the intervention of needs? 70 research question 2: what is the significant difference in employment creation before and after the intervention of needs? research question 3: is there any significant difference in wealth creation before and after intervention of needs? research question 4: what is the significant difference in value re-orientation before and after the intervention of needs? 1.4. hypotheses formulation the following research hypotheses were formulated to guide the study. ho1: there is no significant difference in poverty reduction before and after the intervention of needs. ho2: there is no significant difference in employment creation before and after the intervention of needs ho3: there is no significant difference in wealth creation before and after the intervention of needs ho4: there is no significant difference in value-re-orientation before and after the intervention of needs. 2. literature review 2.1. what is needs? since the programme was set up in 2003 by the olusegun obasanjo led administration, several scholarly publications have greeted the concept of needs. okonkwo (2014) defines needs as a “panacea policy of the obasanjo’s led civil administration to positively change the economic fortune of nigeria. while imf and ida (2015) define needs as the response to the developmental challenges confronting the nation nigeria. imf and ida (2015) described needs as national plan for prosperity. needs was also denoted as people-oriented plan and solutions to most economic questions. it was a programme through wide consultation designed by the people and for the people. needs is all about the nigeria people which is centered on peoples’ welfare, education, political power, health, physical security and empowerment which are of paramount factor in attaining the futuristic vision. otoghagua (2007) in the same vein described needs as a global policy that was integrated into international development targets (idt) which was set up in 1996. the intent of needs according to otoghagua (2007) was to address issues that bother on how to improve social welfare, human capital development, and sustainability of a nation’s economic environment. bamiduro and babatunde (2006) describe needs as a dissimilar economic plan with distinct objectives to making nigeria achieve poverty reduction and be financially viable. the duo asserted the explicit focus of needs on the projected real gdp growth of 5 per cent in 2004, 6 per cent in 2005 and 2006, and 7 per cent in 2007. these were expected to be achieved with a stable 5 per cent yearly decrease in the rate of poverty for over five years period of 2003-2007 with the aim of providing at least two million jobs yearly from 2005 to 2007. 71 objectively, needs as an intervention programme set up on rescuing mission was introduced to serves as a bridge to the existing gap in all other developmental framework based on its feasibility (soludo, 2004). 2.2. nigeria economic situation before the advent of needs all national economic plans, policies, programmes and visions are enshrined to ensuring stable development and growth by altering the models that failed in engendering expected change due to their weakness and challenges (effoduh, 2015). the major factor necessitating the introduction of a new policy in any nation is to replace a failed or dead policy. if the old is functional, then there will be no need to introduce the new. according to okonjo-iweala (2013) who described the economic situation of nigeria as faltering as at 2003 when the former president obasanjo won a second term ticket as president, the situation forced the administration to focus on total reformation of every sector of the economy, hence, the introduction of needs. she asserted that all the spheres of the economy need reformation, ranging from stabilizing the volatile macroeconomic environment, checkmating the endemic corruption to removal of various structural features militating against the development of private enterprises. okonkwo (2014) also painted a gory picture of two decades of mal-administration of nigerian economy filled with poor economic performance due to fluctuating prices of oil coupled with military dictatorship and mismanagement of economic resources, the economy was flooded with myriad of challenges such as scarcity of essential products, decay of infrastructural, monumental national debts, high unemployment rate and poor industrial production before the olusegun obasanjo’s civilian government introduced needs as cited by okonkwo (2014). the official study undertaken by the international development association (ida) and the international monetary fund (imf) identified poor growth and high level of poverty as the prevailing dual factors that nigerian economy was confronted with (ida and imf, 2005). the joint research x-rayed the economic situation of nigeria and the major daunting challenges hindering the nation’s development were uncovered and highlighted below: a) stagnated and truncated gdp b) slow and low growth c) risk and high cost of business d) high rate of urbanization e) the millennium development a) stagnated and truncated gdp before the advent of needs programme in 2003, nigeria gdp was plummeted with a truncated history (umeh, 2015). between 1960-70, the gdp recorded 3.1 per cent increase per annum. while during the oil boom, that is 1970-78, gdp recorded positive and remarkable growth of 6.2 per cent annual increase. but in the early 80s, the gdp nosedive into negative status. until around 1988-1997 when a positive growth rate of 4.0 was recorded as a result of the introduction of the structural adjustment programme (sap). in 1960, before independence, agricultural sector alone contributed 63 per cent. in 1988 due to neglect of the sector by working population who were lured away by oil boom (umeh, 2015) which was not only responsible for rural-urban migration but also resulted into urbanization crisis such as slums, insecurity, high cost of living and unemployment. it was not a surprise by 1975, nigeria has become major importer of agricultural products. 72 b) slow and low growth slow growth is another element that shaped the economic situation of nigeria from 70s80s. the go-slow syndrome experienced in developing the nation was encouraged by low saving which is one of the critical requirement and basis for investment and capital needed for industrialization. the joint report from the study of imf and ida (2005) concludes that nigeria ranked the least industrialized in africa with 5%-7% gdp. the above factor coupled with hostile business environment such as infrastructural deficiency, insecurity of lives and property, corruption, low access and high cost of finance were responsible for low growth rate recorded in the 1970s to 80s. c) risk and high cost of business operations the real sector in the economy before the advent of needs in the 70s and 80s was dominated by the primary production due to high risk and cost of doing business by the manufacturing sector. this led to the depletion of natural resources while other sectors were hampered functionally. d) high rate of urbanization the oil boom of 80s caused migration of the labour from rural to cities. the reigning agricultural sector was not attractive enough to the younger populations which were hired into the urban in search for white collar jobs. this development created another negative situation for the economy. firstly, the agricultural sector lost in gross the needed labour to facilitate its activities. while the recipient cities find it difficult to accommodate the influx of the unplanned labour force. it resulted into high cost of living, rent, crime, insecurity, and ultimately poor standard of living. e) attainment of millennium development goals (mdgs) the eight international development goals for the year 2015 also known as the millennium development goals (mdgs) were the economic targets of every responsible developing nations before the year 2015 lapses. the eight goals which were: eradication of extreme poverty and hunger, universal primary education, gender equality and women empowerment, child mortality reduction, improved maternal health, hiv/aids, malaria reduction, environmental sustainability and global partnership for development became standard at which budget were prepared, development and growth were measured. it became obvious up till 1999, that nigeria does not stand any chance of attaining the mdgs because of the economic crisis that pervaded almost all the sectors of the economy (okonjo-iweala, 2013). there was no sign of possibility of achieving the mdgs due to the retrogressive status of the nigeria economy. as previously noted in this study, nigeria has never for once experience drought in developmental and intervention policies, but the eventual outcome has rarely be in tandem with the pre-selected objective and goals. among the policies introduced before needs to reinvigorate the economy, notable and deserved further elaboration is the sap introduced during the military administration of ibrahim badamosi babangida in 1986. the economic situation of nigeria before the advent of needs programme was at critical stage in which none of the productive sectors was spared from the economic woes. they were all plagued with various developmental crises. the economic factors that betides the nations development and growth which eventually necessitated the introduction of needs can be summarized in table 1, as highlighted by imf and ida(2015). 73 table 1 – economic factors that necessitated the introduction of needs a pursuance of unsustainable strategies and policy by the successive government administration b untapped rich potentials of the citizenry c inability to attain mdgs in 2015 d heavy local and external indebtedness e regional unevenness-growth f domination of the real sector by primary production g least industrialized nation in africa h high volatility of macro-economic aggregate-growth i poor economic management j lack of policy coherence k ineffective budget l weak institution m his role business environment n deep and pervasive poverty (over 70%) o threatening unemployment rate p dysfunctional education system q dysfunctional education system r depletion of natural resources s brain drain source: imf and ida (2015) 2.3. advent of needs in 1999-2003, the administration of olusegun obasanjo was able to ensure policy stabilization and also checkmate all the economic problems that permeated all sectors of nigeria. in order to prevent this achievement from being eroded (imf and ida, 2005), a consolidating measure was set up to ensure that the achievement recorded were not lost. hence, needs was introduced in 2004, and saddled with the major responsibility of consolidating on the gains and also lay sustainable foundation on how other economic problems such as poverty reduction, employment generation, wealth creation and value orientation can be attained. according to the former president olusegun obasanjo, needs was primarily introduced to engage the national resources in breaking away from the old to pave way for a new united and prosperous nigeria from this generation to generation to come. needs provided a framework for a national coordinated program of action by the three tiers of government. according to the joint work of imf and ida (2003), the process of needs was began in 2003, stakeholders from all spheres of the economy was given opportunity to air their needs and future ambitions. the information gathered from the national and wide consultation with the people helped in the drafting of the first phase of needs policy. needs was centered on reducing poverty, generating employment, creating wealth, and value re-orientation. meanwhile, the attainments of these goals were tied to a hospitable and conducive environment that will enable business to thrive. needs was a four years medium term plan for the period of 2003 to 2007. though being a federal plan, it integrates both state and local government together to ensure their parts are being played to ensure the success of the whole intervention. state economic empowerment and strategies (seeds) and local government empowerment and development strategies 74 (leeds) for state and local government respectively. besides the involvement all the three-tier of government, all and sundry were mobilized support for the program. 3. research method the study adopted mixed methods were adopted and the analysis is divided into two stages. the first stage involves collection of secondary data from national bureau of statistics (nbs) and other verifiable sources to comparatively analyze the significant difference recorded on poverty reduction, unemployment reduction, wealth creation and value re-orientation before, during and after the intervention of needs as policy. percentage bench mark was set and mean were compared to determine the level of significance. while the second stage involved the use of descriptive survey for data collection. two hundred and forty (240) respondents were randomly selected from state and private institutions in ogun state to examine their opinions on the aftermath effect of needs policy in comparison to its aftermath effect since the policy was objectively designed to affect every citizen. convenience sampling technique was adopted in distributing the questionnaires to respondents in both state ministries and private institutions. two hundred (200) copies of the questionnaires that were filled and returned by the respondents represent 83.3% return rate. instrument reliability was established with a test-retest gave ‘r’ = 0.86. the retrieved questionnaires were analyzed using t-test statistics for testing of hypotheses at 0.05 level of significance while mean was used in answering the research question. a score of 1.5 was taken as cut-off point for accepting an item as significant while score less than 1.5 was taken to be insignificant. table 2 shows that before the introduction of needs as policy intervention, the percentage score for poverty reduction indicator was over 50% in 2001 to 2003 and also worthy of note is the percentage score for wealth creation in 2002 which recorded the highest percentage of 14.6% compare to year 2000, 2001 and 2003 with 5.5%, 6.7% and 9.5 respectively. the overall grand mean of the gdi was 21.19% which is less than 50% bench mark. table 2 – pre-needs era indicator/ year (%) 2000 2001 2002 2003 mean poverty reduction 42.85 50.24 50.42 52.6 49.3 employment creation 13.1 13.1 12.6 14.8 13.4 wealth creation 5.5 6.7 14.6 9.5 9.07 value re-orientation 12 10 16 14 13 grand mean (%) 21.19 sd 354.94 variance 18.84 source: nbs (2005, 2014) table 3 reveals a change in the poverty rate indicator with a percentage score of staggering figure of 54.4% in 2004 that marked the introduction of needs era compare to 42.85% in 2000 before the intervention of needs policy. while employment creation and wealth creation remains staggered. the value-re-orientation increased from 2004 with a percentage score of 10% to higher figure of 22% in both 2006 to 2007. moreover, the grand mean also increased from 21.19% in preneeds era to 22.76% in needs era. this indicates the immediate 75 impact of needs policy on the value re-orientation gdi but the impact on employment creation and poverty reduction remains increasingly insignificant. table 3 – needs era indicator/ year (%) 2004 2005 2006 2007 mean poverty reduction 54.4 51.56 51.58 51.6 52.54 employment creation 13.4 11.9 12.3 12.1 12.42 wealth creation 10.4 7 6.7 7.3 7.85 value re-orientation 10 19 22 22 18.25 grand mean (%) 22.76 sd 412.14 variance 20.3 source: nbs (2005, 2014) table 4 shows that poverty was temporarily stabilized immediately after the introduction of needs policy with figure of 67.5, 68 and 69 percent in 2008, 2009 and 2010 respectively. the employment creation experienced no impact because the percentage stood at 50 for the three years. wealth creation increased and later decreased but the value re-orientation was the worst hit, the percentage plummeted from the higher percentage of 22.73 in 2008 to -4 in 2010 which is the lowest. yet the overall grand mean increased from 22.76 to 32.69%. the increase in the grand mean could be attributed to the immediate effect of needs intervention. table 4 – post needs era 1 indicator/ year (%) 2008 2009 2010 mean poverty reduction 67.5 68 69 68.1 employment creation 50 50 50 50 wealth creation 7.2 8.4 11.3 8.9 value re-orientation 22.73 -7.41 -4 3.7733 grand mean (%) 32.69 sd 31.38 variance 984.7 source: un department of economics. social affairs, nbs (2014 & 2015) table 5 shows that poverty rate grew worse after the introduction of needs policy with a whopping figure of 69.01 in 2011 compared to 51.6% in 2007. the rate continues to worsen even from 2012 to 2014 with an average mean score of 69.43%. the unemployment rate also continues to increase with 27.4% in 2012 and average mean score of 25.25% in compared to 11.9% in 2005 and average mean of 12.42% when needs was introduced. the overall grand mean increased from to 31.7%. the increase in the grand mean could be attributed to the temporary effect of needs intervention but was short-lived due to lack of sustainable culture. 76 table 5 – post needs era 2 indicator/ year (%) 2011 2012 2013 2014 mean poverty reduction 69.01 69.47 69.49 69.74 69.43 employment creation 23.9 27.4 24.7 25 25.25 wealth creation 7.68 6.17 5.49 6.23 6.39 value re-orientation 24 27 25 27 25.75 grand mean (%) 31.7 sd 713.72 variance 26.72 source: nbs (2005, 2014) table 6 shows the summary and comparative analysis of the four eras; pre-needs, needs and post-needs 1 and 2. the table shows that average means score of poverty rate continue to increase unabated from lower 49.3% from 2000 to 2003 that represent the era before the advent of needs intervention compared to the increased figure of 52.54% and 69.43% during needs era and after the introduction respectively. on employment creation rate, the rate was adopted from the report available on united nations department of economics social affairs and national bureau of statistics (nbs) and it was stabilized after the introduction of needs with 37.63% after the intervention of needs. wealth creation recorded the almost the same impact with9.07% before the advent of needs to a decreasing figure of average mean score of 9.07% to 7.6% after the introduction of needs. the value re-orientation also suffered the same fate, it risen 13% to 18% which later fell to 14.5% in 2008, 2009 and 2010 respectively. the overall grand mean show increase in the figure from 21.9% to 32.1% but far lower to the 50% bench mark set for the study. this indicate that needs intervention was not effective, though it cannot be totally tagged a failed policy but ineffective because it was unable to achieve the four cardinal objectives of reducing poverty rate, employment creation and national wealth created and value-re-orientation. table 6 – comparative analysis of the four eras indicator/ era (mean) pre-needs era needs era post-needs era 1 & 2 poverty reduction 49.3 52.54 68.77 employment creation 13.4 12.42 37.63 wealth creation 9.07 7.85 7.6 value re-orientation 13 18.25 14.5 grand mean (%) 21.9 22.76 32.1 4. results the analysis of the data and its interpretation were divided into two parts. part one analyzed the secondary data collected using comparative mean analysis in analyzing the percentage mean scores of the intervention of needs policy before, during and after on the targeted gdi. the grand mean scores were determined to take a decision. any percentage mean score that is less than 50% is considered not significant. the second part of the analysis involves the analysis of the research questions and testing of the hypotheses. a two-point scale was used for analysis. for instance, “significant” was awarded 2 and “insignificant” was awarded 1. following this, the mean scores were determined 77 to take a decision. to take a decision, any mean score below 1.5 is considered negative and above is considered as positive. discussion of the findings is presented at the end of each table. research question 1: what is the significant difference in poverty reduction rate before and after the intervention of needs? table 7 shows the impact on gdi before and after the intervention of needs. table 4 revealed different mean scores under two indicators of poverty. before the intervention of needs, both standard of living and human capital development indicator recorded high mean score and none of the mean score was below 1.5. the standard of living after the intervention of needs recorded the lowest mean score of 1.10 compared to 1.50 mean score before the intervention of needs. also human capital development recorded only one instance average of 1.50 mean score and the rest scores were lower than the ceiling mark of 1.5. worthy of note are the two instances when standard of living slipped into 1.00 after the intervention of needs, and improving the standard of living and development of human capital through poverty reduction are the first objective of needs. this shows that there is no significant difference in poverty reduction rate after the intervention of needs table 7 – poverty reduction rate before and after the intervention of needs indicator/name of organization ijaye estate hospital ogun state internal revenue service federal medical centre united bank for africa redeemed christian church of god poverty b a b a b a b a b a standard of living 1.40 1.00 1.35 1.05 1.45 1.05 1.35 1.00 1.30 1.00 human capital dev. 1.70 1.45 1.75 1.65 1.65 1.45 1.85 1.50 1.65 1.45 indicator/name of organization abeokuta grammar school federal university of agriculture moshood abiola polytechnic moyorex nigeria ltd, glory land adire trading association grand mean poverty b a b a b a b a b a b standard of living 1.60 1.40 1.50 1.10 1.55 1.20 1.45 1.10 1.60 1.20 1.46 human capital dev. 1.65 1.40 1.85 1.40 1.80 1.50 1.85 1.55 1.80 1.50 1.75 note: b=before intervention, a=after intervention research questions 2: what is the significant difference on employment creation before and after the intervention of needs? table 8 shows the significant influence on employment generation before and after the intervention of needs. it reveals different mean scores of unemployment and underemployment which serve as indicator for employment creation before and after the intervention of needs. before the intervention, none of the two indicators recorded mean score lower than the ceiling mean score of 1.5 and while after the intervention the mean scores also took the lower direction lower than 1.5. the employment creation mean score drastically reduced and underemployment score didn’t soar towards the ceiling mean score of 1.5. the mean scores for the two items remained higher than the ceiling mean score before the intervention and remained 78 increasingly lower after the intervention. this connotes two implications, one, the number of employment created was insignificant compared to number of unemployed labor and also the reduction in unemployment and underemployment was not significant. table 8 – significant difference on employment creation before and after the intervention of needs indicator/name of organization ijaye estate hospital ogun state internal revenue service federal medical centre united bank for africa redeemed christian church of god employment creation b a b a b a b a b a unemployment rate 1.68 1.43 1.63 1.73 1.63 1.43 1.68 1.43 1.63 1.43 underemployment 1.73 1.38 1.63 1.33 1.58 1.36 1.73 1.38 1.63 1.38 indicator/name of organization abeokuta grammar school federal university of agriculture moshood abiola polytechnic moyorex nigeria ltd, glory land adire trading association grand mean employment creation b a b a b a b a b a b a unemployment rate 1.63 1.38 1.73 1.48 1.78 1.48 1.83 1.53 1.78 1.48 1.70 1.48 underemployment 1.78 1.56 1.68 1.48 1.78 1.48 1.63 1.33 1.78 1.48 1.69 1.42 note: b=before intervention, a=after intervention research question 3: is there any significant difference in wealth created before and after the intervention of needs? table 9 shows the state of wealth created through the indicators of gdp and level of industrialization before and after the intervention of needs. table 9 reveals different mean scores under these two indicators wealth creation. before intervention, the gdp and industrialization level were both higher and fair because the average mean scores for both were higher than 1.5 mean score set as ceiling mean score. but the gdp mean was plummeted after the intervention of needs. so also for industrialization, the policy was not favourable because all the mean scores after the intervention were lower than 1.5 compared to higher mean score of 1.85 recorded before the intervention. the average mean scores for both gdp and industrialization were higher than the ceiling score of 1.5. this shows that the policy was favorable to wealth creation objective. the implication is that, the level of wealth created was significant after the intervention of needs but not beneficial to the citizens. research question 4: what is the significant difference in value re-orientation before and after the intervention of needs? table 10 shows the state of wealth created through the indicators of value re-orientation through corruption index and crime reduction rate before and after the intervention of nee ds. table 10 reveals different mean scores under these two indicators of value re-orientation. before intervention, the mean score for corruption was higher but not above the ceiling mean score of 1.5 mean score while that of crime reduction were above 1.5 ceiling mean score but the mean score of corruption were made worst after the intervention having mean score lower than 1 mean score in two instances and also of crime reduction have no instance where the mean 79 score was equal or above the ceiling mean score of 1.5. this shows that the needs policy intervention was not effective re-orientation of people value. the implication is that, the policy was unable to re-orientate the value of nigerians and the efforts put up by the policy were not significant. table 9 – significant difference in wealth creation before and after the intervention of needs indicator/name of organization ijaye estate hospital ogun state internal revenue service federal medical centre united bank for africa redeemed christian church of god wealth created b a b a b a b a b a gdp 1.75 1.50 1.80 1.65 1.75 1.55 1.75 1.55 1.75 1.60 industrialization 1.65 1.50 1.70 1.55 1.75 1.50 1.75 1.55 1.70 1.50 indicator/name of organization abeokuta grammar school federal university of agriculture moshood abiola polytechnic moyorex nigeria ltd, glory land adire trading association grand mean wealth created b a b a b a b a b a b gdp 1.75 1.50 1.80 1.55 1.90 1.60 1.75 1.50 1.85 1.55 1.79 industrialization 1.83 1.65 1.80 1.60 1.80 1.55 1.75 1.63 1.85 1.65 1.76 note: b=before intervention, a=after intervention table 10 – significant difference in value re-orientation before and after the intervention of needs indicator/name of organization ijaye estate hospital ogun state internal revenue service federal medical centre united bank for africa redeemed christian church of god value re orientation b a b a b a b a b a corruption index 1.75 1.10 1.80 0.65 1.75 1.25 1.75 1.15 1.75 1.30 crime reduction 1.65 1.20 1.70 1.35 1.75 1.00 1.75 1.25 1.70 1.30 indicator/name of organization abeokuta grammar school federal university of agriculture moshood abiola polytechnic moyorex nigeria ltd, glory land adire trading association grand mean value re orientation b a b a b a b a b a b a corruption index 1.75 1.20 1.80 1.15 1.90 1.00 1.75 0.50 1.85 1.35 1.79 1.2 5 crime reduction 1.83 1.25 1.80 1.00 1.80 1.25 1.75 1.33 1.85 1.25 1.76 1.3 8 note: b=before intervention, a=after intervention 80 5. hypotheses testing hypothesis 1: there is no significant difference in poverty reduction before and after the intervention of needs table 11 shows the t-test result for difference in poverty reduction before and after the intervention of needs. since t-stat calculated value of 0.510452. is lesser than the t-critical of 12.7062 at a'=0.05, then we can conclude that there is no significant difference on poverty reduction after the intervention of needs. therefore, the hypothesis which says that there is no significant difference on poverty reduction as a result of intervention of needs is accepted. table 11 – t-test result in difference on poverty reduction before after mean 1.605 1.3395 variance 0.04205 0.29645 observation 2 2 df 1 t-start 0.510452 t-critical (2 tails) 12.7062 hypothesis 2: there is no significant difference on employment creation before and after the intervention of needs table 12 shows the t-test result for difference in significant difference on employment creation before and after the intervention on needs. since t-stat value of 8.05555 is lesser than t-critical value of 12.7062 at a'=0.05, then we can conclude that there is no significant difference in unemployment rate after the intervention of needs. therefore, the hypothesis which says that there is no significant difference on employment creation as a result of intervention of needs is accepted. table 12 – t-test result on difference in employment generation after the intervention of needs before after mean 1.695 1.450 variance 0.00005 0.0008 observation 2 2 df 1 1 t-start 8.05555 t-critical (2 tails) 12.7062 hypothesis 3: there is no significant difference in wealth created before and after the intervention of needs. table 13 shows the t-test result for difference in wealth creation before and after the intervention of needs. since t-stat value of 9.89949 is greater than t-critical of 4.30265 at a'=0.05, then conclusion can be made that the wealth creation was significant as a result of needs intervention. therefore, the hypothesis which says that there is no significant difference in the wealth creation due to intervention of needs is not accepted. 81 table 13 – t-test result on difference in the wealth created after the intervention of needs. before after mean 1.775 1.565 variance 0.00045 0.00045 observation 2 2 df 1 tstart 9.89949 tcritical (2 tails o 4.30265 hypothesis 4: there is no significant difference in value-reorientation before and after the intervention of needs. table 14 shows the t-test result for difference in value re-orientation before and after the intervention of needs. since t-stat value of 6.89569 is lesser than t-critical of 12.7062 at a'=0.05, then we can conclude that the value re-orientation were not significant as a result of needs intervention. therefore, the hypothesis which says that there is no significant difference in the value re-orientation due to intervention of needs is not rejected. table 14 – t-test result on difference in the value re-orientation after the intervention of needs. before after mean 1.775 1.31501 variance 0.00045 0.00845 observation 2 2 df 1 tstart 6.89569 tcritical (2 tails o 12.7062 6. discussion the result of the appraisal indicated that there was no significant difference recorded on all the (gdi) of poverty rate, employment creation, value-re-orientation after the introduction of needs except for wealth creation. this also confirms the poor state of gdi as corroborated by afolayan (1998) on the retrogressive effects that most of the post-sap policies had on the economy. in addition, findings aligned also with okonjo -iweala (2017) on the weakness of needs and other pp in translating the merits into citizenry benefits despite the laudable introduction. this could have been due to the leadership factor or available political will of the policy stakeholders. the findings from the study indicate that needs was unable to achieve its four cardinal objectives of reducing the national poverty, reduction of unemployment by creating more employment opportunities, national value re-orientation , even though pool of wealth was created but few individual benefit at the expense of the general masses and also failed in general objective of reforming the whole sectors of the economy. in addition, the findings reveal an ineffective impact and insignificant differences on the targeted gdi before and after the intervention of needs. it was observed that the mean scores of most of the items decreased after the intervention of needs except for the items such as the gdp which was rising and falling. standard of living, corruption crime reduction, and 82 unemployment were worsening with lower and absurd mean scores compared to their mean score before the intervention of needs. so in general the intervention of needs was not effective because it added no significant change to the targeted gdi in nigeria but rather worsen the situation. 7. conclusion and recommendations the study has revealed gross ineffectiveness as policy intervention on gdi. this is an indication that even the tripartite effort of the federal (needs), state (seeds) and local (leeds) did not achieve the planned objectives. subsequent study on this topic is advised to focus on how the merits of laudable governmental policies can be translated into the benefits of the citizens. based on the findings of this study, the following recommendations are made: i. thorough analysis of previous or existing policy needs to be undertaken in order to ascertain the reason for its failure, weakness, and replacement and sustainability. ii. there is need for appropriate and effective growth plan in order to improve socio economic welfare of the people. iii. law must be enacted that will ensure continuity of value adding existing policy regardless of change in administration to avoid premature jettisoning of same. iv. new policies should be introduced when only the existing policy has failed to achieve the purpose for which it was introduced. v. a ministry should be saddled with the responsibility of carrying out a comprehensive appraisal of intending policy with appropriate sanction in case of eventual failure before the introduction of new one to avoid waste of human and material resources, including recommendation to abandon any policy that is not working. vi. introduction of new policies should specifically focus on a sector or selected sectors rather than center on the whole sectors of the economy for effectiveness and efficiency. references 1. afolayan, b. (1998). macro economics, indemac limited. 2. akpobasah, m. (2004). the development strategy for nigeria. a paper presented at the overseas development/nigeria economic summit group meeting on nigeria. london 3. bamiduro, j.a. and babatunde, s. t. (2006). needs: prospects and challenges for nigeria. journal of economics and financial studies, adekunle ajasin university, akungba akoko, ondo: logos-universal publishers inc. p.123 4. danladi, a. and naankiel, p.w. (2016). structural adjustment programme in nigeria and its implication on socio-economic development, 1980-1999, the calabar history journal, 6, 2, university of calabar, calabar, nigeria. 5. effoduh, j. o. (2015). the economic development of nigeria from 1914 to 2014. journal of council on african security and development. 6. egonmwan, j.a. (1991). public policy analysis concept and application. benin city: resyin (nig.) company 7. ida and imf (2006). poverty reduction strategy paper joint staff advisory note. 8. international journal of economics and financial research. 3(5), 65-75. 9. obasanjo, a. o. (2004). an address delivered during the lunching of the needs at the presidential villa, abuja, nigeria. 83 10. okojo-iweala, n. (2013). nigeria: background to economic reforms. vanguard nigeria newspaper,www,vanguardngr.com/2012/11/nigeria-background-to-economic-reforms/ amp 11. okojo-iweala, n. and osafo-kwaako, p. (2007). nigeria's economic reforms: progress and challenges, brooking global economic development 12. okonkwo, c. eze (2014). needs and labour in nigeria, 2003-2007, journal of good governance and sustainable development in africa 2. 2 13. otoghagua, e. (2007). trends and contemporary issues on regimes of nigerian heads of state policies and politics achievements and failures. 3rd edtn., benin city: research knowledge and educational services, nigeria. 14. soludo, c.c. (2004). debt, poverty and inequality: toward an exit strategy for nigeria and africa. trenton: africa world press 15. ugoani, j.n.n. (2017). examination of the impact of needs on poverty reduction in nigeria. 16. umeh, c.a. (2015). economic growth without development in nigeria. microsoft word 4 (19-19) sumah 49 corruption: where and why (and how to beat it)? štefan šumah omcometals, slovenia matic borošak themind, slovenia received: september 28, 2019 accepted: november 18, 2019 online published: november 25, 2019 abstract corruptive environment is a phenomenon we are facing every single day through different point of views. it can have positive or negative impact from both macro and micro perspective. the study is focusing on two key questions: where corruption is occurring (geographical, phenomenal levels etc.) and why is it occurring by identifying factors causing it (country specific factors). while the question “where” is relatively easy to answer, the question “why” requires a significantly more complex response. country analysis was made according to their rankings through corruption perceptions index, published annually by transparency international. i have researched the main factors that affect the level of corruption in each group of countries, or rather tried to find similarities and differences between individual groups of countries with regard to what affects the level of corruption in these groups. a basic model of three factors (risk, benefit, and awareness) was created based on several known, scientifically confirmed factors that either generate or reduce corruption and affect the level of corruption in each country respectively. depending on the level of corruption analyzed, countries can be placed into five classes by their common characteristics. during the discussion, the results of the study were then compared with the results of the already-known research, and the matches and differences defined. the findings were also commented upon with the aim to answer the question of how to fight corruption. key words: corruption; causes of corruption; corruption: where?; corruption: why?; fight against corruption. 1. introduction corruption is a phenomenon that has existed in society since time immemorial. however, lately, it is being more and more mentioned and stressed, with research on corruption itself and its negative impacts becoming more frequent only after 1995 (when both countries, as well as international institutions, became increasingly aware of the negative effects of corruption; until then, corruption was treated with a somewhat neutral attitude). due to the proven negative international journal of economic behavior, vol. 9, n. 1, 2019, 49-66 50 effects (especially according to research) of corruption, countries are striving to prevent or at least limit its spread. corruption is mainly a consequence of circumstances that do not allow equal access to goods, services and rights. among these circumstances are poor and overly written laws (the rule is that the most corrupt countries have the most laws, which are also the most extensive), lack of political will, inefficiency of state institutions, poor quality of management, great discretionary power of civil servants, values of society and tolerance to corruption. they are created due to the greed of individuals, lack of integrity, ignorance, lack of responsibility, excessive complaisance (www.acfe.si). most experts and researchers who used to be or are still engaged in corruption more or less agree that it is endangering both social stability and security as well as values, and is impeding the economic and social as well as political development of countries, while at the same time threatening man as an individual. the word corruption is derived from the latin word "corruptus", which means corrupt and, in legal terms, an abuse of a trusted position in one of the branches of power (executive, legislative, judicial) or in political or other organizations, with the intent to obtain, for oneself or others, material gain that is not legally justified. the impact of corruption on the functioning of society is negative in the long run, which is why the domestic and international community is paying more and more attention to it. due to the negative effects of corruption, all countries are trying to intervene in this area in order to prevent or at least limit its spread. corruption occurs always and everywhere, where the profit and benefits of individuals, groups, or businesses are involved and is represented in all spheres of social and political life. it appears in the form of bribery, acquaintances, associations, nepotism and privileges, and definitely cannot be easily detected. it reduces economic growth, increases poverty, lowers the quality of services, draws public resources and consequently undermines the credibility of politics, influences decision-making processes, and destabilizes democratic systems (dobovšek, 2005, p. 24). if corruption is to be understood, it is necessary to know the reasons why it occurs. there is never only one cause; there are numerous causes and they act together in combinations that allow corruption. the causes arise from political, social, economic conditions of each country, as well as from historical development, customs and culture (horvat, 2008, p. 6). why is it important to distinguish between corruption and other criminal acts, for example, theft or fraud, explains senior (2006, p. 30, 31). there are two sides to theft: the one which steals and the one which has something stolen (the one which steals might rob an individual, community or state), whereas corruption comprises of three sides: the one which offers the bribe, the one which takes the bribe (both sides benefit in doing so), and the third which is harmed (the state, taxpayers, the company, etc.) or is in a worse position because of it. or, as he simplified, if someone takes 10 pounds from someone's wallet, the one who steals the money is better off, while the other is worse off (only that person is affected). and, if a contractor bribes an official to win a tender, those companies that have failed to win are worse off, and if this contractor then bribes the official to accept a higher price for the service, indirect influence (indirect damage) on the taxpayers also occurs. fraud is only a more sophisticated form of theft, with the same result, which is an injured party, however, the victim can hope for compensation if the thief or fraudster is brought to justice. nevertheless, if it is known that the thief or the fraudster will not be judged for bribery of the court or police, it can be assumed that corruption is more harmful to the society than theft or fraud. in addition, corruption is concealed, it affects a third party, and those who suffer due to it will never be able to identify the causes for their suffering and they will never receive any repayment for it. 51 2. corruption: where? corruption occurs everywhere where money is involved. there is, in general, more corruption where management of foreign money, that is, taxpayers' money is involved. roughly speaking, if the question “corruption: where?” is asked, three different areas of corruption occurrence can be defined as: a geographically defined notion; the levels on which it occurs (especially as corruption in the public administration); an environment in which it occurs. if we say "where" and by that mean a geographical concept, we can roughly say that corruption is largely geographically dependent. the highest level of corruption is in asia (mostly in central asia) and africa (north and central africa), as well as in south america (according to the transparency international map) (figure 1). figure 1 – map of corruption (darker color, more corruption) source: https://www.transparency.org/cpi2017 however, if by "where" we mean where corruption does occur in the state administration (if corruption is primarily considered as a phenomenon in the public administration), three levels of corruption can be identified (dobovšek, 2008): micro-level presents small gifts to public officials for achieving the desired service, which is the officials' duty anyway. corruption at this level is tied to those officials who deal with documentation and license issuing. people are very tolerant of this, it has become a part of 52 everyday life, and the amount of unlawfully acquired funds does not exceed the average monthly salary of an official; middle level includes public officials at a higher level. it is most widespread at the local level, where the local politics, with its help, achieves solutions that fall within the competence of the middle level of public officials. the public does not tolerate such corruption; it can amount to a few monthly salaries of an individual official; macro-level corruption is linked to government procurement through the conclusion of major contracts, the performance of major work in the country (e.g. construction) and other major investments. it is the most dangerous part of the corruption that takes place in the highest social and political circles and is enabled through the abuse of functions and positions, political power, and the abuse of social status. such forms of corruption usually remain hidden, and if they are detected, the main players remain undetected. typically, those are representatives of elites who through corruption transfer large amounts of money. however, corruption can also be distinguished according to the environment in which it occurs. according to this criterion, we distinguish four forms of corruption: corruption between public officials and private individuals, which is a form of corruption where a private person wants to obtain a "kind of" favor and is usually a minor form of corruption, which is, however, a good basis for social degradation; corruption between public officials and politicians, where it comes to returning services on a personal level; corruption in the private environment, which is the most common form of corruption in the economy and is reflected in the abuse of economic contracts (e.g. giving priority at public tenders); corruption between individuals and politicians. 3. corruption: why? 3.1 corruption – risk, benefit and awareness in his work liberalism: the classical tradition, ludwik von mises (1927) explained some of the laws necessary for participation in the market economy, which are: 1. private property, i.e. private ownership of production assets. individuals have the right to own and use not only goods that are ready for consumption, but also factors of production from which goods can be produced and services for sale and use offered; 2. freedom, namely the freedom of every individual, without distinction, which is to be guided by his own goals and plans, based on which he is voluntarily included in the social system of division of labor through a contract and a mutual agreement; 3. peace, namely, the abolition and the elimination of violence in human relations, for an individual can only feel safe to direct his mind and efforts toward creative improvements in the human situation when in the environment of peaceful integration; 4. equality, namely equal personal and political freedom before the law, with which each individual has the freedom to choose to join the system of division of labor according to his own consideration regarding what is the most profitable, without legal obstacle or restriction; 5. inequality of wealth and income, that is, the financial situation of each individual depends on his success in serving others in the system of division of labor, whereby the relative income and financial situation of the individual inevitably reflect different achievements in this endeavor; 53 6. a government with constraints, which means that political authority with its powers and responsibilities is limited to those tasks that are necessary to ensure peace in which the freedom and property of an individual are protected against oppression and violence. of course, these laws can also be identified as the idealization of the liberal state and are of more economic or philosophical nature, but the fact is that if one of these laws is not fulfilled, corruption falls on fertile soil. therefore, are the countries where production assets were or still are in their possession usually at the top of the list of the most corrupt countries. moreover, if an individual has no freedom, if others decide about him and his goals, then is the individual often forced into corruption actions in order to achieve his goals. also, at the top of the list, there are usually countries that are at war. equality before the law, both personal and political, is also important, for if there is none, then there is no rule of law, and this in itself allows for the development of corruption. the rules of the game have to be the same for everybody. the inequality of wealth and income are not an important factor at all at first glance, however, when placed opposite the socialist equilibrium, it can immediately be seen that without the fulfilment of this law we fall into corruption. and a government without restrictions, where there are too many laws, regulations and other legal acts, where the government takes the discretionary power or even adapts the entire legal system, is the generator of corruption at all levels of decision-making or management in the country. failure to comply or non-compliance with one of these laws leads to corruption. however, corruption itself is a phenomenon too complex to be explained only by this. in order to better define or find out corruption: why?, i tried to simplify the problem and i combined several influential factors in one of my previous researches (together with mahić, 2017). thus, in this article, i considered corruption as an illegal or criminal offense (legislation, political and economic environment, etc., which refers to the previously described mises law) together with the conditions for its creation in one part and as a set of ethics, morals, religions, customs and traditions in the second part. in his study, the nobel prize winner becker (1974), with the help of economic analysis, presented what influences unlawful or criminal behavior. simply put, in his opinion, man is a rationally thinking being and the decision of whether or not a person will commit an unlawful act is influenced by three factors: 1. the benefit which is acquired through an unlawful act; 2. the likelihood of being caught; 3. the expected penalty if caught. by comparing the first factor to the other two, the person then rationally decides whether or not the unlawful act is worthwhile, which is explained by the model of choice, i.e. when the perpetrator or the potential perpetrator prefers the risk, or when the risk is on the verge and the perpetrator considers whether the real income from the crime is greater or lesser than the one that would be received in less legally risky activities, and then rationally decides. and precisely this condition of "optimality" is, according to becker, the main decision-making principle, and not, for example, the effectiveness of the police or the court. in short, it is about weighing the potential positive and negative effects (costs and benefits) and not about thinking whether it is right. although this is a simple model, it can easily be applied to an individual unlawful (and also to an immoral) act, therefore also corruption. the theory of rational choice, which arises from the theory of intimidation, also considers similar weighing of expected results (benefit/risk, penalty), however, it also takes into 54 account the findings of the economic theory 1 and transfers them to the behavioral field. the theory of rational choice emphasizes the expected benefit (rewards and penalties) of legal behavior against the unlawful. if becker's model of choice is summed up, corruption (simplified) is also dependent on the ratio between the benefit that a person who commits a corruption act expects, the level of penalty2 and the possibility of being caught. so, the higher the benefit, the smaller the chance of being caught, and even if one is caught, the penalty is low the higher is the degree of corruption and vice versa; smaller benefits, greater possibility of being caught and high penalties discourage people from corruption (man rationally estimates if it is worth the risk). the degree of corruption is thus (according to šumah and mahić, 2017): dc = f (be, lp, cc) (1) dc: the degree of corruption be: benefit lp: the level of penalty cc: the chance of being caught the level of penalties and the possibility of being caught can also be called risk: ri = f (lp, cc) (2) ri: risk or hazard, which depends on the possibility of being caught and the level of penalties, if one is caught. whereby: ri = 0, if lp = 0 in ri = 0, if cc = 0 thus, the degree of corruption (sk) is simplified: 1 economic theory: increasing revenue or increasing economic opportunities reduce crime as well as deviant behavior in line with the theory of rational choice. economic recessions and a decline in economic growth lead to an increase in crime, as opportunities for progress and achievement of the standard are reduced (aljaž, 2009). 2 the possibility of being caught are elements of intimidation. but what is a fair penalty, or the level? cesare beccaria (2002), as one of the pioneers of modern criminal law, said that as long as the penalty is quick and follows the offence immediately, it is more fair and useful, since the goal of state repression is to prevent the delinquent from committing new damage to their fellow citizens, and to prevent other services of similar acts. too many rigid penalties are of no importance because they make people insensitive and therefore have an opposite effect than desired. the penalties must be proportional to the social harm caused by the offense and calculated to achieve their real purpose. penalties for them may only be enforced by law. laws must be clear and understandable, and courts must not interpret them in their own right. the criminal procedure must be public, the defendant must be provided with defense, torture must be abandoned. the death penalty is not necessary, except in exceptional circumstances. in the 1990s, tom r. tyler (meško, flander and eman, 2016: 13) published a work entitled “why people obey the law?” his study showed that people are more respectful of the laws if they believe in the legitimacy of the authorities and law enforcers than in the intimidating role of criminal sanctions. his work has prompted a number of empirical tests of the legitimacy of authorities, notably the police and criminal justice. and it is precisely the fact that people respect the laws more if they believe in the legitimacy of authorities and law enforcers that is crucial in the fight against corruption. 55 dc = f (be, ri) (3) the fluctuation of the degree of corruption, dependent on benefits and risks is also graphically depicted in figure 2, which illustrates how the level of corruption in society decreases with increasing risk and decreasing benefits, which means that the level of corruption increases with decrease in risk and increase in expected benefits. figure 2 – with increasing risk and decreased benefits, the degree (level) of corruption in society is reduced source: šumah and mahić (2017) similarly, the degree of corruption is influenced by the level of awareness in the society regarding what is right and what is wrong (ethics, morals, religion, as well as habits and customs). different countries have different attitudes toward corruption. in europe alone two extremes can be found, from the completely corruption intolerant north to the warm south, where corruption is an almost normal, socially acceptable phenomenon. or the difference between countries with a democratic past, which have traditionally persecuted corruption and former socialist countries, where corruption in the state apparatus used to be a part of folklore tradition. the influence of cultural values and the negative effects of corruption on the micro-level was well presented by lee and guven (2013): the indicators of perceiving corruption correlate with actual bribery experiences; for those who love risk, there is a greater likelihood of offering or demanding a bribe; a culture dominated by men (patriarchy) and acceptance of bribery are in a positive correlation; the personal attitude to bribery is influenced by past experiences of bribery; those who demand bribes are more likely to offer bribes themselves. a major influence is also the dominant religion in the country. it is generally known that there is least corruption in countries that are predominantly protestant. the influence of majority protestantism has been tested several times and has proven to be an important factor in the low level of corruption in a country. however, the relationship between protestantism and good governance is probably more rooted in history than in today's practice. today, there are many nominally protestant countries that are de facto secular, while many non-protestant countries are also fighting against corruption very effectively. thus, the influence of 56 protestantism appears to emerge from its egalitarian ethos, which could indirectly work to support the general direction towards ethical universalism, literacy and promotion of individualism. its role is therefore important at certain stages of development, which explains why the first countries that were well-managed were predominantly protestant. this does not mean that other religious traditions are incompatible with good governance, only that they failed to construct this particular complex of factors at the right moment in history (mungiu pippidi, 2013). and the more the society as a whole is aware of the problem of corruption, the more the tolerance of corruption leans towards zero, the less present it is. this could also be defined as the prevailing ethics and morality3 or by how they are present in society4. for this reason, a parallel can be drawn between the degree of corruption, the benefit and the risk, and the degree of corruption, the benefit and the awareness (figure 3). dc = f (be, a) (4) be: benefit a: awareness (degree or level of ethics, morality) figure 3 – the lower the benefit of corruption and the higher the awareness of its harmfulness, the lower the degree of corruption and vice versa. source: šumah and mahić (2017) 3.2 analysis and identification of factors that could answer the question corruption: why? for the purpose of the study, and in order to facilitate and more precisely analyze the factors that influence the level of corruption, the factors considered are combined (i.e. the interdependence between benefit and awareness, and the interdependence between benefit and risk or hazard)5. 4 perhaps it would be better to use the term culture instead of society, in the sense that huntington (1993) uses it in his book the conflict of civilizations. 5 rus came to similar conclusions (2005). according to him, the degree of corruption depends primarily on the following factors: (1) the personal and collective integrity (2), the possibility of disclosing corruptive agreements, (3) the severity of sanctions, and (4) the magnitude of the potential benefits participants have. for the purposes of the study, and for easier and more transparent analysis, points (2) and (3) were combined under the common denominator risk or hazard. 57 if all the factors are combined then: dc = f (be, a, ri) (5) whereby: max dc = (be = max, a = 0, ri = 0) min dc = (be = 0, a = max, ri = max) for a clearer picture and easier analysis, a chart was created in which individual countries are ranked according to their ranking on the index of corruption perception6 for 2016 (transparency international7, 2017) in five classes. twenty-five countries ranked in the first four classes, while others ranked in the fifth (countries from 100th to 176th place). the countries were analyzed based on what prevails in them (non-) tolerance of corruption (ethics and morality, or whether it is guided by awareness) or the effect of risk. however, the picture is fairly clear only in the first and partially second class. in class i, two distinct groups of countries formed according to the nature of the research; in the first were the countries with a long democratic tradition, high ethics8 and morality regarding the attitude to corruption (the scandinavian countries, germany, the united kingdom, the united states, canada, etc.). the second group comprises of the countries that have started (very successfully) dealing with corruption in the last twenty years, mainly through strong anti-corruption legislation, successful advertising and education campaigns (the most prominent example is singapore, where the adoption of the anti-corruption law and the harsh approach immediately dealt with corruption9, with the uae, qatar, chile, hong kong, estonia following). somewhere in the middle are the countries where there is no sharp dividing line (france, japan). they thus more or less belong to the category of countries, which are positioned the highest in terms of gdp per capita (of course, there are also exceptions). in these countries, corruption is primarily a means of gaining influence or power (both in the economy and in politics). typical of these countries is also that they are economically independent, and 6 the cpi, or the corruption perception index is also subject to a critical view that puts its credibility into question. thus, hough (2017) lists the most common criticisms of the cpi: 1) it is very difficult to simplify such a complex phenomenon as corruption with one number; 2) the cpi focuses solely on corruption in the public sector (when in fact the private sector actors often play an important role in corruption); 3) the cpi measures the perception of corruption and not the degree of corruption in general. therefore, as an example, he points out that it would be sensible to measure the experience with corruption instead of measuring its perception (which is already being done in some surveys, for example, the beeps index, where corruption surveys are conducted on over 15,000 managers in 30 countries). 7 corruption perception index (cpi), which is the most widely used and widely quoted reference in various corruption surveys, is measured on a regular basis every year, and measures corruption in the public sector among officials, employees and politicians, i.e. it measures the administrative and political corruption. this index is based on surveys and research carried out by independent institutions among the so-called experienced experts, i.e. business people, analysts and local experts, rather than on empirical data. they assess the abuse of power, the bribing of the administration, the double-crossing of public procurement procedures, the misappropriation of public funds, the effectiveness of anti-corruption measures in the public sector. the higher the index, the less corrupt is the state, i.e. at index = 10 a complete absence of corruption; index = 0 a completely corrupt state. this involves indirect measuring of corruption and this index measures only the perception of corruption in the public sector, which can be considered a disadvantage. 8 what they have in common is to a large extent their protestant ethics. 9 many high-ranking state officials were taken from their jobs straight to prison in the first week of the adoption of the anti-corruption law. 58 in the vast majority of them also the rule of law and high gender equality apply (naturally there are always exceptions). even more colorful is the ii class (countries ranked between the 26th and 50th places). it comprises of countries in transition (slovenia, czech republic, lithuania, slovakia, etc.), countries with relatively advanced democracy (spain, malta, etc.), young democracies (rwanda, namibia, etc.) and countries where monarchy still rules, and democracy is merely a pattern (saudi arabia, bhutan, bahrain, etc.). what is common to these countries is that corruption does not constitute a means of survival but merely a means of raising an existing standard (a better car, vacation, better housing, etc.). these countries are located in the middle and to the right of the center of the graph (see fig. 4). if the transition countries are in the middle (already partly developed awareness of the harmfulness of corruption and medium-high risk), there are, on the other hand, on the extreme right mostly non-european countries where the risk, i.e. high penalties if one is caught, and the possibility of capture, is relatively high (qatar, israel, taiwan, bahrain, etc.10). in these countries, systemic corruption is already occurring, which then escalates in the following classes. among these countries is also slovenia and kpk (2010: 8 9) found that in slovenia, 12 of the 13 indicators, which are listed as a sign of the presence of systemic corruption are perceived. in contrast to the countries with the same low or lower level of administrative corruption, the biggest problem in slovenia is the systemic corruption for which there are strong indicators; a number of reasons, which are largely conditioned by the process of transition and extremely weak control institutions, and (in recent years) a low level of trust in the institutions of the rule of law. likewise, countries differ greatly from one another in terms of the prevailing religion, attitudes, and gender equality. what they do have in common is that they are subject to the rule of law to a fairly high degree11. however, it could be said that these countries nevertheless lack the political will to fight corruption or the ruling elites (whether they are established political parties or monarchs), and such a state even suits them. this group is followed by a third group, where europe, with the exception of italy (where corruption is a national sport), is represented by transition countries (bulgaria, romania, slovakia, etc.). the rest are, more than not, countries with a relatively low level of democracy, however, corruption remains not so much a means of survival as an improvement in the standard. in the third class, countries are difficult to define, since the boundary between awareness and risk is already very narrow. apart from the exceptions, the patriarchal society12 10 the example of georgia speaks for itself, where in a relatively short period of time, corruption has been very successfully tackled with. engval (2012) notes in his extensive anti-corruption study in georgia that the first precondition for a successful fight against corruption is strong political leadership and, of course, political will. the so-called rose revolution removed shevannadze, whose clique almost completely privatized the country and enthroned new leadership, which became the authority by promising a fight against corruption. corruption in georgia was widespread in all segments of the society, from top to bottom, and this new leadership had broad support from georgia's citizens for extensive and thorough reforms, and for rapid and radical changes. considering similar examples of countries that have managed to curb corruption, he also stresses that in order to successfully fight corruption, it is necessary to "overthrow" the old system and replace it with new norms and rules of behavior, with a thorough reform of the state apparatus and the reform of political, economic and social institutions. 11, however, at this point, we must separate the law, as interpreted by the western civilization and the law that is, for example, dictated by religious books, such as the koran. in both cases, this is a law that is respected in a particular territory; however, these two forms cannot be equated. saudi arabia can be cited as an example, where from a western point of view barbaric punishments, such as beheadings, cutting hands off, and stoning are carried out. yet they are carried out according to the laws that apply there and in this way (inhuman punishments for us) maintain or preserve their way of "rule" of law. 12 despite the fact that italy is one of the most developed countries (especially the north of italy, which is industrially highly developed), a strong patriarchate is present in its southern part. and as is characteristic of patriarchy, the basic cell is extended family, which must take care of its members. thus, jobs, privileges, various 59 already dominates in most of these countries (again with exceptions), gdp is lower than in the first two groups, and the dominant religions in this group are orthodoxy and islam. figure 3: ranking of countries according to the level of corruption and according to what influences the level in these countries the most (awareness or risk) source: šumah and mahić (2017) for the third group, it could also be said that in some countries there is the occurrence of anomie13 (which is distinct in the fourth and fifth groups of countries), that is, a state in which works, services, etc. are obtained on the basis of associations (also family) and acquaintances. the same applies to greece. 13 durkheim's theory of anomie (marks, 1974): anomie is a temporary situation or state that occurs between people when the society is evolving from a primitive to a modern entity. it is a result of broad scientific, technological 60 norms lose their significance and are ineffective for the broader mass of people. these are mostly countries where economic freedom alongside the freedom of the press is very limited, and where frequent violations of human rights occur. in the fourth and fifth groups, there is no longer a dividing line between risk and awareness. in these countries, the risk is low, while corruption is becoming more and more (the lower on the scale a country is) a way of life and an increasingly viable means of survival. especially the countries in the fifth group, with the highest degree of corruption, are strictly patriarchal, predominantly islamic and with low or very low gdp. in these countries, there are ongoing inter-ethnic conflicts, civil wars, or they are otherwise involved in some armed conflict. so, why corruption? of course, corruption differs from country to country; however, it is possible to identify some of the key common driving forces that generate it: ‑ the more is the economic activity in a country regulated and limited, the higher the authorizations and the power of officials in deciding, the greater the possibility of corruption, as individuals are willing to pay or offer payment in order to avoid restrictions. an especially great chance for corruption exists there where under the regulation, officials are given the opportunity to decide on the basis of discretionary power, that is to say, the more laws there are, the more are public officials, due to their position, enabled an artificially created monopoly power, and if their salaries are low at the same time, they quickly try to improve their material position; ‑ similarly, a well-regulated financial sector, a bit of grey economy and a black market also lead to less corruption, and countries with a well-regulated system have less corruption than those where the opposite applies. there is less corruption also in countries with higher economic and political freedom; ‑ corruption is generated also by the lack of transparency and control by supervisory institutions and, therefore, where there is an insufficient legal basis or sufficient political will to control, which allows a non-transparent functioning of both politics and economy, corruption flourishes; ‑ the ineffective sanctioning of corruption, which increases the possibility of continuing the corruptive actions of those involved, also has a great influence, and there is a strong likelihood that, due to the inefficiency of sanctioning, others will get involved in corruption; ‑ some forms of corruption relate to an informal form of social security, where the family or the narrower community takes care of their members. such forms of informal social security prevail in less developed countries with an absence of formal social security regulation and in the countries of southern europe where the influence of the broader family (patriarchy) is still very strong; italy, greece, albania, bosnia, etc. these countries exhibit extremely widespread nepotism, cronyism and clientelism as the family, as well as the broader community, are considered types of social security, with the family or the community taking care of their members; however, the members must, naturally, be loyal and somehow repay the benefits that they receive; ‑ the influence of the dominant religion in a country is also important. while the southern, predominantly catholic part of europe, with its highly hierarchical organization, cultivates the cult of the family (as well as the cult of the broader community of solidarity) and several liabilities, the northern, mainly protestant part and social changes. in such transition periods, most of society will be affected, and not only rare individuals. the anomie refers to the broken relationships between the individual and society. 61 emphasizes individualism and individual responsibility (which results in fewer abovementioned forms of corruption). corruption prospers also in the countries where islam and orthodoxy are the main religions; ‑ the level of gdp also has a significant impact on the level of corruption. with rare exceptions, corruption flourishes primarily in low-gdp countries. therefore, there is a saying that "poverty is a curse" which largely applies to all developing countries, being the countries most affected by poverty. and poverty destroys all ethical and moral values; ‑ even low average education in a country is one of the signs that point to a high level of corruption; ‑ however, in determining the conditions for corruption and factors that are important for (non-) corruption, most of the known researches are forgetting peace in a country, which is a prerequisite for the start of the fight against corruption. therefore, the state of war or some other state of siege in a country leads to a high level of corruption. based on several studies studied, shan and schacter (2004, p. 2) found similar; i.e. the main generators of corruption are the following: ‑ the contentiousness of legitimacy of the state as a guardian of the public interest. in very corrupt countries, there is very little public acceptance of the idea that the role of the state is to rise above private interests in order to protect the wider public interest. corrupt officers focus primarily on how to serve specific clients who are related to them on an ethnic, geographic, or other bases. the line between what is public and what is private is unclear, and frequent and almost routine is also the abuse of public functions for private interests; ‑ the rule of law is weak. laws apply to some and not to others, and law enforcement is often used to exercise private interests, rather than protecting the public interest. the symbol of the breakdown of the rule of law is corrupt police, which acts as a crusher of law, and not as its executor; the pulling over of motorists for fictitious traffic offences is only an excuse for bribe collection. and the judiciary, which is the foundation of the rule of law when it is fair, is also corrupt in corrupt countries; ‑ the inefficiency of the responsible institutions. in countries with low corruption, the institutions responsible for the control of corruption are powerful as well. these institutions are established by the state itself (judiciary, auditors, commissions, etc.) or they are created outside the official state structures (media, civil initiatives, etc.). in corrupt countries, however, these institutions are very weak and have major shortcomings; ‑ the commitments of national leaders (the governments, the president, the leaders of the parties, etc.) to fight corruption are weak or non-existent. in societies where corruption in the public sector is endemic, there is a suspicion of the correlation or involvement of the highest governmental representatives in corruption. consequently, they will not be motivated to fight it. similarly, the findings of this study coincide with svenson's (2005) findings; that it is nevertheless possible to recognize some of the key, common driving forces that generate corruption. he defined what is common to all countries, which are among the most corrupt: ‑ all are developing countries or countries in transition,; ‑ with a few exceptions, these are low-income countries (including public administration employees); 62 ‑ most countries have closed economies; ‑ the influence of religion is visible (protestant countries have far the lowest level of corruption); ‑ low media freedom; ‑ relatively low level of education. 4. conclusion. corruption: how to beat it? indeed, corruption is a multi-dimensional process. on one hand, there is the provider of benefits, on the other the receiver, and both are aware of the action that remains hidden. and the third link in the chain is everyone else, the victims. although not every act of corruption is a criminal offence, it is unethical and detrimental to the economic and political development of society. normally, people with political and economic power and power of decision-making (integrity, 2013) are involved. the philosopher karl popper also wrote in his book "the open society and its enemies" that the biggest problem is not who should command, but how to control the one who commands, therefore how the political and social institutions should be organized in order to prevent weak and incompetent rulers from doing too much harm. however, since there does not exist a general and unmistakable way to prevent the tyranny or corruption of important people, the price of freedom is eternal alertness (brioschi, 2003, p. 125). one of the possible solutions for reducing corruption is offered by ariely (2012, p. 181) based on the "broken window theory" described in 1982 by george kelling and james wilson in an article for the atlantic magazine. the article dealt with the establishment of order in dangerous urban neighborhoods. the solution was not seen in the increased presence of police officers on the streets but elsewhere. the authors noticed that smashed windows in unregulated neighborhoods (which remain unrepaired for a long time) in themselves "invite" additional damage to the same building and others in the immediate surroundings. vandalism thus expands and intensifies. if there are no broken windows, there will be no incentive for the next vandals. this theory is difficult to confirm or deny, but according to ariely, its logic is convincing and he suggests that petty crimes should not be overlooked, excused or ignored (in this case, the occurrence of tiny corruption), as this would only increase the problems. this, in his opinion, applies especially to politicians, directors, public officials, and celebrities. he otherwise wonders if it were unfair if these people were subject to stricter standards than ordinary people, however, it should be noted that people who are more under the scrutiny of others have a greater influence on the behavior of viewers (and followers) and the consequences for the society are therefore greater if they are the ones who transgress. therefore, all phenomena of corruption, even the smallest ones, should provoke an immediate reaction without any grace, for the only way to fight corruption is to practice zero tolerance towards it. directors, public officials, politicians and the like should be under even tougher scrutiny, both in terms of their actions and their financial situation. the institute of the reversal of the burden of proof should thus be used more frequently (for the control of the property). if we want to deal with or limit corruption, one of the easiest and most effective ways is to take the unlawfully acquired property away from people, in which case it is not necessary to prove the blame of those who are suspected of corruption; it is them who must prove where their property is from, and if they do not convincingly do that, they are stripped of their possessions. through this perspective we can talk about so called concern for fairness. this concept is important because it stimulates people to deviate from self-interest and profit maximization if it leads to unfairness and punish others at the cost themselves (tarasov, 2015), 63 but the answer to how to deal with corruption successfully is not unambiguous, as some countries have achieved great successes in a relatively short period of time (singapore, estonia and georgia), while others have been struggling with it for a long time (the best-known example is italy). in any case, the first condition is to ensure freedom (personal freedom, economic freedom, freedom of speech, freedom of the press, etc.) and democracy, and then education and awareness of people. however, this is not about introducing western-type democracy, as our culture knows it since it has often proven that that can cause more harm than good, especially with the help of the army. to begin with, the good practices of countries that are similar to each other (religion, habits, tradition, ethics, and morality) and often have a common history should be used. however, people often do not recognize corruption, because it is already part of everyday life, a kind of folklore for them (typical of countries in transition), and those who are rich because of it do not receive condemnation, but admiration: "he did well for himself!’’ there is too little done with respect to prevention and education, for only if one gets people to become aware that we are all paying or are being deprived due to corruption (worse roads, more expensive healthcare, etc.), a critical mass with zero tolerance for corruption can be created, and only thus can success in the fight against corruption be guaranteed. in general terms, the important measures to prevent or reduce corruption (complete eradication is not possible) are: ‑ in the fight against corruption, two coordinated directions of action are needed; the first is to provide a critical mass through education and awareness of citizens, which will have zero-tolerance levels of corruption, and the second is to ensure the political will for change; ‑ using the reversed burden of proof institute. the institute of reversed burden of proof is one of the means in the fight against all types of organized crime. this form of crime brings huge gains to criminal organizations and individuals. with such assets acquired, they increase economic power, which they also use to promote their own interests in the economy and politics. thus, law enforcement agencies are placed in a subordinate position and are therefore always looking for new ways of curbing this kind of crime at home and internationally. a series of international acts entail the deprivation of the proceeds of criminal activities into the forefront at the principle level, as well as at the level of concrete requests for the enactment of established procedures. thus, the aim of the institute of reversed burden of proof is that the suspect loses his property if he cannot prove that he has acquired it in a legal way and has also settled obligations (especially tax) to the state; ‑ the first step towards preventing corruption in public administration and public enterprises is to educate the management and employees, which acts are prohibited or immoral. due to the specific nature of corruption, many do not even know or are unaware that their action is actually corrupt, and therefore education on the harmful consequences of corruption and on disciplinary and criminal consequences should be one of the primary tasks; ‑ as a wider action in the fight against corruption, education about what corruption is and what its consequences are should be introduced already in secondary schools, in order to raise as many people as possible with zero tolerance level of corruption. we can ask ourselves how to include the correct concept of citizenship into society we live in. if it has to do with politics, understood as a decision-making and illuminated process, with the authentic and effective participation of as many subjects as possible and in any age group, with the responsibility perceived by the subject as taking charge of the world 64 where the social environment is built, then a set of participatory formal and informal processes, inside and outside the school, are necessary to prevent that the political culture becomes a prerogative of a few subjects living far away from the living world, from everyday experiences that the city, the community offers and demands to signify (puka & beshiri, 2013); ‑ more women in the police and public administration, as women are proven to be less corrupt than men; ‑ stricter laws and higher penalties for corruptive acts and lower standards required to prove corruptive acts. however, most of the known researches, in determining the conditions for corruption and factors that are important for (non-) corruption, are forgetting peace in a country, which is a prerequisite for the start of the fight against corruption. even though we know a lot about corruption, and we have detected its negative impact in various fields, there is still lack of information on how countries are taking action to fight successfully against corruption. we could say the results of the fight are known but the battle itself is not exposed in many research papers. the challenge is therefore to make research on how to successfully fight corruption and which methods work. this can be further on a great example for other countries to follow and implement in their strategies of limiting corruption. the fact is that corruption will never be completely eradicated. references 1. allen, f., qian, j. & shen, l. 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(2005). the bulging pocket and the rule of law: corruption, inequality, and trust. in conference on the quality of government: what it is, how to get it, why it matters (pp. 17-19). microsoft word 3 (20-10) sentuti2.docx 37 board composition and family firms’ profitability. do generational stage and performance level matter? annalisa sentuti carlo bo university of urbino, italy gail denisse chamochumbi diaz carlo bo university of urbino, italy francesca maria cesaroni carlo bo university of urbino, italy received: june 10, 2020 accepted: july 14, 2020 online published: july 27, 2020 abstract this article examines the relationship between board composition and family firms’ performance. namely, by adopting the theoretical framework of socio-emotional wealth and analyzing a sample of italian medium-sized family firms, we investigate how the presence of non-family directors affects their financial performance, considering the generational stage as a moderating variable. findings suggest that a higher presence of non-family directors has a less positive effect on first-generation family firms than in later generations of family firms. furthermore, by adopting a quantile regression, results show that this effect is more striking in low-performing family businesses than in high. keywords: family businesses; board of directors; firm performance; non-family directors; corporate governance; generational stage; first-generation family firms; quantile regression 1. introduction family firms are the prevalent form of business organizations across the globe (zellweger, 2017). these companies are characterized by a deep and broad involvement of family members in ownership, governance, and management across generations (chua et al., 1999). many scholars maintain that the extent to which the owner family can affect firms’ profitability mainly relies on the family’s involvement in governance systems and decision-making (sciascia & mazzola, 2008; kellermanns et al., 2012), while its involvement in business ownership is considered less important (sacristan-navarro et al., 2011). international journal of economic behavior, vol. 10, n. 1, 2020, 37-44 38 this fact raises questions about the most effective composition of governance systems in family firms. a crucial decision that owner families have to take, especially when the business grows and managing it becomes more complex, concerns the possible involvement of nonfamily directors (sciascia et al., 2014). in fact, this decision implies that family members should share business controlling and decision-making with non-family directors. bearing in mind that the board of directors is the main structure of corporate governance (lane et al., 2006; nordqvist et al. 2014), several scholars have examined how its composition may influence family firms’ profitability (kowalewski et al., 2010; mazzi, 2011; mazzola et al., 2013; minichilli et al., 2016; mustapha et al., 2017; calabrò et al., 2020; fernàndez-temprano & tejerina-gaite, 2020). to date, conflicting results have emerged. indeed, prior research suggests that the presence of non-family directors can be beneficial (anderson & reeb, 2004; voordeckers et al., 2007; minichilli et al., 2009; wright & kellermanns, 2011; basco & voordeckers, 2015; corbetta et al., 2017; arzubiaga et al., 2018), detrimental (lee, 2006), or neutral (kowalewski et al., 2010; mazzola et al., 2013; minichilli et al., 2016) to family firms’ performance. thus, how the involvement of non-family directors can affect family firms’ profitability is still unclear (kowalewski et al., 2010; mazzola et al., 2013; minichilli et al., 2016; o’boyle et al., 2012; pintado & requejo, 2015), and the research gap is still unfilled. this reality is especially true concerning non-listed small and medium-sized family firms (arzubiaga et al., 2018; garcia et al., 2019), as existing studies mostly consider big and listed companies. moreover, many scholars compare family and non-family businesses and implicitly consider family firms a homogeneous group (chua et al., 2012; daspit et al., 2018), thus failing to capture the effects of their heterogeneity on financial performance. to fill this gap, this study focuses on private medium-sized family firms and investigates the relationship between board composition and family firms’ performance. in carrying out such analysis, our starting point is that family businesses are not a homogeneous group. apart from the different levels of family involvement in family firms’ governance and management (nordqvist et al., 2014), one of the main sources of heterogeneity within family firms is the generational stage (daspit et al., 2018). family firms in different generational stages can show profound differences in business goals, strategic behaviors, decision-making processes, management style, openness, and trust towards outside managers and directors (kellermanns & eddleston, 2006; gomez-mejia et al., 2011; cruz & nordqvist, 2012; sciascia et al., 2014; arrondo-garcía et al., 2016; garcia et al., 2019). therefore, we believe that including family firms’ generational stage in the analysis allows us to go into greater depth in exploring the effect of family/non-family members’ involvement in family firms’ governance and its relationship with firms’ performance. in our analyses, we have adopted the socio-emotional wealth (sew) perspective (gomezmejia et al., 2007; gomez-mejia et al., 2010; gomez-mejia et al., 2011), assuming that the aim of preserving affective endowments changes over generations (berrone et al., 2012). it is higher in first-generation family businesses (more oriented to non-financial goals) and lower in multigenerational family businesses (more interested in financial goals) (sciascia et al., 2014). according to this perspective, we believe that the involvement of non-family directors on family business boards could produce different effects depending on whether the family firm is a first or subsequent generation. notably, we posit that non-family directors' presence could have a lower benefit when the founder generation is in charge because of the existence of differences in terms of priorities and objectives between family and non-family members. moreover, we argue that the moderating effect of the generational stage on the relationship between non-family directors and financial performance may vary across financial performance levels (low or high). this occurs because when the family firm achieves high performance, the family owners perceive that the sew preservation is ensured (zellweger, 2017), so conflicts 39 with non-family directors are less likely to arise. conversely, if the family firm experiences low performance, conflicts between family and non-family directors may arise, especially in firstgeneration family firms. on the contrary, these conflicts are less likely to occur in latergeneration family firms, which are less oriented towards sew and, therefore, more willing to take drastic decisions to protect financial performance, which is considered a priority. for that reason, we hypothesize that the influence of non-family directors can change not only with regard to the generational stage but also the distribution of family firms’ financial performance. we have tested our hypotheses on a sample of 219 italian medium-sized family firms. midsized companies have been widely neglected in research on family firms’ performance and board of directors. that is why our focus is on this important yet under-researched segment of companies. our findings confirm that in first-generation family firms, the positive effect of non-family directors is more limited than in later generation family firms. furthermore, by adopting a quantile regression, results show that this effect is more striking in low-performing family business than in high-performing ones. this study makes four theoretical contributions. first, we show that the involvement of non-family directors is not a universal panacea for all family firms because these firms are not a homogeneous universe. notably, the involvement of non-family directors is less effective in first-generation family firms and particularly in those with low performance. second, our study underlines the importance of performance level as a factor that can deeply affect the relationships between non-family directors involvement and family firms’ financial performance. third, we further knowledge about professionalization (bassani & cattaneo, 2020) and possible variables that can shape the success of this critical process for medium-sized family businesses. finally, from a methodological perspective, this study confirms the usefulness of the quantile regression to evaluate the effects of non-family directors on firms’ performance further. in the remainder of the article, we describe our theoretical framework, develop our hypotheses (section 2), and present the research method, sample selection process, and the definition variables (section 3). then, we show our results and robustness tests (section 4), ending with the discussion and conclusions (section 5). 2. theoretical framework and hypothesis development the sew perspective represents an all-encompassing approach that captures the “affective endowments” of family owners, including the family's desire to exercise their authority, the enjoyment of family influence, the maintenance of clan membership within the firm, the appointment of trusted family members to important roles, the retention of a strong family identity, and the continuation of the family dynasty (gomez-mejia et al., 2007; berrone et al., 2012). from this perspective, the uniqueness of family firms is given by the importance attached to non-economic objectives (emotional and social needs of the family) in influencing family firms’ decision-making and strategic choices (gomez-mejia et al., 2011). the fundamental priority of a family business is to maintain family control over the company, acting conservatively, and avoid business decisions that may jeopardize business continuity, even if it means giving up higher performance (gomez-mejia et al., 2007). within the sew perspective, the generational stage of family firms assumes a crucial role and is considered one of the most important sources of heterogeneity among family firms (gomez-mejia et al., 2007; gomez-mejia et al., 2010; gomez-mejia et al., 2011). sentiments, emotions, and relationships within the family controlling a firm may vary from one firm to another and, within each firm, from one moment to another over time (hoy & sharma, 2010), as do the aims, values, and perceptions of the family owners (westhead & howorth, 2006). 40 similarly, the need to preserve “affective endowments” in family businesses changes with the passing of generations (berrone et al. 2012). thus, not all generations in control have the same level of sew and pursue the same goals in managing the business. as affirmed by arrondo-garcìa et al. (2016), corporate decisions are contingent on the generation in control. since first-generation family businesses present a stronger emotional attachment to the firm than multigenerational family businesses, the former are more oriented to non-financial goals and less interested in financial performance (sciascia et al. 2014). firstgeneration leaders prioritize their firm’s survival so that they can pass it on to later generations (arrondo-garcía et al., 2016). in fact, in first-generation firms, one of the most important nonfinancial aims is trans-generational sustainability, which has major implications for the decision-making process (astrachan & jaskiewicz, 2008; zellweger et al., 2010). the founder generation tries to ensure the company’s stability as much as possible to ensure continuity (breton-miller & miller, 2009). control, influence, sense of dynasty, and emotional attachment have a stronger weight in the first generations, given these companies’ founder-centric orientation (berrone et al., 2012). in this vein, several scholars have claimed that conflicting findings from extant research on family/non-family members’ involvement in governance structure and a firm’s profitability can be explained by considering the generational stage of the business (arosa et al., 2010; garcía-ramos & garcía-olalla, 2011; chua et al., 2012; sciascia et al., 2014; maseda et al., 2015; arrondo-garcia et al., 2016; blanco-mazagatos et al., 2016; garcía-ramos et al., 2017). the generational stage is also recognized as a key factor in influencing business performance (cucculelli & micucci, 2008; garcia-castro & aguilera, 2014; sciascia et al., 2014; garcíaramos et al., 2017; miller et al., 2017). according to these arguments, and in line with the sew viewpoint, we posit that the generation in control can act as a moderator in the relationship between board composition and family firm’s financial performance. in fact, in first-generation family firms, the involvement of non-family directors may be in conflict with first-generation priorities, as the latter care more about preserving their sew while non-family directors “might only focus on business performance without taking into consideration family objectives” (gómez et al., 2016). in a first-generation family firm, the leader’s orientation towards non-financial goals (preserving sew, even at the expense of financial performance) could be in contrast with non-family directors’ priorities, as the latter are less attached to the business and more oriented to maximizing financial goals (breton-miller & miller, 2013). consequently, in a first-generation family firm, a stronger agreement on objectives and priorities is expected in a board of directors entirely or mainly composed of family members rather than in a board with a high presence of non-family directors. when family members mainly sit on the board, quicker and less conflicting decisions are expected, with a positive effect on the firm’s performance. hence, in first-generation family firms, the positive effect of non-family directors diminishes because of potential conflicts, which may arise with family members and slow down the decision-making processes to the detriment of financial performance. on the other hand, when the business is managed by subsequent generations— typically less concerned about preserving sew—conflicts between family and non-family directors are less likely, and greater harmony in the boardroom will benefit the company’s financial performance. in light of these arguments, we assume that non-family directors’ presence interacts with the generational stage to influence family firm’s financial performance. thus, we propose the following hypothesis: 41 hp1. in first-generation family firms, the positive effect of non-family directors on business performance is limited than in later generations. we believe, furthermore, that this effect could vary across business performance levels. specifically, we argue that the relationship between board composition (e.g., presence of family/non-family directors) and family firms’ performance can change according to the firm’s performance level (poor performance or high performance). from a theoretical point of view, the sew paradigm provides an effective explanation of why priorities, behaviors, and choices of owner families change according to the company’s level of performance. according to this paradigm, family businesses consider the preservation of “affective endowments” their priority, which has a substantial impact on strategic decision-making. however, zellweger (2017) argues that family firms can alter their scale of priorities (financial vs. non-financial goals) depending on the circumstances the firm is facing (e.g., low or high performance). in other words, according to the degree of vulnerability perceived in terms of sew, family members are more or less inclined to alter their attitudes and strategic decisions to protect the firm and safeguard their sew. in conditions of financial well-being—that is, when the company achieves high performance—family owners are less likely to modify their behavior and strategic decision making (i.e., it is more likely that the board of directors will not have to take drastic decisions that generate conflicts) because high performance guarantees not only the stability and survival of the firm but also the maintenance of their sew. vice versa, in conditions of low performance, the preservation of “affective endowments” (berrone et al. 2012) may be threatened, which then puts the survival of the firm at risk and hence the maintenance of the sew. according to berrone et al. (2012), poor performance poses a twofold threat: possible financial distress for the family, especially if family members have invested most of their money in one organization, and the risk of losing their sew, if they have to sell or close the company. this vulnerability creates a strong sense of uncertainty and financial instability. therefore, under this threat, the family members may change their priorities to restore the financial well-being of the firm and thereby preserve the sew (zellweger, 2017). however, we argue that, especially in first-generation family firms, non-financial goals do not disappear, and family business owners may experience a great sense of pressure in simultaneously pursuing both financial performance recovery and sew preservation. dealing with poor performance can require radical and/or extreme decisions, and first-generation family directors (more oriented towards finding a balance between financial recovery and sew preservation) might come into conflict with possible non-family directors (mainly oriented towards performance recovery). for instance, non-family directors may press to dismiss some employees to reduce costs and improve financial performance. nevertheless, first-generation family directors may be less willing to do this as it could compromise the family firm’s relationship with employees and its corporate social responsibility, which are both crucial concerning the preservation of their sew (berrone et al., 2012). the trade-off between the conflicting perspectives of family and non-family directors could slow down the decision-making processes and the strategic behavior of the business. thus, the benefits stemming from the involvement of non-family directors in first-generation family firms may prove to be less significant in the case of low-performing firms than highperforming ones. from a methodology point of view, the prior empirical literature has commonly studied the relationship between board composition and financial performance, by taking for granted that the effect of this relationship is always constant across the distribution outcomes. however, 42 some scholars (arrondo-garcia et al., 2016; conyon & he, 2017) in governance studies made a call to analyze the differential effect that could take place at different levels of performance. in this context, we have introduced the performance level to understand whether the influence of non-family members’ involvement in the board can change along with the distribution of family firm’s financial performance. in doing so, we agree with scholars who posit that the effects of specific governance features (e.g., the composition of a board of directors) on a firm’s performance can vary across the distribution of the outcome variable (conyon & he, 2017). this perspective implies that the effects of the board’s composition on a family firm’s performance should be analyzed, not only considering the generational stage (first generation or otherwise) but also the business’s level of performance. thus, in contrast to what has been assumed in previous studies—where the effect of board composition is considered constant across the performance distribution—our hypothesis is as follows: hp2. the moderating effect of the generational stage on the relationship between non-family directors and financial performance varies across performance levels. 3. research method: model, sample, data, and variables 3.1 model to test our hp1, we have adopted the ordinary least squares (ols) estimator. specifically, we ran the following conditional mean regression model: 𝑌𝑖𝑡 = 𝛼 + 𝛽𝐺𝑖𝑡 + 𝛾𝑋𝑘,𝑖𝑡 + 𝜀𝑖𝑡 (hp1) where yit represents the dependent variable, in our case, financial firm performance in year t. the term g indicates our main independent variables of interest. particularly, these are measured by the percentage of non-family members on the board, generation in control, and the interaction term between the previous two. lastly, x is a set of control variables (all variables are defined below). results from ols regression were further investigated using quantile regression. the rationale behind this choice is that ols regression does not allow us to take into account that the relationship between board composition and family firms’ performance can change according to the firm’s performance level. in fact, ols regression only predicts the average— conditional mean—relationship between an input variable x and outcome quantity y. therefore, in most analyses on this topic, the effect of board composition is considered constant across the distribution of performance. quantile regression can be applied to predict single parts of the distribution of an outcome variable, named quantiles (koenker & gilbert, 1978), and offers two main advantages. first, quantile estimates are less likely to be influenced by extreme data points. second, as suggested by conyon and he (2017), the effects of specific governance features (independent variable) can vary across the distribution of the outcome variable (dependent), and adopting a quantile regression allows for a more comprehensive picture of that relationship. several scholars in governance studies have highlighted advantages stemming from the use of quantile regression (arrondo-garcia et al., 2016; conyon & he, 2017) and have suggested using such a method to overcome the contradictory results obtained so far when adopting ols regression (arosa et al., 2016; conyon & he, 2017). that is why we believe that adopting quantile regression can make 43 a significant contribution to further knowledge on the relationship between board composition and family firms’ performance. in line with these arguments, we have used quantile regression to test our hp2, arguing that the moderating effect of the generational stage can vary along with the distribution of financial performance. namely, the hp2 has been tested using the following quantile regression to estimate conditional quantile functions (koenker & gilbert, 1978): 𝑄 𝜏 = 𝛼𝜏 + 𝛽𝜏𝐺𝑖𝑡 + 𝛾𝜏𝑘𝑋𝑘,𝑖𝑡 + 𝜀𝑖𝑡 (hp2) qτ represents the τth quantile regression function. in this study, we have estimated the 25th (q25), median (q50), and 75th (q75) percentiles of the performance distribution. more specifically, firms with low performance are located in the first quantile (q25), while highperformance firms are located in the last quantile (q75). the interpretation of the results derived from the application of the quantile regression is similar to an ols estimator. however, three different coefficients are obtained (q25, median, q75), which represent in detail the relationship between financial performance (dependent variable) and the covariates (independent variables). 3.2. sample and data collection research on the relationship between board composition and family firms’ performance mainly focuses on large and listed firms (bammens et al., 2011), even though the majority of family firms worldwide are small and medium-sized, unlisted companies. only a few studies have analyzed small family businesses (westhead & howorth, 2006; sciascia & mazzola, 2008; mazzola et al., 2013; sciascia et al., 2014), while mid-sized companies are completely neglected. that is why this paper focuses on private and medium-sized family businesses. we aim to shed light on this important yet under-researched segment of companies. indeed, medium-sized businesses represent a very important class of business, which has been playing an increasingly important role in many countries in the last decades, such as italy (ciambotti & palazzi, 2015; songini et al., 2015; coltorti et al., 2017), because of their ability to contribute to innovation, employment, exports, and the growth of the italian economy. moreover, medium-sized firms present some distinctive features that significantly differentiate them from large and publicly traded companies, such as lower use of management techniques and mechanisms, less professionalization, and less involvement of independent managers and directors. when it comes to board composition and its effect on firms’ performance, considering medium-sized family firms is particularly important as results from previous studies concerning the boards of large family businesses can hardly be extended to medium-sized family businesses. in fact, small family firms usually only include family members on the boards, but when the business grows and proceeds through its life cycle, managing the company becomes more complex, new and more qualified skills are required, and the involvement of non-family members becomes necessary. however, the presence of non-family directors is not always beneficial for the performance of family firms as a mix of family/non-family members on the board and in the management team is not always able to produce the desired effects (lee, 2006; daspit et al., 2018). it is, therefore, important to understand the conditions and variables that can favor or hinder the ability of non-family directors to contribute to the improvement of the performance of family businesses. our sample covers private medium-sized family firms located in central italy. following the definition presented by the european union commission recommendation in 2003, we have classified a firm as medium-sized when it has more than 50 employees but less than 250 and generates annual sales between 10 and 50 million euros. according to the definition of 44 central italy provided by the italian institute of statistics (istat), we have collected data from the marche, lazio, tuscany, and umbria regions. central italy is a particularly interesting area for analysis because of the significant presence of medium-sized family businesses (mediobanca & unioncamere, 2015). family businesses were identified considering companies in which a family holds a share of capital that allows it to control the company. specifically, we have classified a firm as a family business when an individual or a family (two or more family members) hold more than 50% of equity (minichilli et al., 2010; naldi et al., 2013). since there is no official database of italian family businesses, we have adopted a manual procedure to classify companies as family or non-family businesses, conducting an in-depth review of the ownership structure of the selected firms. the kinship among shareholders was ascertained based on their surnames (arosa et al., 2010; corbetta et al. 2015). this procedure is widely shared and applied in the empirical research on family business and have been adopted, bearing in mind that it could lead to an underestimated sample. to minimize the measurement bias, in some cases, we also used information found in the media, company websites, etc. the final data set is composed of 219 family firms. data were collected in 2012, and two data sources merged: the aida database to extract the sample and collect financial information (roa, ebitda margin, etc.) and the reports from the italian chamber of commerce to obtain information about the structure of the boards of directors and the ownership. stata software was used for data analysis. 3.3. definition of variables to test our hypotheses, we have applied a financial performance measure as the dependent variable, namely, return on assets (roa), expressed as earnings before interests and taxes divided by total assets. it has frequently been considered particularly suitable for analyzing firm profitability (arrondo-garcia et al., 2016; minichilli et al., 2016; sciascia et al., 2014). to robustness check, we have also considered the ebitda margin, which is equal to earnings before interest, tax, depreciation, and amortization (ebitda), divided by the overall turnover. this margin is a sound proxy indicator of the firm’s ability to generate cash flow through its core business (granata & chirico, 2010; dolenc et al., 2012; cesaroni et al., 2017). this analysis checked the following independent variables: non-family board, generational stage, and interaction term: non-family board x gen stage. non-family board measures the percentage of non-family members on the board of directors and is defined as the number of non-family directors vis-à-vis the total number of directors (lee, 2006; arosa et al., 2010; mazzola et al., 2013; sciascia et al., 2013). we have used a 25-year cut-off point to capture generational effects following prior family business research (gersick et al., 1997; arrondo-garcia et al., 2016; blanco-mazagatos et al. 2016; gottardo & moisello, 2017). the generational stage has been codified as a dummy variable: code 1, first-generation family firms under 25 years old; 0, later generations family firms 25 years old or older. although this proxy has been used in previous family business studies, we have discussed this as a limitation in the conclusions. to identify the moderating generational effect between non-family directors and financial performance, we have calculated the interaction between the generational stage and non-family board (non-family board x generational stage). to guarantee a suitable model and take account of other possible reasons for the differing performance of family firms, a number of control variables have been analyzed on the basis of previous empirical research. we have considered the family ownership variable by using the percentage of equity owned by the family since family involvement in ownership represents an important heterogeneous factor in family firms (daspit et al., 2018), which may influence performance (sciascia & mazzola 2008; sciascia et al., 2012; sciascia et al., 2013; arzubiaga 45 et al., 2018). we have also included the past performance variable, calculated by using the revenues from the previous three years and coded in a multi-categorical variable: constant, increase, or decrease. the reason for including this variable is that, as widely recognized in literature, past performance can affect present financial performance (cucculelli et al., 2016; minichilli et al., 2016). moreover, we have considered the family ceo variable because, as extant studies have pointed out, the family ceos may influence the firm’s behaviors (umans et al., 2020) and performance (corbetta & salvato, 2004; minichilli et al., 2016). the family nature of the ceos has been determined by checking the surname with that of the controlling family and measured by a dummy variable, with a value of 1 if a family member leads the company, and 0 otherwise. another governance-level factor that has been considered is the variable of women on the board, calculated as the ratio between the total number of women on the board of directors and the total number of directors. this factor takes into account the potential influence of women directors on financial performance (minichilli et al., 2016; poletti-hughes & briano-turrent, 2019; samara et al., 2019; terjesen et al., 2009). finally, we checked for other, more traditional drivers of business performance commonly used in empirical studies (arosa et al., 2010; mazzola et al., 2013; sciascia et al., 2013; ansari et al., 2014; blanco-mazagatos et al. 2016; cucculelli et al., 2016; minichilli et al., 2016; cavaco et al., 2017; garcia-ramos et al., 2017): company size (total assets) by using the natural logarithm of the book value of total assets; debt level (financial independence) by adopting the ratio of equity divided by total assets; and the industry (industry) by using dummy variables based on the italian industrial sectors (ateco, 2007): code 1 for manufacturing firms; 0, otherwise. 4. results 4.1. descriptive analysis table 1 presents descriptive statistics for the analyzed variables providing mean, median, standard deviation, and median differences between first-generation and later generation family firms. concerning firm size, measured by total assets, as expected, first-generation family businesses are smaller than later generation businesses, and this difference is statistically significant. in regard to the debt level, the median value of the financial independence indicator is higher for later generations of family firms than first-generation ones. in other words, later generations family firms seem to be more able to finance their own activity autonomously. regarding non-family members’ involvement in the board of directors (non-family board), what emerges is a limited presence of non-family members in the governance of both first and later generation firms. the family involvement in ownership (family ownership), as predictable in small-medium sized businesses, appears to be strongly concentrated in the hands of the family. in both cases (first-generation and later generations family firms), the median presence of family is almost 100% of the total equity. concerning the presence of women in governance (women board), women’s involvement in the board of directors remains very low both for first and later generations. concerning performance indicators, later generations outperformed first-generation family firms, both in terms of return on assets (roa) and the ebitda margin, and this difference is always statistically significant. table 2 shows the correlations among the variables used in the present analysis. multicollinearity is not an issue. moreover, the absence of multicollinearity among the independent variables is confirmed by variance inflation factors (vif) obtained through the ols regression analyses, which never exceed 3 (the recommended threshold) (myers, 1990). 46 table 1 – descriptive statistics variables first-generation (1) later generation (0) difference mean median s.d. mean median s.d. (median) total assets 20234.28 20501.39 10584.36 24796.52 21801.77 12953.28 -1300.38** fin. independence 0.288 0.228 0.185 0.377 0.321 0.216 -0.093*** non-family board 0.325 0.292 0.356 0.200 0 0.283 0.292** family ownership 0.891 1 0.176 0.887 0.994 0.155 -0.006 women board 0.169 0 0.242 0.198 0 0.241 0.000 ebitda margin 0.057 0.049 0.054 0.083 0.069 0.068 -0.020*** roa 0.029 0.024 0.075 0.051 0.032 0.067 -0.008* n. firms 67 152 ***, ** and * indicate significance at the 1%, 5%, and 10% levels, respectively. table 2 – correlation matrix (1) (2) (3) (4) (5) (6) (7) (1) roa . (2) ebitda margin 0.711* . (3) family board 0.039 -0.026 . (4) family ownership 0.032 0.061 0.371* . (5) women board 0.009 0.024 0.009 0.043 . (6) total assets 0.039 0.368* 0.067 0.149* 0.037 . (7) financial independence 0.335* 0.453* -0.014 0.047 0.173* 0.283* . *p< .05 4.2. findings table 3 presents results for the ols and quantile regression by considering our main dependent variable (roa) and the robustness dependent variable (ebitda margin). concerning our first hypothesis —“in first-generation family firms, the positive effect of non-family directors on business performance is limited than in later generations”—results from ols regression support our assumption. they show that the generational stage moderates the relationship between board composition and financial performance. particularly, the presence of non-family directors has a positive effect on the performance of later-generation firms (non-family board: β= 0.052, p< .05). however, this positive effect is diminished in firstgeneration family firms (the moderating effect: non-family board x gen stage, β= -0.100, p< .001). these findings were confirmed by the same model but with the robustness dependent variable (ebitda margin, β=0.086, p < .01). our results also show that the coefficient of the generational stage, which represents the effect of passing from one generation to another on financial performance when no external member is involved in the board, does not show significant influence. regarding the control variables included in the models–family ownership, family ceo, women board, past performance, total assets, financial independence, and industry–the following results were obtained. concerning family involvement in ownership, it is not possible to establish any relationship between the variable in question and firm performance. also, regarding family ceos and women directors, no relationship with financial outcome appears. concerning past performance, as reasonably expected, if the performance during the past three 47 years showed an increase, current performance is positively influenced. firm size (total assets) seems to have a negative influence on family firms’ performance. moreover, a higher level of financial independence has a positive effect on profitability. lastly, no relationship was found between manufacturing family firms and performance. summing up, our findings suggest that the generation in control represents an important factor of heterogeneity of family firms. as we hypothesized, the generational stage leads to a moderating effect on the relationship between board composition and financial performance. specifically, the positive moderating effect is less powerful in first-generation family firms than in later ones. in other words, the presence of non-family members on the board produces lower benefits in terms of financial performance when the founder generation controls the family firm. quantile regression was used to test our second hypothesis “the moderating effect of the generational stage on the relationship between non-family directors and financial performance varies across performance levels”. as mentioned above, the interpretation of the findings is similar to that of ols regression, but for each term, we have more coefficients to interpret: the 25th, the median, and the 75th quantile. they represent—from the lowest to the highest—the different points across the outcome variable distribution (roa, ebitda margin). overall results from quantile regression confirm previous findings obtained by ols regression; however, those results indicate a clear difference across performance distribution. regarding the interaction term (non-family board x gen stage), results in table 4 support our second hypothesis. the moderating effect of the generational stage varies throughout the different levels of performance (roa). particularly, this effect emerges as negative and significant in the first quantile (β=-.048, p< .01) when the performance is low; and in the second quantile, although less significant, (β=-.043, p< .10) when performance is median. in the third quantile, at high performance, no significant effect is apparent. in other words, findings demonstrate that the positive effect on financial performance of non-family members in governance, which emerged in the case of later-generations firms, is diminished for firstgeneration family firms, specifically in family businesses with low performance. in another point of outcome distribution, the third quantile (75th), no influence appears. thus, taking into account the different levels of a firm’s financial performance, the moderating effect of the generational stage is not homogeneous across the range of distribution of return on assets. furthermore, the effect of the non-family board variable is positively and statistically significant in the second quantile alone (β= .034, p < .10). this variable indicates that a greater presence of non-family members on the board positively influences performance in the case of later-generation family firms, but this effect proves more significant in the median quantile rather than in the case of lower performance (first quantile) or higher performance (third quantile). as regards the generational stage variable, findings do not show a significant influence across the distribution of performance. in addition, regarding the control variables, the findings for family ownership, family ceo, women board, past performance, total assets, financial independence, and industry show a different effect across performance distribution. for instance, roa has a negative relationship with the firm-size measured as the logarithm of total assets at the 75th quantile. past performance, if increased in the last three years, positively affects the current financial performance at the median and 75th quantile. return on assets has a positive relationship with financial independence at the 25th, median, and 75th quantile. the sector has a positive relationship with both profitability indicators (roa and ebitda margin) at the 25th and median quantile, while other control variables such as family ownership, family ceo, and women boards are not found to be statistically significant at any point in the performance distribution. 48 table 3 – findings variables roa ebitda margin roa ebitda margin ols q25 q50 q75 q25 q50 q75 non-family board 0.052** 0.054** 0.015 0.034* 0.049 0.0252** 0.029* 0.045 (0.026) (0.022) (0.013) (0.018) (0.032) (0.012) (0.016) (0.029) generational stage 0.010 0.008 0.004 0.001 0.005 -0.0035 0.013 0.005 (0.012) (0.009) (0.008) (0.11) (0.019) (0.007) (0.009) (0.017) non-family board x gen stage -0.100*** -0.086*** -0.048*** -0.043* -0.062 -0.046*** -0.064*** -0.063 (0.039) (0.026) (0.018) (0.026) (0.046) (0.017) (0.023) 0.040 family ownership 0.004 0.006 -0.006 0.003 -0.016 -0.002 -0.009 0.004 (0.030) (0.025) (0.018) (0.026) (0.045) (0.017) (0.023) (0.040) family ceo 0.013 0.006 0.008 0.014 0.000 0.011 -0.003 -0.000 (0.013) (0.012) (0.008) (0.010) (0.018) (0.007) (0.009) (0.016) women board 0.001 -0.004 -0.008 -0.017 -0.001 -0.002 -0.018 0.004 (0.018) (0.018) (0.011) (0.016) (0.028) (0.011) (0.014) (0.025) past performance increasing 0.035*** 0.020** 0.007 0.0194** 0.029* 0.004 0.013 0.013 (0.010) (0.009) (0.006) (0.009) (0.017) (0.006) (0.008) (0.014) decreasing 0.012 0.021*** -0.011 0.017 0.015 0.0148* 0.023** 0.012 (0.013) (0.013) (0.009) (0.013) (0.023) (0.008) (0.011) (0.020) total assests -0.023** 0.021*** -0.008 -0.012 -0.025* 0.0087* 0.012* 0.030** (0.011) (0.006) (0.005) (0.008) (0.013) (0.005) (0.007) (0.012) financial independence 0.118*** 0.116*** 0 .029** 0.060*** 0.121*** 0.042*** 0.075*** 0.140*** (0.026) (0.028) (0.014) (0.019) (0.035) (0.013) (0.018) (0.031) industry 0.016 0.006 0.018*** 0.018** 0.018 0 .026*** 0.019** 0.011 (0.010) (0.013) (0.006) (0.009) (0.016) (0.006) (0.008) (0.014) f statistics 4.20*** 8.51*** r-squared 0.244 0.348 pseudo r-squared 0.100 0.093 0.175 0.191 0.192 0.236 n 219 219 219 219 219 219 219 219 ***,** and * indicate significance at the 1%, 5%, and 10% levels, respectively. 37 to draw more robust conclusions, next, we explored the relationship between the term of interaction (non-family board x gen stage) and the ebitda margin as the outcome variable. at the 25th and median quantile, we identified a negative and significant relationship (β= -.046, p < .01; β= -.064, p < .01 respectively) between the term of interaction (non-family board x gen stage) and the outcome variable ebitda margin. it is important to highlight that this relationship does not emerge in the subsequent quantile, 75th. this indicates that the combined effect of the generational stage and non-family members’ involvement is not found in the case of highperformance family firms (i.e., those located in the third quantile of outcome distribution). the results allowed us to confirm previous analyses obtained with the main dependent variable, roa. in summary, findings show that a higher presence of non-family members on the board of directors has a less positive effect (called the negative moderating effect) in the case of firstgeneration family firms by comparison with later generations. furthermore, this effect is more striking in low-performing family businesses than in high-performing ones. finally, to verify the reliability of the results, some robustness tests were performed. we re-estimated our main model using the ebitda margin, which is equal to earnings before interest, tax, depreciation, and amortization (ebitda), divided by the overall turnover. this margin is a sound proxy indicator of the firm’s ability to generate cash flow through its core business (granata & chirico, 2010; dolenc et al., 2012; cesaroni et al., 2017). findings for ols regression and quantile regression report a similar consistency with the main model applied. 5. discussion and conclusions this study examines the relationship between board composition and family firms’ performance, considering the generational stage as a moderating variable. specifically, adopting the theoretical framework of sew and investigating a sample of italian medium-sized family firms, we have analyzed how the presence of non-family directors affects the performance of first-generation or later-generation family businesses. empirical findings suggest that a higher presence of non-family directors has a less positive effect on firms’ financial performance in the case of first-generation family firms than in later generations. furthermore, by adopting a quantile regression, we have demonstrated that this effect is more striking in low-performing family businesses than in high-performing ones. our findings show that the involvement of non-family members in the boards produces different effects depending on the generation in charge. in first-generation family firms, the family directors’ willingness to preserve sew (gomez-mejia et al., 2007; gomez-mejia et al., 2010; gomez-mejia et al., 2011; berrone et al., 2012) could be in contrast with the priority of non-family directors, less attached to the business and more oriented to increasing financial performance (le breton-miller & miller, 2013). this contrast is diminished in later generation family firms as they are characterized by a lower emphasis on sew preservation and a stronger commitment to increase financial performance (sciascia et al. 2014). these arguments explain why non-family directors generate a more limited benefit on first generation family firms’ profitability than on later generations. furthermore, our findings show that the moderating effect of the generational stage on the relationship between non-family directors and financial performance varies across financial performance levels and is more impressive in low-performing businesses than in highperforming ones. the reason is that when the family firm achieves high performance, family owners perceive that sew preservation is ensured (zellweger, 2017), and radical and/or extreme decisions (e.g., dismissing employees), which could create conflicts between family and non-family directors, are not needed. on the contrary, when the family firm faces low 38 performance, non-family directors might press for drastic decisions to recover financial performance, but family directors, especially in first-generation family firms, may be less willing to assume those decisions to preserve the sew. the trade-off between the conflicting perspectives of family and non-family directors could slow down decision-making processes and the strategic behavior of the business, thus explaining why the benefit of non-family directors on financial performance is lower in low-performing family firms than in highperforming ones. our findings contribute to family business literature in four ways. first, our analysis suggests that the relationship between board composition and family firm’s performance is not univocal, given family firms heterogeneity in terms of the generational stage. specifically, the sew theoretical framework has helped us to identify situations in which the involvement of non-family directors may be more or less beneficial for family firms. from this perspective, we have discussed the role of the generational stage as a key moderating variable, and we have also shown that the moderating effect changes according to the performance level. thus, we have furthered knowledge about family firms and board composition effectiveness by explaining that the involvement of non-family directors is less effective in first-generation family firms, especially in those with low performance. previous research has provided mixed results on this subject, as different authors have suggested that non-family directors’ involvement can be beneficial (anderson & reeb, 2004; voordeckers et al., 2007; minichilli et al., 2009; wright & kellermanns, 2011; basco & voordeckers, 2015; corbetta et al., 2017; arzubiaga et al., 2018), detrimental (lee, 2006), or neutral (kowalewski et al., 2010; mazzola et al., 2013; minichilli et al., 2016) to family firms’ performance. however, existing studies have mostly considered big and listed companies (bammens et al., 2011), while private mid-sized family firms have been completely neglected (arzubiaga et al., 2018). furthermore, they have mostly implicitly considered family firms as a homogeneous group (chua et al., 2012; daspit et al., 2018), ignoring how their heterogeneity may influence financial performance. in this regard, our study confirms that heterogeneity matters and helps to explain why previous research on this topic has given very conflicting results. second, our study is one of the first to underline the importance of performance level as a factor that can influence the relationships between family/non-family directors and firm performance consequently. in this regard, results from the quantile regression show that the influence of non-family directors changes along with the distribution of financial performance and is less beneficial in first-generation family firms that face low performance than in those with high performance. consequently, in addition to the level of family involvement in family firms’ governance and management (nordqvist et al., 2014) and generational stage (daspit et al., 2018), the performance level should be considered another important source of heterogeneity within family firms. third, we have furthered knowledge on medium-sized family businesses and the possible consequences of non-family directors in their governance structure. medium-sized family firms have been largely neglected in previous studies on this topic, despite their increasing relevance in most economies, like italy (ciambotti & palazzi, 2015; songini et al., 2015; coltorti et al., 2017). professionalization is a critical process for those firms, as they often experience growing participation of external managers in governance and management structure. thus, knowing the variables that can shape the success of this process is of great importance (bassani & cattaneo, 2020; sandu, 2020), and our results provide important suggestions by proving that the involvement of non-family directors does not always generate the expected beneficial effects on performance. finally, from a methodological point of view, this paper confirms the usefulness of the quantile regression in evaluating the effects of non-family directors on firms’ financial 39 performance. this method has effectively allowed us to observe that the effects of non-family directors vary across the distribution of financial performance. conyon and he (2017) called for greater use of this analysis method to explore other potential reasons, explaining the conflicting results in the relationship between governance structure and family firms' performance. we have responded to this call, and the results from our analysis have helped to shed new light on the application of this statistical method when analyzing this subject. from a practical point of view, our study may prove very useful to founders, owners, and ceos of family businesses as it offers valuable indications to guide choices related to the composition of corporate governance bodies and the involvement of non-family directors. even if professionalization of family firms is generally considered a necessary process to improve firms’ performance and encourage its growth, our analysis shows that the involvement of nonfamily directors may not always be beneficial to the firms as other variables—namely the generational stage and the performance level—can affect such result. this important result sheds new light on corporate governance mechanisms that occur in family businesses, especially when they are in a transition phase from small to medium size. in other words, the proper valorization of the external professionals involved in a firm strongly depends on the cultural context in which they operate. family members should, therefore, remodel their mentality and attitude towards external subjects to avoid conflicts which, in the worst case, may cause non-family directors to leave and the consequent depletion of resources and competencies needed for the firm’s growth (sentuti et al., 2020). practitioners and advisors should take due account of these findings in their consulting work with family firms. this study is not free from limitations, which reveal stimulating avenues for future research. first, our analysis is based on data referring to a restricted geographical area. although this area is particularly suitable for our analysis, given the high presence of medium-sized family businesses, our findings suffer from generalization limits. therefore, future studies should examine larger areas, both in italy and other countries, to verify the validity of the results obtained. it would also be interesting to replicate our analysis in countries with different features, especially from the cultural point of view. in fact, the importance of family, the strength of family ties, and the relationship between the owner family and the business are all factors that can influence the results that emerged from our analysis. thus, replicating such analysis in other geographical areas could be useful for understanding the effect of cultural variables. second, our analysis is based on data referring to just one year. although we introduced the “past performance” control variable to increase the robustness of the results, further research could be performed using a panel analysis. other limitations concern the independent variables used in our analysis. we defined the generational stage using a rough proxy based on a 25-year cut-off point. this proxy has been used in previous studies (gottardo & moisello, 2017). moreover, we tested the sensitivity of our findings using an alternative threshold of 30 years (fernandez & nieto, 2005). however, we are aware that this approach may be seen as a limitation. therefore, future research could use the generation running the business to test the moderator effect of the generational stage. moreover, to obtain a more nuanced picture of the relationship between board composition and family business performance, the analysis could be enriched by including other variables that could affect the effectiveness of the board and thus influence the company’s performance. in particular, the percentage of affiliated/unaffiliated outsiders and the ceo duality/non-duality (corbetta & salvato, 2004) could be considered. 40 references 1. anderson, r.c., & reeb, d.m. 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�������%��h������ i����� ��� ������ j� ���� ��=� k���� �������������� ��� ������ ������ ������"����� ��!���"�� �l����"� #�� m�������� no4+p*q)7f*'+r4s40-t64'f+u4s)4v+99 9 m��� ww� !!� b�:?xb�yc� microsoft word 7 (20-14) benevolo.docx 79 global strategies and entrepreneurial firms: the role of the entrepreneur’s features in the decision-making process clara benevolo university of genoa, italy lara penco university of genoa, italy teresina torre university of genoa, italy received: july 21, 2020 accepted: november 8, 2020 online published: november 15, 2020 abstract the purpose of this paper is to deepen knowledge of entrepreneurial decision-making about global strategies. towards this goal, it presents a conceptual framework useful for supporting entrepreneurial decisions for globalisation, drawing on an integrated analysis of the external environment and of the internal components, with a specific focus on entrepreneur’s characteristics, in terms of cognitive and emotional profiles. it is suggested to adopt a logical process to identify which strategic levers are available for global players to implement their global strategies. the paper provides several implications. in terms of theoretical implications, existing studies are based on the industrial organization-based theory or on the resource-based theory, while an integrated analysis combining these two aspects seems to be lacking. the proposed framework represents a complete and integrated one devoted to global strategies orientation, it also inserts the ‘entrepreneur matter’ as a variable that affects both the decisionmaking process and the global decisions’ contents. with regard to managerial implications, this framework can help global entrepreneurial firms or future global entrepreneurial firms to face problems related to the global dimension and make decisions to define the strategic levers for globalisation. it proposes the description of the various variables connected to the external environment, the features of the internal firm, and the personal traits of the entrepreneur, all elements which an entrepreneur-decision-maker should take into account during the decisionmaking process to attain a successful decision. international journal of economic behavior, vol. 10, n. 1, 2020, 79-95 80 keywords: internationalization, global strategies, entrepreneurial decision-making; entrepreneur’s profile; successful intelligence; self-efficacy; perspicacity; emotions. 1. introduction in current environment, internationalisation represents the main path for companies’ growth and development but it remains an open question whether international business development proceeds from globalisation or a more circumscribed phenomenon like regionalisation (rugman and verbeke, 2004; dunning et al., 2007; ghemawat, 2007). a generally accepted definition affirms that globalisation is an ongoing process of supranational development, growing integration, and deep interconnection affecting all human activities (govindarajan and gupta, 2001). according to levitt (1983), companies oriented towards globalisation develop according to a multinational model, design a unique high quality/low-cost product addressed to an undifferentiated market, establishing strategies to serve it as a unique global one or, at least, to global segments (hofstede et al., 1999; douglas and craig, 1995). a significant chunk of the business literature analyses internationalisation and globalisation following similar frameworks, based on the indubitable connection between these phenomena. nevertheless, a neglected area of research is the complexity of global strategies and the related decision-making process undertaken by companies willing to pursue a global strategy and manage interdependencies between markets in the global context. moreover, the available decision-making frameworks are few and often partial, while a specific decision-making framework useful for entrepreneurial firms looking for global strategies seems to be lacking. in the international entrepreneurship domain, contributions focused on decision-making models for international entrepreneurs are limited (jones and coviello, 2005; o’cass and weerawardena, 2009; musso and francioni, 2013; verbeke and ciravegna, 2018). there is also a lack of decision-making models designed to employ entrepreneurs’ individual characteristics as a factor influencing the decision-making process and the choices related to strategic and managerial decisions in the global environment. in general terms, scholars in the entrepreneurial field apply the general concepts and principles of the decision-making literature to entrepreneurs’ decision-making (berner et al., 2012; de winnaar and scholtz, 2019; shepherd and rudd, 2014). however, considering that entrepreneurs want to have control of their destinies when dealing with uncertainty (alvarez and barney, 2004), decisions are affected not only by the features of the decision-making process (e.g. rational vs intuitive) but also by the entrepreneurs’ individual characteristics (cardon et al., 2012). these characteristics are crucial for the creation, survival, success, and longevity of entrepreneurial firms (caputo et al., 2016; pellegrini and ciappei, 2015; shane and venkataraman, 2000). academic contributions focused on antecedents of entrepreneurial orientation (koellinger, 2008; lumpkin and dess, 1996; penco et al., 2020; shane and venkataraman, 2000) have studied ‘personal’ dimensions, e.g. pro-activeness, risk-taking, and innovativeness (wiklund and stepherd, 2005). the literature on decision-making has inserted the role of the entrepreneur within the process since an entrepreneur’s profile affects the entire decision-making process and contents (andersson, 2011; sarasvathy et al., 2014). based on these premises, the purpose of this paper is to deepen the understanding of entrepreneurial decision-making about global strategies. a conceptual framework (proposed as a decision-making instrument) is developed to define the implementation patterns of global strategies. the model incorporates not only external and internal factors, but also the individual characteristics of entrepreneurs. the paper is built in such a way that it offers a contribution to the literature examining these complex relationships in a global context where both external factors (spulber, 2007; yip, 2000) and entrepreneurs’ profiles influence process and content of 81 the decision and impact the prospects for success either negatively or positively (bolzani and der foo, 2018; o’cass and weerawardena, 2009). this study has also managerial implications, supporting global entrepreneurial firms or future global entrepreneurial firms to face problems and make decisions to define the strategic levers of globalisation. the remainder of this paper is organised as follows: section 2 introduces the concepts of global strategies, the decision-making process, and entrepreneurship, which are at the basis of our conceptual framework. section 3 explains the proposed framework. finally, section 4 discusses the academic and practical implications of the framework. 2. theoretical background 2.1. global strategies and the decision-making process international business and management scholars generally do not specifically investigate global strategies as a subset of international strategies or provide different definitions of global strategy (de kluyver, 2010; inkpen and ramaswamy, 2006; peng, 2014). levitt (1983) denominates as ‘global’ any strategy aimed at supplying and selling a globally standardised good all over the world. similarly, harzing (2000) underlines the primary role of producing standardised goods and managing supply chains through high-efficiency levels (farrell, 2004). it follows that a global strategy consists in achieving global efficiency at the lowest cost level. bartlett and ghoshal (1991) also consider the role of national flexibility, while yip (1989; 2003) similarly asserts that companies must react to external strengths and move toward globalisation by implementing global strategies. according to porter (1986), a global strategy sees a company selling its products over many countries and adopting a globally integrated strategic approach with a high degree of coordination in the value chain activities. other scholars, such as ghoshal (1987) and birkinshaw et al. (1995), underline that integrating a company’s competitive strategy moves through the main world markets represents the core of the global strategy. in line with our concept of globalisation, collis (1991) asserts that a global strategy is required when the interdependencies of the company’s competitive positioning in different countries are important. concerning global strategies, the literature has proposed several models that aim to identify factors that a global decision-maker should take account of. traditional models are mainly focused on external factors (yip, 2000). addressing the industrial organisation-based theory or resource-based theory (barney, 1991; roth et al., 1991), literature suggests that the strategic choice of a firm competing in global markets is not just a function of market contexts (birkinshaw et al., 2005); rather, yaprak et al. (2011) present a framework of global strategy implementation in which the role of internal factors (resources and capabilities to compete in the global marketplace) are relevant. these frameworks are designed with attention to large and managerial companies, while the definition of an integrated framework for globalisation suitable for entrepreneurial firms in their different forms (e.g. start-ups, smes, family firms, etc.) remains a neglected area of research in the decision-making domain. 2.2. entrepreneurial decision-making decision-making is a crucial moment for entrepreneurial firms (de winnaar and scholtz, 2019) and the extant literature has identified different approaches. in a ‘pure’ rationalistic approach, decision-makers are aware of all the business impacts and make decisions to maximise their performance (lunenburg, 2011). the ‘corrective’ of bounded rationality (simon, 1991) enriches the rationalistic model, in considering that decision-makers cannot always be perfectly rational and profit-oriented but are also influenced by other factors, i.e. the limits of available 82 knowledge, external pressures such as time constraints and moral obligations (klein, 2008). in the strategic management field, the rationalistic (and bounded) approach is added to the strategic planning approach (lorange, 1980). the literature on entrepreneurship has underlined the relevant role of strategic planning in supporting entrepreneurial decision-making (chwolka and raith, 2012). the second approach is the ‘intuitive’ and ‘behavioural’ one: successful or realised strategy is an ‘emergent’ one, a ‘pattern in a stream of actions’ taken by members of an organisation, as opposed to a rationalistic plan (mintzberg, 1987). a dilemma in management theories concerns whether decisions are more effective and successful if they stem from rationality or ‘creative intuition’ (mintzberg, 1987). consistent with sadler-smith (2004), rationality and intuition comprise two different cognitive styles, the diversity of which depends on information analysis (rational and intuitive) and the organisation of information in the memory of the decisionmaker. de winnaar and scholtz (2019) argue that particularly in the entrepreneurial decisionmaking process, the intuitive approach is in line with the theory of bounded rationality. following these premises, two dominant theories regarding the decision-making process can be found in international entrepreneurship studies. the first refers to the causation process (sarasvathy et al., 2014), while the second is focused on the effectuation process, which starts from a given set of the entrepreneur’s characteristics (e.g. traits, mind-sets, skills) that affect her/his knowledge and social networks (andersson, 2011). in this latter perspective, the entrepreneur is regarded as an ‘effectuator’ that is: “[. . .] an imaginative actor who seizes contingent opportunities and exploits all means at hand to fulfil a plurality of current and future aspirations, many of which are shaped and created through the very process of economic decision-making and are not given a priori” (sarasvathy, 2001, p. 262). 2.3 factors affecting entrepreneurial decision-making: the role of the entrepreneur’s profile addressing effectuation theory, which explicitly situates the entrepreneur at the centre of the decision-making process (andersson, 2011; sarasvathy et al., 2014), it is crucial to study and obtain information about the entrepreneur’s personal profile since it is the entrepreneur who reads and explains the internal and external environments and devises different interpretations and related decisions (sarti and torre, 2019). in the cognitive-knowledge approach, the entrepreneur’s personal profile has attracted great attention from scholars interested in understanding how decision-making processes develop (shepher, 2015; zahra et al., 2005). the sociology literature, on the other hand, considers entrepreneurs as embedded in a social context; in this view, the socio-economic characteristics of entrepreneurs, such as family’s origins, education/training level, entrepreneurial and technical background, and previous experience, are relevant in shaping their decision-making process (koellinger, 2008; shane and venkataraman, 2000). in the psychology domain, other variables addressing individual attributes have been examined: innovativeness, self-confidence, locus of control, risk-taking, high level of individualism, openness to change, self-enhancement, low levels of power, conformity, and security (e.g. tan, 2001; wakkee et al., 2010; wiklund and shepherd, 2005) among these profiles, creativity plays an important role in supporting the growth strategy of the international entrepreneurship (butler et al., 2010; wakkee et al., 2010). in terms of decision-making, sociological and psychological profiles bring a more versatile thinking style that balances both linear (analytic, rational, logical) and nonlinear (intuitive, emotional, creative) approaches to decisions. considering that entrepreneurs attempt to match their mental images of the environment and perceptions of opportunities with the company’s action, pellegrini and ciappei (2015) focus 83 on the concept of perspicacity as the ability to detect exceptional cases correctly and in turn to properly enact the entrepreneurial orientation process. another important concept is perspicacity (bandura, 1997; cardon and kirk, 2015), i.e. a person’s belief in his/her ability to perform a task and to obtain the desired outcome. reinforcing the role of entrepreneurial selfefficacy, sternberg (2004) proposes the concepts of successful intelligence, which is necessary to build a specific path through which an entrepreneur reads the external and internal context. the entrepreneur’s emotional filters also affect decision-making (cardon et al., 2012; shepherd, 2015). deepening this stream, it has been argued that entrepreneurial passion is the core of entrepreneurship (cardon et al., 2012; 2013; 2015). welpe et al. (2011; 2012) find that emotions influence both the evaluation of opportunity and the exploitation of entrepreneurial decisions, while according to shepherd (2015), emotions and knowledge-cognitive profiles have reciprocal influences on the decision-making process and content. emotional intelligence (ingram et al., 2019; salovey and mayer, 1990) is considered to help in connecting the aforementioned profiles. 3. conceptual framework the existing literature on global strategies (bartlett and ghoshal, 1989; doz et al., 2001; ghemawat, 2007; knights and cavusgil, 2005; porter, 1986; 1990; yip, 1989; 2003; zou and cavusgil, 1996) does not provide a framework that integrates external strategic analysis with internal one. moreover, the entrepreneur’s role in the process of decision-making is neglected (cavusgil and knights, 2015). to address this gap, our paper focusses on both the external drivers and internal forces arising from globalisation and acting on companies’ strategies and behaviours, as the foundations of new competitive advantage. the suggested framework is composed of several phases, into which the global strategies decision-making process can be organised (benevolo, 2013). the process begins with an external environment analysis according to the following perspectives: (1) the strategic drivers leading industry toward globalisation, and (2) the local specificities that can be exploited via a global strategy. the first step identifies the external strengths, defining the industry globalisation degree by considering a number of globalisation drivers (yip, 2003), the importance of which varies by industry. the second step investigates the local specificities to take advantage of through a global strategy. these latter are important because a global competitive advantage also originates (or on the contrary) from the ability to seize and exploit differences, and to combine original uniformities and differences (ghemawat, 2007; spulber, 2007). indeed, globalisation uses interdependences between different countries, markets, and actors (yip, 2000), and these represent the foundation of global competitive advantage (inkpen and ramaswamy, 2006; lasserre, 2007; spulber, 2007). on the other hand, the internal analysis is based on the company’s specific features (collis, 1991), which we call ‘legs’ and ‘hands’ (see infra) to underline their operational roles in the strategy development. the entire decision-making process is affected by the entrepreneur’s ability and enthusiasm to play this role, analysing and synthesising inputs, scanning global opportunities, and attaining decisions. we name this aspect ‘entrepreneurial glasses’ as a mix of two complementary dimensions – ‘head’, comprising the entrepreneur’s personal knowledge-cognitive attitude, and ‘heart’, comprising the entrepreneur’s emotions. global opportunities and strategic global intent emerge from the result of external and internal analysis, filtered through the entrepreneur’s glasses. when the main features of global strategy are delineated, the final output of the framework consists in selecting the most appropriate strategic levers to compete in the global marketplace (yip, 2003). the underlying 84 hypothesis is that a global strategy must exploit a strategic advantage, defined as the extra-value that a company can generate through the coordination of resources, productions, and markets in a ‘global value connection’ (spulber, 2007). the framework is synthesised in figure 1. figure 1 – structure and rationale of the proposed framework 85 3.1 external environment analysis: globalisation drivers and local opportunities the external environment analysis adapts and enriches a framework originally proposed by yip (2000; 2003) and related to the globalisation drivers. these drivers represent the industry’s underlying features, creating the conditions necessary to develop global strategies and impact on modes and directions of global strategy. five groups of drivers can be identified:  market drivers, referring to customers’ behaviours and networks’ features of distribution. many trends are leading to progressive globalisation: global priorities and needs, global customers, global channels, the transferability of marketing policies, the existence of leader countries where companies are forced to operate, the decrease of the time necessary to innovation of the products’ to spread through the market (yip, 1992; 2003).  cost drivers, which can lead to a cost advantage on a global scale (e.g. global economies of scale or scope, experience curve, global sourcing cost differential among countries). all these features allow and require a value chain reorientation, aimed at exploiting the interdependencies among different countries in terms of both cost reduction and richness/quality of available resources (yip, 1992; 2003).  technology drivers, originated from the flexibility that new technologies offer in terms of efficient and valuable answers to specific needs emerging in different geographic markets (sawhney, 2006). moreover, technology development can change the world production map, relocating activities according to newly arising opportunities (de backer and miroudot, 2012).  government drivers, which include an opening to global markets arising from production and trade liberalisation policies, trade barriers removal, global technical standards exploitation, common marketing policies, etc. on the opposite side, restrictive commercial policies represent an obstacle to companies’ adoption of global strategies. of course, government drivers can exploit a different strength in the various industries, while legislation differences open to arbitrage opportunities (ghemawat, 2007).  competitive drivers. a company’s globalisation process can be supported by a high internalisation/international delocalisation degree of an industry, the existence of international and global competitors, interdependencies between the different regional markets, the transferability of competitive advantages, etc. (ghemawat, 2007; yip, 2003). the second step in external environment analysis deals with local specificities and is based on the hypothesis that a global competitive advantage arises from the ability to combine global environment opportunities that are available to every existing company, with local specificities (country factors) suitable for deployment as strengths on a wider basis (benevolo, 2013). in order to construct (and maintain) a competitive advantage at global level, it is therefore necessary to compare the sources of competitive advantage with the characteristics of the country of origin and the peculiarities of the countries where competitors, suppliers and partners are based. for this reason, country factors need to be identified. regarding this issue, we enlarge and enrich spulber’s ‘star analysis’ (2007) and ghemawat’s approach to global strategies (2007). five groups of country factors can be identified:  home country factors, represented by the features of the original country of the company, facilitating or preventing the international growth path. they can be classified into four typologies: identity and culture; nature of existing relationships with stakeholders; the existence of brands that customers can immediately associate with the specific country; 86 and the political-legal environment (bertoli and resciniti, 2012; delgado et al., 2010; ghemawat, 2007; porter, 2000).  supplier country factors, comprising the possibility of realising the best combination of raw materials/components/services suppliers at a global level. the ability to create valuable relationships is crucial (hult et al., 2014; trent and monczka, 2005).  customer country factors, referring to the individuation of groups of countries which are homogeneous from the perspective of customers’ needs, and sufficiently numerous to represent significant transnational segments of the global market. we also refer to the possibility of adapting, to a certain extent, the marketing mix to the local context (inkpen and ramaswamy, 2007; spulber, 2007).  partner country factors, concerning the specificities of the countries where partners, (with whom agreements and partnerships are established) are operating. countries must be selected and divided into: demand-side partnerships (based on products’ complementarities) or supply-side partnerships (based on competencies and technology complementarities).  competitor country factors, related to local specificities representing strengths in the competitors’ global strategies. also for competitors, the star analysis must be conducted and then compared with the company analysis (spulber, 2007). 3.2 internal analysis: the firm’s legs and hands the internal analysis considers resources and competencies required to manage risks and difficulties in the global environment. we name these features legs and hands; together they define the company as a complex and organic system, and may characterise the various key resources in different ways.  legs. the strategic management literature addresses this aspect within the theory of resource-based view (barney, 1991; roth et al., 1991). resources must be evaluated by a process of internal auditing. examples of legs for a global strategy are business model transferability, presence at a global level, and tangible and intangible resources availability.  hands. hands are evaluable by addressing the analysis of core competences (hamel and prahalad, 1994) and of dynamic capabilities (teece et al., 1997). studies focused on organizational design help to focus on this factor. examples of ‘hands’ for a global strategy are: management culture and quality, relational qualities, coordination capacity, the possibility of leveraging the competitive advantage at a global level. an appropriate mix usually translates into a high potential for globalisation and can lead to a ‘global value connection’, which is the best combination of internal factors and opportunities, leveraging on differences and interrelations in the global environment (benevolo, 2013; spulber, 2007). 3.3 evaluation of entrepreneurial glasses: entrepreneur’s head and heart the originality of our framework is that it includes the entrepreneur’s features. we based this approach assuming that these features make the difference in the way the decision-making process is run. consistent with effectuation theory (andersson, 2011; sarasvathy et al., 2014), the entrepreneur is indeed the crucial and central part of the process to be evaluated since decisions are affected by his/her capabilities of detecting, understanding, anticipating, and synthesising the environmental inputs in order to envision and design a direction to move towards (shepherd, 2015). 87 the entrepreneur’s capability and role are named ‘glasses’ since glasses serve: i) to look ahead, forecast, imagine the future, and ii) to filter and perceive internal and external factors in order to scan global drivers and local opportunities and to create a global strategic intent. our framework considers that glasses are the result of a mix of ‘head’ and ‘heart’. we use: i) head as an overall and synthetic way of understanding, which comprises the cognitive perspective of the entrepreneur and the potential impact this perspective has on how he/she perceives environmental information; ii) heart as an overall and synthetic way to consider emotions, moods, and feelings which influence entrepreneurial thinking and the exploitation of possible opportunities. i) head according to pellegrini and ciappei (2015), the knowledge-cognitive perspective is considered crucial in the international entrepreneurship domain since it supports to understand the interrelationship between environment, experience, cognition, and entrepreneurs’ decisions regarding different global strategies. so, it supports the entrepreneur to evaluate or (selfevaluate) his/her personal knowledge endowment, identifying those elements that could be more relevant for the external/internal context and actions to acquire missing elements. our framework includes an assessment of individual entrepreneurs’ objective factors such as age, education, training, years of experience, family background, network of ties, and mindset (musso and francioni, 2012; 2013; shepherd, 2015; zucchella and magnani, 2016), considering the critical and predictive role of these variables. for the complete definition of the knowledge-cognitive profile, our framework follows stenberg (2004) and adopts the concept of successful intelligence, comprising the analytical, creative, and practical intelligences. all these intelligences are applied to create a concrete scheme for the assessment of entrepreneurial cognitive aspects. the evaluation of the analytical intelligence is aimed at understanding the entrepreneur’s ability to scan, collect, and interpret complex information (baum and bird, 2010): managerial skills such as skills related to strategy and planning (casson, 2005) can be considered the most important requirement for the construction of this intelligence. creative intelligence generates new and high-quality ideas, consistent with the needs of the internal or external environment (sternberg, 2004). this type of intelligence is considered a valid support for entrepreneurs operating in international contexts (butler et al., 2010) where environmental conditions cannot be reasonably foreseen by applying rationalistic procedures (zucchella and magnani, 2016). creative intelligence is the result of entrepreneur’s profiles, starting from his/her personality characteristics, experience, and training. practical intelligence comprises the entrepreneur’s ability to identify solutions for ‘day to day’ problems. in a global context, the main problem is to understand and manage the interdependences among markets. the entrepreneur’s personal experience is considered a predictor of practical intelligence. these typologies of intelligence are also influenced by other personal factors concerning the entrepreneur’s ‘cognitive’ sphere. baum and bird (2010) note the moderator role of selfefficacy, which is the confidence that someone has in his/her ability to successfully attain a goal or perform a task: it reflects the entrepreneurs’ belief in the perspective of innovation, marketing, management, risk-taking, and financial resources with global decisions (bandura, 1997). pellegrini and ciappei (2015) introduce the concept of perspicacity as the ability to detect accurately exceptional cases and in turn to enact precisely the entrepreneurial orientation process. all these variables are considered bullet points for the evaluation of an entrepreneur’s personal cognitive traits. 88 ii) heart consistently with baron’s (2008) suggestion that entrepreneurship is an ‘emotional journey’, this study includes emotions in the process of decision-making for globalisation opportunities. reference is made to the concept of entrepreneurial emotions as proposed by cardon et al. (2012), which is used in our framework to summarise the whole phenomenon of subjective feelings related to an entrepreneur’s affective perspective; the assumption is that an entrepreneur’s reactions to particular stimuli, and those emotional states emerging from general situations in which an entrepreneur lives, and contextualised in a specific entrepreneurial process, lead to a decision. emotions have a pervasive influence on decision-making, particularly in complex situations (such as the ‘global context’) and directly influence an individual’s exploitation approach (welpe et al., 2012). in detail, we suggest considering:  fear, as a negative emotion related to the anticipation of an event which indicates threat, supporting an attitude to avoid entering new situations (higgins, 2005; krause, 2004) and preventing risk-taking;  joy, as a typical positive emotion which reinforces exploitation tendencies (baron, 2000; brundin et al., 2008);  anger, as a negative emotion significantly related to lower risk perceptions, so as to positively influence exploitation tendencies (foo, 2009);  passion, which is considered the heart of entrepreneurship, for its role in fostering entrepreneurs’ efforts, dedication, persistence towards goals, or in improving new venture survival and performance (cardon et al., 2013); an entrepreneur’s passion affects employee commitment (breugst et al., 2012). to deepen the role of emotions in entrepreneurship, we also suggest introducing the concept of emotional intelligence – defined as a person’s ability to realise his/her emotions, capture others’ emotions, and use them to achieve the desired goal (salovey and mayer, 1990). ingram et al. (2019) organize this concept in ‘intrapersonal emotional intelligence’ and ‘interpersonal emotional intelligence’. consistently with shepherd (2015), emotional intelligence helps to connect the knowledge-cognitive and emotional domains in the decisionmaking process, representing an additional linking element between head and heart. 3.4 the output of the decision-making framework: identification of strategic levers for globalisation the results of the external and internal analysis represent a starting point for the identification of the tools required to implement global strategies. these tools are termed strategic levers here, to underline the possibility of using and combining them into an original mix, for a globalisation strategy. there are six types of ‘global’ levers, variously usable and combinable (benevolo, 2013): ● global management of markets (achievable through the definition of market shares, identification of global segments, proposition of global products/services, and globalisation of marketing); ● global configuration of value-generating activities (up to the creation of global platforms); ● global management of relations (contractual and non-contractual relations, outsourcing choices, network formation); ● global management of intermediation and arbitrage (matchmaking or market-making); ● global management of knowledge and information (global information systems, identification of new business models, exploitation of arbitrage opportunities); 89 ● global management of the competitive scenario through appropriate competitive actions (cross-subsidisation, control of competitors, counterattack, prevention, global sequence, etc.). 4. conclusions, scholarly/managerial implications, and future research this paper has developed an integrated analysis/evaluation/decision/implementation framework to suit companies intending to redefine their strategic behaviours and competitive schemes in the global market. this framework has been proposed to support global strategy formulation for entrepreneurial firms that want to exploit opportunities deriving from a global strategy based on interrelations and interdependencies between different markets. this will be useful for international entrepreneurial firms that want (or need) to become global; for ‘born global’ entrepreneurial firms; and for multinational entrepreneurial firms that want to manage their markets in a more coordinated way. a logical process is suggested to identify the strategic levers available for global players to implement strategies, more than suggesting strategies themselves. in particular, this framework serves as a practical tool for the entrepreneur that wants to face the global challenges, nurturing the most important drivers referred to both to the external and to the internal environment. it supports the entrepreneur in finding the correct balance between global and local opportunities in order to formulate the global strategic intent and to identify suitable levers. moreover, the focus on the personal profiles, the entrepreneur has the possibility to self-evaluate and identify possible gaps. in this vein, it helps to detect the opportunities and threats of the global approach and the internal strengths and weakness deriving from the internal environment in which the entrepreneur is included. the work take in account the most important international business issues developed by scholars (buckley, 2002; ghemawat, 2007; peng, 2004; porter, 1986; spulber, 2007; yaprak et al., 2011; kim and aguilera, 2015). it is based on the global strategies literature and has the additional value of representing an integrated framework. while globalisation processes are increasingly pervasive and radical, they do not lead to the homogenisation of competitive models, neither from the perspective of countries, nor about markets, nor for company strategies. it seems that companies’ ability to develop and exploit a global competitive advantage is increasingly linked to the ability to detect and manage the interdependencies between different markets, through innovative and flexible modes of managing markets, competitors, information, and knowledge. starting from these premises, our framework provides several theoretical, managerial, and political insights. first we suggest an original conceptual framework for global decisions in which the entrepreneur’s personal characteristics (heart and head) are both considered relevant variables for evaluation and drivers that affect the entire decision-making process. in terms of managerial implications, our framework can help global entrepreneurial firms or future global entrepreneurial firms to face problems and make decisions to define the strategic levers of globalisation. it proposes a description of the different variables connected to the external environment, features of the internal firm, and personal traits of the entrepreneur, all those variable that an entrepreneur-decision-maker should take into account during the decisionmaking process to attain a successful decision. moreover, implications for human resource management emerge. this model, in fact, can serve to explain the entrepreneurial culture and the leadership style so as to communicate in the best way the factors that have shaped and created the ‘global strategic intent’. understanding the resources / competencies gap in a general assessment can prove to be useful for an organization operating on a global scale. 90 from a broader perspective, the framework encourages governments, policy-makers, and entrepreneurs to invest in promoting research and specific training interventions aimed at supporting entrepreneurs in enhancing their capacity to manage effective decision-making processes for globalisation. this paper has several limitations. first, our framework is untested in an empirical setting. further research is required to address this gap, analysing multiple case studies by presenting hypothetical situations to entrepreneurs in order to understand its real applicability. second, this framework does not complete the picture of the variables involved in the entrepreneurial decision making process, both in terms of external and internal perspectives. focusing on the entrepreneurial profiles, we have simplified the number of variables related to the cognitive and emotional aspects of entrepreneurs. the extension to other aspects, such as the role of an entrepreneur’s cultural background and his/her experiences when defining and implementing global strategies, could be a suitable subject for specific future research. in particular, collecting additional results from a case-study research and enhancing the number of variables, this framework can help validate a model based on different hypotheses, with the help of further research that is based on an extensive survey. references 1. alvarez, s.a., & barney, j.b. 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(2016). international entrepreneurship: theoretical foundations and practices. london, uk: palgrave macmillan. 5 board characteristics and financial report timeliness in the nigerian financial sector: a dynamic panel data analysis fatai abiodun atanda university of ibadan, nigeria olubunmi f. osemene university of ilorin, nigeria iyanuoluwa fanimokun university of ilorin, nigeria received: october 11, 2022 accepted: january 30, 2023 online published: february 24, 2023 abstract lack of timely financial report is an issue to different stakeholder groups because it allows a segment of investors to have costly private information, which they will exploit to the detriment of the less-informed segment. it has also resulted into loss of credibility in published accounts and led to substantial criticisms of the effectiveness of corporate governance mechanisms like board characteristics. this paper employed dynamic panel data analysis to examine the impact of board characteristics (size, diligence, financial expertise and independence) on financial reports timeliness in the nigerian financial sector. the study used system generalized method of moments (gmm) to analyze the corporate governance mechanism and financial reports data, collected from 24 purposively-selected listed firms over 11 years. consistent and strong evidence revealed that board characteristics (size, independence and financial expertise) had significant effect on financial report timeliness. while board independence and board financial expertise led to untimely audited report, board size led to timely audited report. the insignificant effect of board diligence suggests that a mere increase in board meetings was not effective in predicting timely audited financial statements in the selected companies. we recommend increased quality board members with relevant accounting, financial reporting expertise and managerial experience, among others. keywords: financial report, board size, board diligence, financial expertise, board independence. international journal of economic behavior, vol. 13 n. 1, 2023, 5-32. https://doi.org/ 10.14276/2285-0430.3587 6 1. introduction one of the qualities of accounting information is financial report timeliness. it has significance value to stakeholders (e.g. management executives, creditors and potential investors) who require timely financial information for decisions making (uthman, ajadi & asipita, 2018). due to this importance, the securities and exchange commission (sec) in nigeria issued code of corporate governance (2012), which mandated all publiclylisted companies to file audited accounts not later than ninety (90) days after their accounting year-end. this requirement was to help build trust, efficiency and confidence in governance (warrad, 2018), as any delay in releasing earnings information decreases the value of information efficiency (hashim & rahman, 2010). the requirement therefore means that boards of directors must be interested in early filing of annual reports, as failure to do so will indicate their own failure (handayani & yustikasari, 2017). preliminary data from audited accounts of financial institutions, collected from the nigerian stock exchange (nse), showed that a higher proportion of the companies (about 65%), on the average, reported within 90 days during the period 2010 and 2020 (appendix 1). in addition, the proportion of the companies that reported timely rose from about 46% in 2010 to about 54% in 2013; 75% in 2017 and 79% in 2020. this showed that the efforts of the sec at ensuring timely financial information to stakeholders paid off and empirical evidence on board characteristics responsible for this improvement should be brought into focus. this is because the board, by law, is responsible for setting policies and strategies needed to achieve timely financial information. lack of timely financial report is an issue to stakeholders who need financial information. this is because delay in releasing earnings information allows a segment of investors to have costly private information, which they will exploit to the detriment of the less-informed segment of investors (afify, 2009). the concern was based on the notion that corporate governance, especially the board, can be used to reduce delays in financial reporting, as posited by the agency theory; to monitor the actions, policies and decisions of managers (oecd, 2004); and to reduce inefficiencies from moral hazards and adverse selection that may arise from agency problem (afolabi & dare, 2015). the concern therefore requires that a strand of studies be carried out on the factors influencing financial report timeliness quality and the main research question should be whether board characteristics, bear sufficient information content to predict timeliness of financial report. financial report delays have resulted into loss of credibility in published accounts (saad & jarboui, 2015). they have also led to substantial criticisms of the effectiveness of corporate governance mechanisms in the literature (uthman, et al., 2018). we follow this line of inquiry by addressing the following question: how do board characteristics influence timeliness of financial reports of listed companies in the nigerian financial sector? therefore, this study investigates the effect of board size, board diligence, board members’ financial expertise and board independence on the timeliness of accounting information of publicly-quoted companies in the nigerian financial sector, as captured by the time it takes a company to prepare and audit annual accounts and reports. we hypothesize that the four board characteristics, as a corporate governance mechanism, do not bear information contents to explain and predict timeliness of financial report prepared by listed deposit money banks and insurance companies in nigeria. 7 this study contributed to knowledge in many ways. first, unlike many previous papers, we established average time (number of days) financial institutions in nigeria used in preparing and auditing of annual financial reports. absence of reliable empirical evidence on this can serve as hinderance to relevant stakeholders and government authorities obtaining ample information on the progress and success of the various codes of corporate governance issued in the past and the need to carry out more monitoring activities. second, we cover four vital board characteristics in the financial report timeliness model while controlling for some firm-specific factors such as size, audit quality (big-4) and financial conditions (leverage and profitability) of the financial institutions. despite their popularity in corporate governance studies, very few studies explore their relative importance to financial reports’ quality in the nigerian financial institutions. third, findings from literature about corporate governance mechanisms and timeliness of earnings information were mixed (positive, negative and no relationships). they were inconclusive, given the diverse mechanisms and methodology adopted. besides, most of the studies skewed towards non-financial companies and the little ones on financial institutions in nigeria used discretionary accruals to capture quality of financial information. in particular, we acknowledge few recent notable studies, which investigated board characteristics and timeliness quality of accounting information prepared by financial institutions in nigeria (asiriuwa, et al., 2021; igbekoyi & agbaje, 2018; uthman, et al., 2018 and derri & abdullahi, 2017). the issue of unequal measurement, especially for financial report quality, however needs critical examination, as many studies have used the difference between accounting year-end and when annual general meeting (agm) was held as a measure of audit report lag. this present study deviates from this by considering the actual number of days a financial institution used to prepare and audited annual reports after accounting year ends, as a measure of financial report timeliness. the lower the number, the timely the audited reports. fourth, different modelling and estimation techniques were used in previous studies, some of which fell short of econometrics tests such as normality, multicollinearity, heteroskedasticity and serial correlation. we took into consideration the unobserved heterogeneity of the sampled financial institutions due to differences in size (assets), financial conditions (leverage and efficiency in resources use) and capacity to engage big4 audit firms. we also considered the short panel nature of the data where the number of cross sections is greater than the time dimension as well as the possible endogeneity of both dependent and explanatory variables, which were found to be autoregressive of higher order, respectively. both the standard ordinary least squares (ols) and fixed effect (fe) estimators, used in previous studies, would be strongly biased upward and downward, respectively. we therefore employed dynamic panel data technique using system gmm suggested by blundell and bond (1998). this, to the best of our knowledge, was not used in previous studies. the rest of this paper is organized such that after this introduction is section two on stylized facts about financial reports timeliness and board characteristics over the period 2010-2020. this is followed by section three, which covers literature review, while methodology is presented in section four. in section five, we discuss empirical results and section six concludes the paper with recommendations. 8 2. stylized facts on financial report timeliness and board characteristics figure 1 depicts the trend analysis of the average financial report timeliness (frt) and board characteristics – independence (bid), diligence (bdl), financial expertise (bfe) and size (bsz) of 24 companies operating in the nigerian financial sector, over the periods 2010-2020. before issuing corporate governance codes for banks in 2012, less than 46% of the banks, especially in 2010 prepared and audited financial reports within 90 days (see appendix 1). this means that the rest (54%) of the banks used more than 90 days to prepare and audit their yearly reports. figure 1 − trends of financial report timeliness, board financial expertise, board independence, board size and board diligence in the nigerian financial institutions (20102020). source: the nigerian stock exchange, 2020. during the year, the financial institutions used an average number of about 108 days to have an audited account. compliance rate however rose to 54.17% (13 out of 24 firms) in 2011, which indicated a marginal improvement in early reporting to stakeholders. the average time the financial institutions used to prepare and audit financial reports during the year was about 107 days, which indicated that unnecessary delays were still recorded by some of the financial institutions. 4,5 5 5,5 6 6,5 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 bdl 0 20 40 60 80 100 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 frt (%age) 0 2 4 6 8 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 bfe 6 6,5 7 7,5 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 bid 0 50 100 150 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 frt (days) 11 11,5 12 12,5 13 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 bsz 9 in 2012, there was a decrease in the rate of compliance with the regulation as only 50% of the financial institutions met the benchmark of 90 days and the average number of days recorded was about 142 days. by 2013 however, 54.17% of the financial institutions also presented their annual reports timely, with average time period of 104 days after financial year end, which showed an improvement in the rate of compliance with the regulation. more so, in 2014, about 63% of the companies were able to meet the stipulated time, which further reduced average time period to about 89 days. in addition, the figure showed a continuous improvement in the proportion of the financial institutions that made public their audited reports and accounts timely from about 71% in 2015 to 75% in 2016 and 2017 to 79% in 2018. this showed that more financial institutions realized that timely presentation of financial reports was important for decisions making. during the years, the average number of days it takes most of the firms to make public their financial reports and accounts was about 98 days, 83 days, 90 days and 87 days, respectively for 2015, 2016, 2017 and 2018. a sharp decrease in the proportion of the financial institutions that complied with the regulation in 2019 from 79% in 2018 to about 67% in 2019 was recorded. however, this did not affect the timeliness of accounts as the average time of 87 days was still recorded. there was improvement also recorded in 2020 with a percentage of 79% of the financial institutions that made public their financial reports and accounts early with an average time period of about 86 days. it can therefore be posited that the year 2020 witnessed the highest rate of compliance with the requirement of the code. fig. 1 further shows average board diligence for the selected financial institutions. the number of board meetings, on the average was about 6 from 2010 to 2019 and 5 times, on the average, in 2020. the financial institutions were adjudged to have done well in this corporate governance mechanism because the law requires their boards to hold four (4) meetings within a year. whether this culminated into timely preparation and presentation of audited financial reports and accounts is however yet to be ascertained. in the same vein, the law requires financial institutions to have a maximum board size of 20. however, most of the selected firms did not achieve this maximum during the period under consideration. the average number of directors revolves around 12 throughout the period. this means that most of the financial institutions had potentials to increase the size of their board whenever the need arises. moreover, trends of the independence of the boards during the period was also presented. the average size of independent directors was 7 during 2010-2020. this was found to be more than proportionate to the average board size of 12 and the maximum expected by the law if the maximum of 20 directors is complied with. it can therefore be posited that boards of directors of most of the financial institutions were independent. the financial expertise of the boards shows that, on the average, 5-6 directors had financial background and the required expertise in each of the years, with just little difference from one year to the other. we therefore reasonably expected board directors with financial expertise to significantly impact on audited reports timeliness for the selected companies. 3. literature review agency theory forms theoretical bedrock of this study. the theory explains board characteristics whereby each of them functions as a monitoring mechanism that can be used to reduce financial reports delay in corporations (jensen & meckling, 1976). the theory posits that a relationship exists when one person or a group of people, called agent, is acting 10 on behalf of another, called principal (okpala, 2012) and that how the agents and principals relate may cause agency conflicts. the theorists posited that governance is based on resolving conflict of interests between a company’s owners or providers of finance or shareholders and its managers. the theory therefore emanated as a result of the issues that normally arise between the shareholders and those in charge of the company (management), otherwise referred to as agency problem. according to the proponents of the theory, agents will act with rational self-interests. this is because they will want to maximize monetary compensations, job stability and other perks of office and do no more than seek to appease the shareholders. they cannot be expected to act to protect shareholders’ interests, as they would want to first satisfy their own self-interests. therefore, they are to be monitored and controlled to ensure that their principals’ interests are best served (garuba & otomewo, 2015). to do this, the theory pointed out certain roles that corporate governance mechanisms should play, which were assumed to be an effective tool to minimize agency problems (sakka & jarboui, 2016). the primary responsibility of directors therefore relates to governance functions of board in serving the shareholders’ interests of wealth maximization by approving the decisions made by the management and monitoring their implementation. according to wan & adamu (2012), corporate governance is an important monitoring device that boards of directors use to minimize the problems brought about by the principalagent relationship. it was primarily developed to ameliorate inefficiencies, which emanate from moral hazards and adverse selection (afolabi & dare, 2015). according to these authors, corporate governance mechanisms include board diligence, board size, board financial expertise, board independence, internal audit, boards structuring, segregation of duties and policy development. the governance mechanisms are used by owners to protect themselves against any expropriation by outsiders and to monitor the actions, policies and decisions of the agent (oecd, 2004); to monitor the activities and progress made by a company; and to take remediating actions when the company goes off the track. the lack of these mechanisms in a company will therefore allow managers to deviate more easily from shareholders’ interests (omolaye & jacob, 2017). empirical studies have provided explanations on the validity or otherwise of governance mechanisms effectiveness, most importantly board characteristics. in terms of crosscountry studies, baatwah, et al. (2015) examined the effect of governance mechanisms on timeliness of accounting information from companies in the middle east and north african countries. the study collected information from 116 companies listed on the muscat securities market over 2007-2011. random effects model was used and board characteristics (expertise and size) and financial expertise of audit committee negatively affected timeliness of accounting information. the association of board independence and diligence; audit committee’s independence, size, and diligence; and external auditor type with timeliness of accounting information was however insignificant. the authors concluded that the governance mechanisms were not effective in middle east and north africa countries as in developed countries. holtz & neto (2014) studied the association between board structural compositions and accounting information of non-financial firms listed on the brazilian securities, commodities and future exchanges. the economática database and annual reports of the firms provided data covering 2008-2011 for the study. the authors employed multiple regression to analyze data. the analysis provided data that indicated positive effect of that 11 board independence on financial reports’ quality and that stronger governance structures led to increased quality of accounting information. the validity or otherwise of the predictability of board size and independence on audit time lag was also investigated by agyei-mensah (2018) and al-daoud, et al. (2015). al-daoud, et al. (2015) explored information collected from 112 jordanian business entities listed on the amman stock exchange over 2011-2012 and multiple regression was also employed to analyze data. results from the analysis showed that companies with more independent board members significantly took shorter time to prepare and audit accounts and that companies with larger board size significantly led to higher audit report lag. again, boards with more diligence (meetings) recorded shorter audit report lag. in the same vein, agyei-mensah (2018) investigated the impact of corporate governance and reporting lag on financial performance of quoted companies in ghana. the author used 90 firm-year data over 2012–2014 and employed descriptive analysis tools to obtain background information on the variables of interest. this was followed by inferential statistical analysis using multiple regression to analyze data. descriptive analysis results indicated that over the period, mean value of audit report lag was 86 days; with standard deviation of 21 days, minimum of 55 days and maximum 173 days. data from using regression analysis technique showed that board independence and board size had significant negative impact on audit report lag. moreover, the inter-relationship of corporate governance, auditors’ characteristics and timeliness of accounting information in the light of financial security law (2005) amendments in tunisia, was examined by sakka & jarboui (2016). the study collected panel data from 28 listed companies over the years 2006-2013. the data was analyzed using generalized least square (gls) regression analysis technique. empirical evidence showed that audit report publication date was short and external auditor’s characteristics were high and that good corporate governance played a pivot role in improving quality of accounting information. in nigeria, some studies gave explanations on the impact of different corporate governance mechanisms on the quality of earnings information. these included azubike & aggreh (2014), chi-chi & friday (2016), ohaka & akanni (2017), paulinus, et al. (2017), uthman, et al. (2018); igbekoyi & agbaje (2018); and asiriuwa, et al. (2021). azubike & aggreh (2014) investigated factors determining audit reports timeliness and adopted crosssectional design, which relied on data sourced from audited accounts and reports of listed manufacturing firms during 2010-2012. results from ordinary least squares (ols) regression analysis provided data, which showed significant positive influence of board size and board independence on audit report lag. contrastly, ohaka & akanni (2017), using data from listed firms in nigeria over 2000-2011, found non-significant impact of board independence on timely financial reporting. while chi-chi & friday (2016) analyzed data collected from five purposively selected listed companies in nigeria over the period 2006-2015 using vector autoregressive (var) analysis and found positive impact of board structure on financial reports quality, paulinus, et al. (2017) analyzed data collected from 15 quoted companies producing consumer goods over the periods 2012-2016. the authors employed simple regression technique and found significant negative relationship of board size with audit delay. however, igbekoyi & agbaje (2018) used survey method of enquiry and employed econometric tools such as unit roots, co 12 integration and error correction model to analyze data from nigerian listed banks over 2006-2015. the authors found board structure had significant positive effect on accounting information disclosure and concluded that corporate governance contributed to accounting information quality in the nigerian banking sector. financial reports timeliness model was estimated by uthman, et al. (2018) by employing generalized least squares (gls) technique to investigate the effects of some board characteristics on financial report timeliness in 15 nigerian listed insurance companies over 2011-2016. random effect regression results showed that board meetings and board size had significant positive effect on the quality of accounting information. but almasdy (2018) failed to support the finding for board size because evidence from pearson correlation used to analyze data obtained from 68 companies listed on amman stock exchange over 20112015 accepted null hypothesis of no significant relationship. companies with less than eight board members led to untimely financial reports while companies with more than eight board members led to financial reports timeliness. the foregoing clearly shows that extant literature on financial report quality is quite extensive. however, a number of gaps still existed and necessitated further researches. to the best of our knowledge, unlike for other sectors, ample empirical evidence is lacking on the average time financial institutions in nigeria used to prepare and audit financial reports. again, the focus of most of the previous studies has been on board size and board independence with little attention on board diligence and financial expertise. besides, little studies provided explanations on the predictability of the four selected board characteristics (size, independence, financial expertise and diligence) on the timeliness of accounting information from financial institutions in nigeria. in addition, empirical evidences from previous studies were mixed and inconclusive, given the diverse methodologies adopted, some of which fell short of econometric tests such as normality, multicollinearity, heteroskedasticity and serial correlation; the short panel nature of data used; and the autoregressive nature of the dependent and explanatory variables, which informed the need to adopt a better analytical method. thus, there is need to adopt dynamic panel data approach using system gmm estimator to analyze data. however, ordinary least squares (ols) and generalized least squares (gls) were commonly used in previous studies (see table 1). we therefore extended previous studies such as azubike & aggreh (2014), chi-chi & friday (2016), paulinus, et al, (2017), ohaka & akanni (2017), igbekoyi & agbaje (2018); uthman, et al. (2018) and asiriuwa, et al. (2021) with additional variables and a different estimation technique. consequently, academics irrespective of their socioeconomic status expect improvement in what bothers on bpc elements such as poor funding, inadequate infrastructure, neglect of collective agreements, delay in promotions, arbitrary decisions, among others. however, their awareness of participation in, and level of benefit from collective agreements can be largely determined by their sociodemographic characteristics. 13 table 1 − summary of review of methodological literature on board characteristics and financial report timeliness author year/ country variables measured methods of analysis major findings 1 singh & sultana 2011/ australia board independence, financial expertise, diligence. ols regression boards played substantial role in reducing audit lag. 2 apadore & noor 2013/ malaysia board independence, audit time descriptive statistics, ols regression board independence did not play any significant role in reducing audit report lag 3 sakka & jarboui 2014/ tunisia board size generalized least square and logistic regression. panel data approach the panel data regression analysis revealed that board size significantly affected financial reports timeliness. 4 holtz & neto 2014/ brazil board size, board independence multiple ols regression model board independence positively influenced quality of accounting information. board size negatively affected quality earnings information. 5 baatwah, ahmad & salleh 2015/ oman board independence, board expertise, board size panel data, multiple regression analysis board size and expertise significantly associated with audit report lag. there is insignificant association between board independence and audit report lag. 6 ishak 2015/ malaysia board size, board independence descriptive and multivariate analysis (logistic regression) board independence negatively related to acceptance of modified audit report. board size did not influence the issuance of modified audit report. 7 al daoud, ku ismail & lode 2015/ jordan board size, board diligence, board independent, board financial expertise multiple ols regression analysis greater number of directors related with higher audit report lag. boards with more meetings had shorter audit report lag. board independent significantly led to shorter financial reporting time. board financial expertise associated positively with financial reports timeliness. 8 basuony, mohamed, hussain & marie 2016/ arab board size, board independence ordinary least square (ols) board size and board independence had significance relationship with audit report lag. 9 sakka & jarboui 2016/ tunisia board size, board independence generalized least squares a good structure of corporate governance played key role in improving the quality (timeliness) of financial reports. 10 alfraih 2017/ kuwait board independence, board size multivariate regression board independence and board size had significant effect on audit report lag 11 raweh, handayani, yustikasar 2017/ indonesia board independence multiple ols regression analysis board independence had no influence on audit report lag 14 12 agyeimensah 2018/ ghana board size, board independence multiple ols regression analysis board size and board independence had negative impact on audit report lag 13 almasdy 2018/ jordan board size pearson correlation coefficient matrix analysis board size showed no significant effect. 14 mohamed & elshawarby 2018/ egypt board size, board expertise, board independence multiple ols regression analysis board size, board expertise and board independence had significant impact 15 warrad 2018/ jordan board size, board diligence multiple ols regression analysis there is a significant relationship between corporate governance characteristics and audit report lag in jordan 16 raweh, kamardin & malek 2019/ oman corporate governance mechanism audit committee characteristics panel data, multiple ols regression there was no significant relationship between audit committee independence, meetings and audit report lag in oman. 17 azubike & aggreh 2014/ nigeria board size, board independence crosssectional research design, ordinary least square regression technique a significant relationship existed between board size and audit report lag and between board independence and audit report lag. 18 ilaboya & christian 2014/ nigeria board independence, board size ols regression analysis board size had significant effect on audit report lag, board independence had no significant effect on audit report lag 19 chi-chi &friday 2016/ nigeria board size, board independence multiple ols regression analysis board independence negatively affected financial reporting quality, board size had positive impact on financial reporting quality 20 paulinus, oluchukwu& samtochukwu 2017/ nigeria board size simple regression technique, ols estimation technique board size had significant negative relationship with audit delay of corporate firms in nigeria. 21 ohaka & akanni 2017/ nigeria board independence multiple ols regression analysis board independence was found to be insignificant. 22 igbekoyi & agbaje 2018/ nigeria board size unit root, co integration and error correction model board size had significant positive relationship with accounting information disclosure. 23 uthman, ajadi & asipita 2018/ nigeria board size, board independence, board meeting gls multiple regression technique board meeting, had negative effect on the timeliness of financial reporting. board size had positive and significant effect on the timeliness of financial reporting. 24 asiriuwa, adeyemi, uwuigbe, uwuigbe, ozordi, erin & omoike 2021/ nigeria board size, board independence, board diligence, board financial expertise, ceo gender logistic regression analysis, ols estimation technique all the board characteristics had bigger effect on the timeliness of financial statements of the financial institutions. source: prepared by the authors, 2022. 15 4. methodology ex-post facto research design, which deals with existing data that cannot be manipulated by researchers, was employed. we obtained data from audited reports of 24 purposivelyselected financial institutions based on data availability: 12 deposit money banks and 12 insurance companies listed on the nigerian stock exchange (nse) as at december 2021. currently, only 13 deposit money banks and 23 insurance companies were listed on the nse. so, to arrive at the sample size of 24 financial institutions, companies that failed to have audited accounts consistently over the period of interest were dropped. at one time or the other, some of the companies were delisted and hence, their annual reports were not publicly available during these periods. financial sector was selected due to the pivot role it plays in the nigerian economy, the various financial scandals that have caused loss of credibility in financial reports in the past and the regulatory requirements developed by appropriate authorities and regulators in order to stabilize the sector. the data were publicly available and collected from the nse. the data covered eleven (11) years from 2010-2020, making a total number of 264 observations of panel data. panel data is suitable for controlling unobserved individual specific effects caused by heterogeneity of cross sections in a sample. non-controlling of these effects often leads to bias in the resulting estimates (olubusoye, et al., 2016). pane data is employed where more informative and richer data sets, more degrees of freedom, more variability, less collinearity among variables, more reliable estimates and more accurate inference of model parameters are needed. it is also appropriate for studying complex issues of dynamic behavior. 4.1 model specification the financial report timeliness model is specified using equation in static form as infrt = β0 + β1bidit + β2bdlit + β3bfeit + β4inbszit + βjƛj,it + ɛit (1) however, the dynamic panel data version of the model is specified as follows: n n n n n fit=∑ βf,mfi,t-m +∑ βd,p di,t-p +∑ βl,q li,t-q +∑ βe,r ei,t-r +∑ βz,s zi,t-s + βjƛj,it + ώi + ϐt + ɛit (2) m=1 p=0 q=0 r=0 s=0 where: f = frt, which is financial report timeliness d = bid is board independence l = bdl is board diligence e = bfe is board financial expertise z = inbsz is board size ƛ = vector of control variables i.e. leverage (lev), profitability (roa), audit type (aud) and firm size (fsz) β1 – βj = coefficient of explanatory variables; ɛ = stochastic term i = cross sectional (banks) n = 1,2,… in = natural logarithm t = time series ώi is included to capture unobservable individual firm fixed effects. 16 we also considered the unobservable fixed effects over time (ϐt). the a priori expectation is that β1 – βj < 0. 4.2 measurement issues dependent variable of this study is financial report timeliness while board characteristics (independence, diligence, financial expertise and size) are the explanatory variables. we introduced some control variables to the model in a stepwise manner for robustness check. these included audit type, financial conditions (leverage and profitability) and firm size, as used by singh & sultana (2011) and uthman, et al. (2018). we measured all variables as follows: 4.2.1 financial report timeliness this can be achieved through reporting accounting information on time and with sufficient regularity so as to fulfill users’ economic decision-making needs (ohaka & akanni, 2017). companies and allied matters act, 1990 requires all limited liability companies to lay audited reports before shareholders at agm not later than six months after year-end. however, sec imposed restriction on the number of days that financial institutions should file annual audited reports to the commission and the general public, which is 90 days after accounting year ends. where earnings information is not provided on time then, it may not be relevant for decision-making. many previous studies measured this variable using audit report lag with the presumption that accounts must be audited before they can be presented to the public. financial report timeliness was therefore measured as the difference between accounting year-end and the date audited report is signed (raweh, et al., 2019). since we are interested in how fast a financial institution makes audited earnings information readily available to users, we measured the variable as the number of days a financial institution used to prepare and audit accounts after year-end. hence, the shorter the number of days, the timely the financial reports. 4.2.2 board independence corporate governance code developed by sec (2012) provided that non-executive directors should be in majority of all board members. again, the cbn (2014) code of corporate governance for banks and discount houses specified the number to be five (ofo, 2015) while the national code of corporate governance, 2018 provided that not less than two-third of a board should be composed of non-executive directors, and that half of it should be independent directors (derri & abdullahi, 2017). according to ilaboya & christian (2014), the importance of non-executive directors was justified for two reasons. first, they will be able to carry out their functions freely as they will not be subjected to influence from the majority shareholders or the management. second, they are in position to monitor the management and ask questions since they have no economic interests in the companies. this shows that non-executive directors, with right skills set and who have no interests that can conflict with their power to exercise independent judgment, are in better position to monitor management and all executive directors who are insiders (ibadin, et al., 2012). in line with the provisions of extant codes and previous studies like ilaboya & christian (2014) and sakka & jarboui (2016), we measured this explanatory variable as the size of non-executive directors in a board. 17 4.2.3 board diligence this refers to the frequency of meetings held by a board in a year. it is a means of evaluating how well members of a board play their roles in representing shareholders (hashim & rahman, 2014). this is because board activities are reflected through the commitment of board members in playing their role as an agent of shareholders (jensen & meckling, 1976). bala & kumai (2015) argued that more diligent boards are likely to improve internal governance, which can have positive effect on early submission of annual reports and accounts. in addition, hashim & rahman (2014) asserted that board meeting frequency facilitates auditors’ reliance on a firm’s internal controls, used to minimize board’s workload and consequently result in decreased financial report delay. the board is therefore probably suited to monitor the production of financial reports by the management (ebimobowei & yadirichukwu, 2013). the law requires that board of directors must hold meetings at least once every quarter. baatwah, et al. (2015) used number of meetings to measure this variable and we also adopted this measure in this study. 4.2.4 board financial expertise it is ordinary expected that boards with financial and accounting knowledge are likely in a better stance to monitor and guide management activities. this is because boards with the expertise are expected to follow up financing, accounting and financial management activities at all stages and when preparing accounts as well as ensuring compliance with generally accepted accounting principles (gaaps), accounting standards and other regulatory and professional requirements (mohamed & elshawarby, 2018). to carry out this task effectively and efficiently, according to bala & kumai (2015), board members must be able to ask vital questions from management. the quality of internal resources (human) can be helpful to a board by having the skills, experience and knowledge, which can lead to timeliness and reliability of accounting information. as used by al-daoud, et al. (2015), we measured financial expertise as the number of members with relevant financial and accounting skills and experience in a board. 4.2.5 board size this represents the number of members on a board of directors (ibadin, et al, 2012). cbn code of corporate governance, 2014 stipulated board size for a financial institution to be a minimum of 5 and a maximum of 20, comprising independent, executive and nonexecutive directors. according to agency theory, boards with large number of directors will cause agency cost like communication issue between the management and directors (ngamchom, 2015). salehi & abedini (2008) established that board size significantly related to early submission of audited reports of corporations. in addition, larger boards were found to have cooperative expertise and were more capable of carrying out responsibilities (akhtaruddin, et al., 2009). we measured this explanatory variable as done by sakka & jarboui (2016) and azubike & aggreh (2014) that is, the total number of board members in a company per year. 4.2.6 control variables we considered some control variables that can be correlated with financial report timeliness in the model. as documented in the literature, audit type (aud), firm size (fsz), leverage (lev) and profitability (roa) are determinants of financial report quality. we measured audit type by considering whether or not the audit firm engaged by each financial institution during a year was a big-4. where a big-4 auditor is engaged, 18 we assigned 1 and if not, 0. this means that audit type is a dummy variable. in addition, we measured firm size as total assets for a year and profitability as a ratio of earnings before taxes (ebt) to total assets while leverage was measured as a ratio of total debts to total assets. 4.3 estimation techniques for proper estimation of equation (2), there is the need to address some econometric issues. we carried out pre-estimation tests such as normality test using skewness/kurtosis and shapiro-wilk tests; pearson’s multiple correlation for multicollinearity; and autocorrelation using cumbi-huizinga (1992) test. we tested the dependent variable for possible autoregressive (ar) or moving average (ma) for the series generating process in order to determine whether or not lagged dependent variable should be included as a regressor in models. the autocorrelation test was also carried out on all explanatory variables to ascertain whether or not they are strictly exogenous. based on the results obtained from these tests, we employed dynamic panel data technique using system gmm to estimate models. this technique is appropriate due to the nature of dependent variable i.e. financial report timeliness, which was autoregressive of higher order. we estimated models by using stata command xtabond2, developed by roodman (2006). moreover, post-estimation tests such as serial heteroskedasticity, overidentifying restrictions and joint significance of parameters using blundell-bond, sargan/hansen tests and f-test, respectively were carried out to ensure robustness of estimated results. 5. results 5.1 descriptive statistics results in table 2 showed timeliness of audited reports, which was the number of days listed financial institutions used to prepare and audit financial information after year-end. data from the table showed an average ratio of 99 days with variability around the mean of about 51.5 days. on the average, this indicated that majority of the financial institutions had audited reports after the 90 days stipulated by law during the period. the minimum number of days recorded was 30 days, which implies that some of the companies made available their annual audited reports very timely while the maximum of 358 days recorded implies some of them did not comply with the regulation at all. these results were far higher than those obtained by baatwah, et al. (2015), which recorded that, on the average, external auditors took 51-52 days after accounting year-end of companies to finalize audit tasks in omani and the results established by abernathy, et al. (2014) and ghafran & yasmin (2018) for us (55 days) and uk (64 days) firms. differences in timeliness of audited accounts of corporations among countries may not be unconnected with differences in industries and board characteristics like financial expertise, which was found to be 43% by baatwah, et al. (2015) in oman, on the average. differences in board independence, board diligence and board size could also have accounted for the difference. it was revealed in table 2 that the average number of independent directors was seven (7) out of the average board size of 12, implying 58%, with a minimum of three (3) directors and a maximum of thirteen (13) directors. this showed that on the average, board members were more independent compared to the 33% required by 2018 code. in addition, the table shows average board diligence of about 6 19 meetings, on the average, were held per annum by the boards of the selected companies. this was also higher than the minimum of four meetings required by the law and 2014 cbn code. average board size (board members) was found to be 12 directors with a minimum of six (6) directors and a maximum of 21 directors, against the maximum of 20 directors recommended by the 2018 national code. this therefore suggested that some of the companies can still accommodate more board members, where and when necessary. table 2 − descriptive analysis results variable observation mean standard deviation minimum maximum frt (days) 264 99.303 51.502 30 348 bid (directors) 264 7.064 2.254 3.00 13.00 bdl (times) 264 5.958 1.923 2.00 13.00 bfe (directors) 264 5.417 2.654 1.00 16.00 bsz (directors) 264 11.928 3.419 6.00 21.00 aud (dummy) 264 0.845 0.363 0.00 1.00 fsz (n) 264 1.12e+12 1.79e+12 4.33e+9 9.86e+12 roa (%) 264 0.0355 0.041 -0.1422 0.3412 lev (%) 264 0.6721 0.298 0.0012 2.547 source: authors’ computation (2022). for control variables, a high mean value of 0.845 for audit quality indicated that most of the companies engaged big-4 firms to audit accounts during the period. in addition, firm size recorded an average value of about n1.12 trillion with standard deviation of n1.06 trillion and a minimum and maximum value of n4.33 billion and n9.86 trillion worth of total assets, respectively. the average firm size indicated that the companies invested heavily in both short and long-term assets. again, a higher mean leverage of about 67% was found for the financial institutions with standard deviation of about 30% from the mean value. this showed that the assets of the companies were financed heavily by debts and hence; highly levered. their financial condition further shows a roa (return on assets), on the average, of 3.55% per annum (standard deviation of 4.1%) with a maximum of about 34% and a minimum of -14.2%. 5.2 preliminary analysis due to the different scales of measurement of the variables, we transform frt, bsz and fsz. this helps to reduce the problem of heteroskedasticity in the variables. besides, standard deviation and range (difference between maximum and minimum values) for all the variables, especially, financial reporting timeliness, firm size and leverage were very large but not higher than their mean values except in the case of roa and firm size. prior to estimating the regression model of this study, we carried out preliminary analyses. these include normality test using skewness/kurtosis and shapiro-wilk statistics; multicollinearity test using pearson’s multiple correlation and autocorrelation test using cumby-huizinga test. all these tests assisted in determining the appropriate technique for estimating the financial report timeliness models. 5.2.1 normality test results table 3 shows the extent of normality of each variable of interest in this study. kurtosis is a measure of combined weight of the tails relative to the rest of the distribution while 20 skewness measures the symmetry in a distribution. skewness and kurtosis statistics, respectively showed that all variables positively skewed and were less than 3, which is an indication of platykurtic distribution of the variables. the adjusted chi-square statistics rejects the null hypothesis of normal distribution for all variables except board diligence and board financial expertise. the z-score for the variables under shapiro-wilk test also showed similar results. therefore, one of the conditions for using ols technique has been violated. table 3 − normality test results var skewness/kurtosis test shapiro-wilk test remark skewness kurtosis adj. chi2 prob. w v z prob. infrt 0.475 0.001 10.71 .005 0.940 5.647 3.87 .000 not normal bid 0.005 0.070 9.75 .008 0.944 5.306 3.73 .000 not normal bdl 0.653 0.191 1.95 .377 0.993 0.627 -1.1 .852 normal bfe 0.282 0.397 1.92 .384 0.993 0.685 -0.9 .802 normal inbsz 0.025 0.242 6.09 .048 0.979 1.975 1.52 .064 not normal infsz 0.097 0.005 9.21 .010 0.961 3.664 2.91 .002 not normal aud 0.000 0.000 68.9 .000 0.821 16.86 6.32 .000 not normal lev 0.247 0.000 29.6 .000 0.521 45.13 8.52 .000 not normal roa 0.000 0.010 23.1 .000 0.894 10.00 5.15 .000 not normal source: authors’ computation (2022). 5.2.2 multicollinearity test results table 4 shows results of pair-wise correlation of all variables. it provides information that indicate absence of multicollinearity problem among the regressors. the rule of thumb specified by lewis-beck (1993) is that the correlation between any pair of two variables must not be high and not more than 0.8 for there to be lack of evidence of collinearity. the data in table 4 showed no evidence of multicollinearity problem among the variables because all of them (including control variables) had a correlation of less than 0.8, pairwise. table 4 − correlation results matrix infrt bid bdl bfe inbsz infsz aud lev roa infrt 1.0000 bid 0.0605 1.0000 bdl 0.1885* 0.0868 1.0000 bfe 0.2181* 0.1518 0.1899* 1.0000 inbsz 0.0857 0.3176* 0.3497* 0.5184* 1.0000 infsz 0.2962* 0.1111 -0.1733 -0.0110 0.0481 1.0000 aud 0.0570 0.4269* 0.0051 0.1725 -0.0473 0.4076* 1.0000 lev 0.0129 -0.2346* 0.0604 0.2819* 0.3461* -0.0563 -0.2485* 1.0000 roa 0.0237 -0.0679 -0.2069* -0.1376 -0.1615 0.1836* 0.1558 -0.1270 1.0000 source: authors’ computation (2022). * significant at less than 5 % level. 5.2.3 autocorrelation test results to obtain information on time series properties of financial report timeliness and regressors, we carried out autocorrelation tests. in each case, we test for the null hypothesis that a variable is not serially correlated at specified lags. table 5 shows that all the variables: dependent, explanatory and control variables were endogenous. except 21 financial report timeliness (lfrt) and board financial expertise (bfe) that exhibited autoregressive of order 4, that is, ar(4), all other variables depended on their past values at higher lag orders (endogeneity problem), indicating that all the regressors were not strictly exogenous. table 5 − autocorrelation test results variable ar statistics order remark chi-square p-value lfrt 7.875 .005 ar(4) endogenous bid 7.390 .007 ar(6) endogenous bdl 4.109 .043 ar(5) endogenous bfe 11.025 .001 ar(4) endogenous lbsz 5.624 .018 ar(7) endogenous lfsz 7.665 .006 ar(8) endogenous aud 6.473 .011 ar(6) endogenous lev 5.419 .020 ar(7) endogenous roa 19.292 .000 ar(5) endogenous source: authors’ computation (2022). given the variables’ time series properties and the short panel data used in this study, we employed dynamic panel data model, which included unrestricted lag structures and used gmm because estimating static model might lead to some problems. the technique helped to control for endogeneity problem of lagged dependent variable, omitted variable bias and unobservable panel heterogeneity as well as measurement errors in variables. 5.2.4 testing for appropriate estimation method to compare different estimation methods such as ols, fe, difference gmm and system gmm in column 1-4, regression analysis was carried out on financial report timeliness model and results were presented in table 6. we presented results for the four different estimation methods for ar(1) process because lags of the explained variable for orders higher than 1 were not significant. results showed that coefficients behaved exactly as expected and estimates for lagged explained variable were 0.418 in specification (1); 0.157 in specification (2); 0.220 in specification (3); and 0.402 in specification (4). in ols model, estimate was biased upward; and both fe and difference gmm estimates were biased downward. estimate in system gmm lies between upper bound of ols model and lower bound of fixed effects and difference gmm models. this showed that system gmm technique should be used to estimate dynamic model specified in equation (2). a system gmm is an augmented estimator, which uses two sets of equation, one of them written in levels form with first differences as instruments and the other in first differenced form with levels as instruments (roodman, 2009). blundell & bond (1998) developed system gmm estimator and it was an improvement on the standard arellano and bond gmm estimator. we used two-step system gmm. this is because it is more robust to address heteroscedasticity and autocorrelation problems than one-step system gmm and yields a more asymptotically efficient estimates than the later (olubusoye, salisu & olofin, 2016). 22 table 6 − ar(1) process of financial report timeliness variable 1 ols 2 fe 3 dgmm 4 sgmm lag lfrt 0.4184*** (.000) 0.1567** (.047) 0.2196 (.239) 0.4015*** (.009) constant 1.1086*** (.000) 1.6118*** (.000) 1.1416*** (.000) observations no. of firms 264 24 264 24 264 24 264 24 *** and ** denote significant levels at 1 and 5 percent, respectively. source: authors’ computation (2022). 5.2.5 control variables and financial report timeliness appendix 2 showed the results obtained from estimating the effect of the four control variables on financial report timeliness using the system gmm estimation method. the results showed that only profitability and firm size had significant relationship with financial reports timeliness in all the models. for all estimations made individually and for all the possible combinations of the control variables, these two variables consistently had significant effect whereas, audit type and leverage consistently did not have any significant effect. the negative results for models that involved profitability and firm size in the table implied that higher profitability and larger firms tend to lead to lower number of reporting days hence, timely financial reports were prepared and audited. these results indicated that only profitability and firm size should be included as regressors in financial report timeliness models to be estimated. 5.3 regression results and discussion table 7 contains results of different models estimated in this study. we introduced control variables and dummy variable (industry) in a stepwise manner to check robustness of models. specification (5) shows results from model without any control variable; specification (6) with profitability (roa) as the only control variable; and specification (7) shows results from model with firm size (fsz) as the only control variable while specification (8) combines roa and fsz as control variables in model. the choice of specification will only affect control variables and has no influence on the estimates of board characteristics (size, independence, diligence and financial expertise). in table 7, all reported robust standard errors were corrected for sample bias, considering small sample size used in this study (windmeijer, 2005). in the table, we reported instrument counts and post-estimation test statistics to show robustness of our estimates. wald-statistics were all significant at 1 percent level, which confirmed joint significance of explanatory variables. again, insignificant of the second order autocorrelation ar(2) test statistics suggested that lagged endogenous variables are valid instruments. in addition, hansen/sargan test of over-identification did not reject the null hypothesis at 5 percent significance level, which further confirmed the appropriateness of instruments used in all estimations. results across different specifications in the table were qualitatively similar, especially for lagged dependent variable and explanatory variables. the coefficient of the lagged financial report timeliness was significant and positive in all the five regressions, which 23 showed the importance of the variable in the models. this suggested strong conditional convergence of financial report timeliness in the short time period. the size (0.347, 0.357, 0.414, 0.309 and 0.455 for column 5 to 9, respectively) of the coefficient was relatively stable in all specifications. according to roodman (2006), variables that are not strictly exogenous, can either be dealt with as predetermined or endogenous in gmm system framework. since we treated board characteristics as endogenous, valid instruments stop one year before, that is, at period t-2 for the first differenced equation and at t-1 for levels equation in period t. the corporate governance variables show consistent effect on financial reporting timeliness across the specifications except for board diligence. given the estimates in column (8) of the table, result for board independence (bid) was consistently positive and significant at different levels, suggesting that higher board independence was significantly associated with untimely financial report. the result showed that the more independence a board, the higher the number of days used to prepare and audit financial reports during the period hence; the more the untimely of the financial reports. we expected a priori that board independence would lead to reduced number of days used to prepare and audit accounting information. however, the results showed otherwise, indicating that large number of independent directors did not intensify monitoring of the management and executive directors, as demanded by agency theory. the result is likely to be an indication of many issues affecting accounts or conflicts between management and non-executive directors, the resolution of which caused delays in accounts and reports preparation and/or auditing. the result supported the findings of agyei-mensah (2018); ohaka & akanni (2017); raweh, et al. (2019); ishak (2015); and apadore & noor (2013) who found positive influence of board independence on audit report lag hence; untimely preparation and audit of financial reports. however, it contrasted the outcomes of bausony, et al. (2016); al-daoud, et al. (2015); holtz and neto (2014); azubike & aggreh (2014); and ilaboya & christian (2014) who found significant negative impact of board independence on audit report lag hence; timely preparation and audit of financial reports. estimates in column (8) further showed that increasing the number of independent directors by one led to 0.2 percentage increase in the number of days used to prepare and audit financial reports in the short run, ceteris paribus. the impact of board independence is economically meaningful given the sample mean of financial reports timeliness of 99 days. increasing the number of independent directors in a firm by 5 will therefore lead to an increase of 1 percent (that is, 1 day) in the number of days that is likely to be used in preparing and auditing of the financial report of the firm; making it 100 days, on the average. this is therefore a warning to any of the financial institutions that may likely be contemplating increasing the number of independent directors that greater independence of directors will marginally lead to a little delay and untimely financial reporting. similarly, board financial expertise (bfe) had significant positive effect on financial report timeliness contrary to a priori expectation of negative effect. this means that the corporate governance mechanism significantly caused delayed financial report preparation and auditing during the period. this is because the results in column (8) showed that higher board members with financial expertise led to increased delays in preparing and auditing of financial report. the result is not in tune with that of mohamed & elshawarby (2018) and al-daoud, et al. (2015) who established that board financial expertise had significant influence on early submission of audited reports. given estimates in column (8), increasing 24 number of board members with financial expertise by 1 marginally led to 0.03 percentage increase in period (days) a company used to prepare and audit report, in the short run. since, the effect was not substantial, the result was an indication that board members with financial expertise exercised minimal monitoring and control functions, which hence led to little delay in reporting. table 7 − regression results from system gmm variables (5) (6) (7) (8) (9) (10) l.lfrt 0.347** 0.357* 0.414*** 0.309* 0.455** 0.360* (0.168) (0.188) (0.149) (0.170) (0.209) (0.199) bid 0.0677** 0.0800** 0.0220* 0.199* 0.0823** 1.872** (0.0273) (0.0400) (0.0130) (0.105) (0.0370) (0.684) bdl 0.0591 0.00371 -0.0141 -0.0115 0.0133 -0.0845 (0.0589) (0.0244) (0.0192) (0.0182) (0.0220) (0.0886) bfe 0.0165 0.0292** -0.0210* 0.0258* 0.0414** 0.0321* (0.0125) (0.0120) (0.0121) (0.0143) (0.0190) (0.055) lbsz -1.009*** -0.953** 0.483* -0.770* -1.371* -0.721** (0.340) (0.403) (0.248) (0.397) (0.770) (0.303) lfsz -0.154*** -0.0815*** -0.0658** -0.0942** (0.0534) (0.0305) (0.0308) (0.0411) roa -1.611*** -1.810** -1.932*** -1.867* (0.502) (0.894) (0.728) (1.077) ind 0.474* (0.269) constant 4.471*** 4.495*** 2.326*** 3.985*** 5.091** -1.704 (1.187) (1.298) (0.778) (0.953) (2.033) (1.172) observations 240 240 240 240 240 240 number of firms 24 24 24 24 24 24 hansen test 16.43 14.06 11.12 12.70 10.54 15.66 hansen prob. 0.423 0.297 0.348 0.625 0.722 0.405 sargan test 15.27 13.18 17.60 24.35 10.70 18.53 sargan prob. 0.505 0.356 0.0620 0.0593 0.709 0.236 ar(1) test -2.532** -2.386** -2.424** -2.665*** -2.377** -2.120** ar(1) prob. 0.011 0.017 0.015 0.008 0.018 0.034 ar(2) test -0.455 0.0847 0.310 0.0462 -0.142 -0.360 ar(2) prob. 0.649 0.933 0.757 0.963 0.887 0.719 wald chi-square 30.25*** 45.13*** 38.84*** 52.86*** 106.89*** 7.23*** wald prob. 0.000 0.000 0.000 0.000 0.000 0.000 instruments count 22 19 17 23 23 23 standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 source: authors’ computation using stata (2022). for board size (bsz), this study found significant negative effect on financial reporting timeliness unlike the findings in past studies such as almasdy (2018); basuony et al. (2016); and ishak (2015) who found insignificant influence of board size on early 25 submission of financial reports. however, the finding is consistent with the conclusions reached by alfraih (2017); hassan (2016); and al-daoud, et al. (2015) that board size led to timeliness of financial reports. estimates in column (8) indicated that firms that consistently recorded untimely or delayed financial reports more or less than the average of 99 days (but not below 90 days stipulated by law) can address this problem by increasing the number of directors in their boards since larger board size led to financial report timeliness. the magnitude of the coefficient is however an indication that unnecessary increase in board size may not bring drastic reduction in number of days used in preparing and auditing financial report, in the short run. the result further showed that a percentage change (increase) in board size by one director will likely lead to a percentage change (decrease) of less than one (0.8) day to be used in preparing and auditing financial report. however, the results for board diligence (bdl) were consistently insignificant for all specifications. the finding is therefore not inconsistent with that of raweh, et al. (2019); warrad (2018) and baatwah, et al. (2015) who concluded that board diligence did not significantly affect early submission of audited reports. the result contrasted assumption of agency theory that when board members meet to discuss urgent matter affecting firms, there will be reduction in late presentation of annual reports. expectedly, the two control variables that is, profitability (roa) and firm size (fsz) had significant negative effect on the time spent by the selected financial institutions to prepare and audit annual reports. these results supported the findings of adebayo & adebiyi (2016) and indicated that increased profitability is likely to lead to timeliness of financial information while larger firms tend to prepare timely financial reports than smaller ones. 5.3.1 robustness checks for robustness checks, we add additional control variable by considering dummy variable for the industry (banks and insurance) of the selected sample in column (9) of table 7. the result provided evidence, which showed that industry had significant positive impact on timeliness of financial information. this means that audited accounts and reports of listed insurance companies in nigeria were not as timely as that of banks. in addition, we use different measures for both the dependent and explanatory variables (except board size) as follows. we measured financial report timeliness as a ratio of the number of days used to prepare and audit financial reports after the year-end to the number of days required by law (90 days). in addition, board independence was measured as a ratio of independent directors to board size in a year; and board diligence as a ratio of number of board meetings actually held in a year to the number of board meetings (4 times a year) specified by law. again, we measured board financial expertise as a ratio of board members with financial expertise in a year to board size of a company. results were presented in column (10) of table 7, which shows estimates that suggested similar results with the results presented in column (8). 6. conclusion effective corporate governance mechanisms are very crucial in enhancing timeliness quality of financial reports by corporations, through which investors’ confidence and firms’ credibility can be restored. a number of studies have empirically examined how board characteristics (independence, diligence, financial expertise and size) individually affect financial report quality. however, few of them explored their relative contributions in the context of the nigerian financial institutions. in addition, they did not employ dynamic 26 panel data approach in estimating the econometric equations specified in the studies. based on this premise, this study investigated impact of board characteristics on financial report timeliness in the nigerian financial sector. using information from audited accounts and reports of 12 listed deposit money banks and 12 listed insurance companies over 2010 to 2020, we found strong and consistent evidence that board characteristics (independence, financial expertise and size) had significant impact (positive and negative) on the time spent by the selected financial institutions to prepare and audit their annual reports. for board size that had significant effect on financial report timeliness with the expected negative sign, it means that the selected financial institutions employed the corporate governance mechanism as a monitoring and controlling tool to minimize agency problems. hence, the results supported the agency theory. the insignificant result for board diligence suggested that a mere increase in board meetings did not significantly improve and was not effective in predicting audited report timeliness. we concluded that board characteristics such as independence, financial expertise and size, as a corporate governance mechanism, bear sufficient information content and are important factors that can be used to explain and predict timeliness quality of audited accounts and reports. we then recommend as follows. firstly, regulators like sec and cbn should monitor the appointment of independent directors into boards of financial institutions after scrutinizing their quality, qualifications and pedigree before approval and confirmation are made. secondly, since board size had significant negative impact on financial report timeliness, it is recommended that board members should be increased by companies that currently spend more than 90 days stipulated by law. however, only those that have requisite skills, knowledge and capacity to develop policies that can aid prompt preparation and audit of financial reports should be appointed. thirdly, management of the firms should employ more accounting professionals with relevant financial reporting expertise and experience so as to enhance timely preparation and auditing of reports. in addition, giving insignificant effect of board diligence, firms with higher frequency of board meetings than necessary should cut down on the frequency of board meetings. the use of committee system is also recommended. finally, disclosure of board financial expertise in quantitative terms should be made mandatory by regulatory bodies such that the number of directors with the expertise can be readily ascertained for research purposes. the limitations of this study include non-inclusion of auditor’s characteristics rather than audit type used a control variable; its focus on only financial institutions and its inability to obtain data from all the financial institutions (21 deposit money banks and 58 insurance companies). more studies should therefore be carried out on other economic sectors or industries. for further studies, we suggest that the relationship between external auditors’ characteristics and financial report timeliness should be investigated though, the effect of audit type was found to be insignificant in this present study. this new research focus will provide some insights into how external auditor’s size, years of experience, capacity (number of clients), turnover and other firm-specific characteristics can have influence on financial report timeliness of their clients. besides, since industry had significant positive effect on financial report timeliness, further studies can look at differential impact of board characteristics on financial report timeliness in banks and insurance companies. this will further provide information on the extent of the corporate governance mechanisms (board characteristics) to explain or predict timely financial report in the two industries. other corporate governance mechanisms apart from board characteristics should also be looked into. 27 references 1. abernathy, j., beyer, b., masli, a., & stefaniak, c. 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(a cura di), cina e oltre. piccola e media impresa tra internazionalizzazione e innovazione, rubbettino, soveria mannelli. 30 appendix 1: number and percentage of financial institutions with early and late audited financial statements (2010-2020) % o f fi rm s (7 9 m on th s) 8. 33 8. 33 20 .8 3 16 .6 7 0. 00 8. 33 0. 00 8. 33 4. 17 4. 17 4. 17 % o f fi rm s (4 6 m on th s) 45 .8 3 37 .5 0 29 .1 7 29 .1 7 37 .5 0 20 .8 3 25 .0 0 16 .6 7 16 .6 7 29 .1 7 16 .6 7 % o f fi rm s (1 -3 m on th s) 45 .8 3 54 .1 7 50 .0 0 54 .1 7 62 .5 0 70 .8 3 75 .0 0 75 .0 0 79 .1 7 66 .6 7 79 .1 7 a u d it e d f in a n c ia l r e po r t t im e n e ss t ot al 24 24 24 24 24 24 24 24 24 24 24 6 p lu s m on th s 3 5 6 0 3 1 2 8 1 1 1 5 m on th s 4 1 2 3 1 1 0 1 1 4 1 4 m on th s 6 5 3 6 3 4 4 3 3 3 3 3 m on th s 10 8 12 12 16 14 15 12 15 11 11 2 m on th s 1 5 1 3 1 4 3 0 3 5 8 1 m on th 0 0 0 0 0 0 0 0 1 0 0 y ea r 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 31 appendix 2: effect of control variables on financial report timeliness standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 source: authors’ computation using stata (2022). variables (1) (2) (3) (4) (5) (6) (7) (8) l.lfrt 0.484** 0.387** 0.457*** 0.509*** 0.396*** 0.456*** 0.461*** 0.448*** (0.131) (0.154) (0.143) (0.173) (0.145) (0.146) (0.155) (0.155) lfsz 0.0312** -0.0620* 0.0368** (0.0155) (0.0344) (0.0144) lev 0.0156 -0.0227 (0.0791) (0.0887) aud 0.0199 -0.0205 0.120 (0.0580) (0.0539) (0.0898) roa 1.099*** -1.725** 1.211*** -1.117** (0.477) (0.760) (0.420) (0.507) constant 2.341*** 2.913*** 2.408*** 2.167*** 3.101*** 2.484*** 2.457*** 2.569*** (0.598) (0.765) (0.684) (0.798) (0.750) (0.670) (0.741) (0.763) observations 240 240 240 240 240 240 240 240 number of firms 24 24 24 24 24 24 24 24 hansen test 22.23 19.63 20.21 13.59 18.51 21.49 20.69 16.80 hansen prob. 0.328 0.417 0.382 0.257 0.423 0.310 0.354 0.331 ar(1) test -2.88*** -2.413** 2.660*** -2.451** 2.664*** 2.746*** 2.712*** -2.477** ar(1) prob. 0.004 0.0158 0.0078 0.0143 0.00772 0.00603 0.00670 0.0133 ar(2) test 0.70 0.370 0.581 0.622 0.391 0.674 0.692 0.427 ar(2) prob. 0.483 0.711 0.561 0.534 0.696 0.500 0.489 0.669 wald chisquare 18.11*** 31.62*** 14.13*** 8.66** 14.55*** 18.42*** 15.95*** 42.03*** wald prob. 0.000 0.000 0.001 0.013 0.001 0.000 0.001 0.000 instruments count 23 22 22 14 22 23 23 19 32 appendix 2 (cont.): effect of control variables on financial reporting timeliness variables (9) (10) (11) (12) (13) (14) (15) l.lfrt 0.443*** 0.518*** 0.419*** 0.396*** 0.453*** 0.460*** 0.488*** (0.162) (0.155) (0.135) (0.131) (0.158) (0.150) (0.155) lfsz -0.0426** -0.0415*** -0.0449*** -0.0587* -0.0457*** (0.0178) (0.0132) (0.0152) (0.0328) (0.0177) lev 0.188 0.0115 ` 0.111 -0.0204 0.254 0.174 (0.142) (0.0872) (0.0993) (0.0879) (0.424) (0.126) aud 0.00461 0.0786 -0.0183 0.0922 0.124 (0.0536) (0.0670) (0.0521) (0.0649) (0.0815) roa -1.436*** -1.393*** -1.211** -1.286** (0.493) (0.516) (0.484) (0.536) constant 2.587*** 2.120*** 2.808*** 2.918*** 2.513*** 2.515*** 2.306*** (0.812) (0.755) (0.656) (0.649) (0.760) (0.800) (0.763) observations 240 240 240 240 240 240 240 number of firms 24 24 24 24 24 24 24 hansen test 16.47 17.96 19.22 19.76 21.13 18.96 16.08 hansen prob. 0.352 0.265 0.443 0.409 0.330 0.395 0.377 ar(1) test -2.358** -2.593*** -2.709*** -2.730*** -2.677*** -2.587*** -2.457** ar(1) prob. 0.0184 0.00951 0.00675 0.00633 0.00743 0.00968 0.0140 ar(2) test 0.272 0.628 0.485 0.355 0.688 0.315 0.326 ar(2) prob. 0.785 0.530 0.627 0.722 0.491 0.752 0.745 wald chi-square 34.63*** 16.54*** 42.99*** 33.64*** 18.48*** 44.99*** 36.34*** wald prob. 0.000 0.001 0.000 0.000 0.001 0.000 0.000 instruments count 19 19 24 24 24 24 20 standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 source: authors’ computation using stata (2022). 1. introduction 2. stylized facts on financial report timeliness and board characteristics 3. literature review 4. methodology 4.1 model specification 4.2 measurement issues 4.2.1 financial report timeliness 4.2.2 board independence 4.2.3 board diligence 4.2.4 board financial expertise 4.2.5 board size 4.2.6 control variables 4.3 estimation techniques 5. results 5.1 descriptive statistics 5.2 preliminary analysis 5.2.1 normality test results 5.2.2 multicollinearity test results 5.2.3 autocorrelation test results 5.2.4 testing for appropriate estimation method 5.2.5 control variables and financial report timeliness 5.3 regression results and discussion 5.3.1 robustness checks 6. conclusion references appendix 1: number and percentage of financial institutions with early and late audited financial statements (2010-2020) microsoft word 6 (19-12) gonzalez 85 nominal or proportional investments: investment strategies, judgments of asset accumulations and time preference nichel gonzalez stockholm university, sweden received: march 1st, 2019 accepted: november 19, 2019 online published: december 2, 2019 abstract this study investigated how fund investment strategies can be influenced by the response format, nominal or proportional. additionally, judgments of accumulated assets and time preference were investigated. participants were randomized to express their investments either as sek or as a percentage of fund assets, in vignette scenarios. historical and forecasted fund interest rate information was varied in a factorial design. the sek participants ignored more information than the percent participants, and used a fixed strategy to a greater extent (investing all or no assets). furthermore, sek participants relied more on forecasts than percent participants. importantly, strategies varied a lot among individuals in both conditions. interestingly, asset judgments were barely related to investment decisions, but time preference was. the large intra-individual variation suggests that there is no “one size fits all” way to give investment advice. furthermore, advisors should be aware that people may invest differently if they think proportionally instead of nominally. key words: asset accumulation; investments; response format; nominal value; proportional value. 1. introduction imagine that you have a fund worth $1 000. now, your banker asks if you want to keep all your money in that fund, or make a withdrawal. the banker can ask you either how big a proportion you want to keep in the fund (0% – 100%), or how many dollars you want to keep in the fund ($0 – $1 000). the questions are logically equivalent, but people tend to respond differently to the same question depending on how that question is asked, in particular when the question is about decisions concerning values and risks, e.g. framing (wu, zeng, & wu, 2018). the fact that people deviate from normative economic models due to their limited cognitive capacities is well described by simon’s theory of bounded rationality (simon, 1957). bounded rationality states that satisficing strategies are generally good enough, because value maximation is not the international journal of economic behavior, vol. 9, n. 1, 2019, 85-104 86 goal for people in general. deviations from normative behavior are also central in kahneman and tversky’s dual process theory, describing how people often use heuristic thinking, which is more intuitive than systematic. heuristic thinking saves time and energy but leads to biases (kahneman, 2003). however, gigerenzer’s theory about fast and frugal heuristics suggests that heuristics are often more adaptive than trying to weigh all the information (gigerenzer & gaissmaier, 2011). the way a person thinks heuristically can affect decisions in various ways. the present paper is focused on how numerical information may be used for long term fund investment decisions. the central aim was to investigate if people invest differently depending on the response format (nominal or proportional). a further aim was to find out if the response format can influence investors to use different information when they decide how much to invest. the information was about fund history and forecasted fund development as well as subjective judgments of asset accumulations. a measure of time preference was also included in the experiment. 1.1. relative and absolute value prospect theory states that we evaluate the utility of assets in relation to a reference point (tversky & kahneman, 1992). when deciding how much to invest from a finite amount of assets, responding with a percentage gives a narrow range of possible numbers (0% – 100%) for the decision. this range of percentages is always the same, because it is independent of the currency and the amount. if the decision is instead based on a nominal amount of money, the range is as large as the available asset value to invest from. hence, the numerical difference from a reference point is the same for proportional investments of different asset values, but not for nominal investments. therefore, we may invest differently, with the same amount of money, depending on whether we see our investment as a proportional investment or a nominal investment. previous research has investigated the effect of fund fees on investment decisions. to a great extent, the fund fees have been found to be ignored (newall & love, 2015). if fees, which are often described as annual percentages of fund value, are instead described as nominal amounts of assets, people tend to pay more attention to the fees (choi, laibson, & madrian, 2010). this debiasing effect of describing fees in nominal terms has been found to persist even as past returns increase (newall & parker, 2019). in other words, people tend to focus more on the fees when they are described in absolute terms rather than relative to the fund value. another area where the nominal and proportional formats are important for how people judge value is when they judge distribution of wealth in a population. such judgments have been found to be much more accurate when they are thought of in nominal terms instead of proportional (eriksson & simpson, 2012). this shows that it is important to investigate how the response format affects decisions. therefore, the present study was focused on investigating how response format may change how people use historical and forecasted fund information for their investment decisions. 1.2. investors’ use of numerical information individual investors tend to focus on past performance of investments, instead of more important information such as fees (newall & love, 2015). the focus on past performance often occurs because of trend chasing, instead of trying to infer managerial skill. hence, the focus on past performance seems to be driven by biases rather than strategic inference (bailey, kumar, & ng, 2011), and it applies to both stock trading (de bondt, 1993; greenwood & 87 shleifer, 2014; mussweiler & schneller, 2003) and mutual fund investments (choi et al., 2010; gonzalez, 2017; gonzalez & svenson, 2014; newall & love, 2015; wilcox, 2003). it is common to analyze fund investment strategies and biases on a group level, but not as common on an individual level (bailey et al., 2011). gonzalez (2017) investigated fund investment strategies on an individual level and found that only a few participants relied on presented forecasts as well as their own judgments of future asset outcomes. in other words, information about the future was mostly ignored by investors, and this applies to both objective information and subjective beliefs (judgments) about future outcomes. however, investment forecasts became important for an increased number of participants when fund interest rates were manipulated to differ more between funds. two limitations of gonzalez’s research were (1) the participants expressed their investments as a percentage of the present fund assets (proportional response), while in reality, investment are commonly expressed as an amount of money (nominal response), and (2) within funds, the interest rates were always of the same magnitude during past and future investment periods. therefore, the present study used the same type of investment problem, but with two conditions. the proportional investment condition was used in this study as well. however, a condition was added to the previous design. in the added condition, investments were made as nominal amounts of money. this study also uses a larger set of investments problem where the interest rate between past and future investment periods are different. 1.3. judgments of asset accumulations usually, investors are primarily interested in the outcomes of their investments. outcomes of investments are often expressed as percentages of annual value change (interest rates). these interest rates accumulate exponentially over time at a rate that is difficult to intuitively understand for people. for example, if you invest in a fund that grows 15% each year, it will be worth twice as much in 5 years, and four times its original value in 10 years. when people judge accumulations of this kind, without carrying out formal calculations, they usually underestimate the accumulated change to a great extent. that is, after a period of gain the value is under estimated and after a period of loss the value is over estimated. this is known as the exponential growth bias (benzion, shachmurove, & yagil, 2004; doerr, 2006; timmers & wagenaar, 1977; wagenaar & sagaria, 1975). the exponential growth bias is robust and applies to both laypeople and experts, even though experts tend to be more accurate. this bias persist even when there are economic incentives to judge accurately (christandl & fetchenhauer, 2009). furthermore, biased judgments of this kind has been found to correlate negatively with behaviors that are positive for the household finance (stango & zinman, 2009). because of the findings described above, the exponential growth bias may be important to consider in investment settings, especially for lay people who may not carry out formal calculations. however, when it is the accumulated possible outcomes of a long term fund investment that are judged, there seems to be a very limited relationship between the exponential growth bias and investment behavior (gonzalez, 2017; gonzalez & svenson, 2014). for this reason, this study will further investigate judgments of asset accumulations of fund investment outcomes in relation to investment decisions. 1.4. the investment problem this study used the same format of vignette investment scenarios as the ones in earlier studies by gonzalez & svenson (2014) and gonzalez (2017), described in the following text. 88 figure 1 – problem example note: example of investment problem, used previously by gonzalez and svenson (2014) and gonzalez (2017). the investment problems consisted of two five-year periods where the first period was historical and the second period was the forecast for the investment (see figure 1). the first period was either a gain or a loss period, and the interest rate was constant within each period. the second period always had the same numerical interest rate as the first period, but there was an equal probability (0.5) of gain or loss. it is important to note that when the gain and loss interest rates are the same for the forecasted outcomes, and there is an equal probability of these outcomes, the expected value (ev) of the investment is always positive, illustrated by equation 1. the left side of the equation defines the marginal gain after growth g during time period t for an investment of value v, and the right side defines the marginal loss of v after a loss of the equal annual percentage g and time t. v(1 + g)tv > v v (1 g)t (1) according to normative economic theory, maximizing ev is the goal. hence, rational investors should always reinvest all of their assets when the conditions are as described above. however, as behavioral economics have illustrated, both theoretically and empirically, people often deviate from maximizing strategies. the participants’ task was twofold. first, they judged the accumulated assets at the end of year 10 for gain and loss outcomes, with the assumption that all of the assets (100%) had been reinvested for years 6 10. second, the participants decided how much to reinvest for the second period (years 6 – 10). investments were made as a proportion (0% – 100%) of the accumulated assets during a first period (years 1 – 5). the general finding of previous studies with this design (gonzalez & svenson, 2014; gonzalez, 2017) is that investments were proportionally greater after gains than after losses. interestingly, the magnitude of the gain and loss interest rates had no, or little, effect on the investment size. in these studies, investments where made as percentages (a proportion) of the capital accumulated during the first 5 years. three reasons to investigate these findings further with nominal investments as an alternative response format are as follows. (1) real fund investments are commonly expressed as a nominal amount of money. hence, investment tasks 89 asking for nominal, rather than proportional, investments will more closely resemble real investment decisions. (2) prospect theory models the subjective utility of losses and gains asymmetrically. therefore, if a person thinks of investments in proportional terms, the relationship between gains and losses will be the same, independent of the assets available to invest from. if a person instead thinks about investments in nominal terms, the utility difference between losses and gains will change depending on the amount to invest from. (3) empirical investigation of fund fees suggests that people pay more attention to fees when they are described nominally instead of proportionally (choi et al., 2010; newall & parker, 2019). therefore, it is relevant to investigate how different formats for expressing investment decisions can affect the use of other numerical information about funds. in this study, to further investigate previous findings (gonzalez, 2017; gonzalez & svenson, 2014) in relation to the response format described above, an experiment with vignette scenarios was designed. two between-subjects conditions were used; one group responded to the investment scenarios with a percentage of assets to invest, and the other group with a nominal number of swedish crowns (sek). furthermore, there were two additional improvements on the previous design, and these were included in both conditions (percentage and sek). first, participants also judged the accumulated assets at the end of year five, that is, the point in time where the investment decisions were made. this was implemented so that sek investments could be converted to percentages, and hence, compared to percentage investments. second, to better differentiate between the effects of the first period and the second period on the investments, the percentages were varied between the first and second period. the design will be described in more detail in the method section. 1.5. time preference people tend to perceive the utility of rewards as smaller the further into the future they will be received. this means that a person may prefer $100 today compared to $200 in a year. i will refer to this as time preference, but it is also known as time discounting, delay discounting, discounting over time, etc. (johnson & bickel, 2002; mcclure, et. al., 2007). time preference, or discount rate, has been described by several different functions, such as hyperbolic discounting (loewenstein & prelec, 1992), sub-additive discounting (read, 2001) and heuristic models (marzilli ericson, white, laibson, & cohen, 2015). in the present study, judged accumulated assets were judgments of an investment’s potential future outcome. because long term investments regard asset outcomes in a distant future, time preference may influence how biased these asset judgments are. however, according to killeen (2009), it is the subjective utility and not the actual value that is discounted. in behavioral economics, beliefs and preferences are important concepts (thaler, 2016), and this study investigated the relationship between the beliefs (judgments) of future asset outcomes and the preference (time preference) for setting assets aside for a long time. furthermore, previous studies (gonzalez, 2017; gonzalez & svenson, 2014) found that there was no, or a very weak, relationship between judgments of asset outcomes and investments. thus, it is possible that the judged asset outcomes become more of a mathematical exercise for the participants and therefore is unrelated to the decisions. time preference may thus be a more relevant factor for these decisions, as time preference refers to a person’s willingness to wait for greater rewards. one may view judged asset outcomes as beliefs about the true state of the world, whereas time preference refers to a person’s preferences regarding what to receive from that world. 90 discount rates describing time preference tend to vary between domains (gattig & hendrickx, 2007). that is, assets lose subjective utility with time at different rates depending on the context. hence, it is important to measure time preference in a way that resembles the domain that it is related to. in this study, participants were asked about how much capital they would invest if they were guaranteed an annual gain for a 5-year investment period. in other words, time preference was measured by an investment task similar to the main fund investment problems, but with only the possibility to gain assets. this way, the preference for waiting for greater gains, instead of realizing their assets immediately, can be related to how much the participants would like to invest when risks of losses are involved, as well as to their judgments of asset outcomes. this was added to the design of previous studies to gain further understanding about how different types of future-oriented thinking plays a role in investment decisions. 1.6. summary of research questions in the present study the research questions were the following: to what extent are investments affected by response format, that is, if investments are expressed in nominal or proportional terms? to what extent do historical interest rates and forecasted future interest rates affect investment decisions? to what extent are judged asset accumulations, time preference and investment decisions related to each other? figure 2 – illustration of the relationships between the investigated variables note: boxes with solid frame indicate variables that are manipulated by the experiment (independent), that is, the information in the investment problems and the response format. the box with the large dotted frame indicates that it is the main dependent variable (investments). the boxes with small dotted frames indicate interrelated dependent variables (asset judgments and time preference) related to the main dependent variable (investments). 2. method a vignette scenario was used to describe a series of fund investment tasks. the participants were randomly assigned into one of two groups, sek and percentage. the sek group expressed their investments as an amount of sek (i.e. nominal investments). the percentage group asset judgments investments time preference historical (years 1 – 5) gain/loss forecasted (years 6 – 10) fund information magnitude (absolute percent) proportional (%) nominal (sek) 91 expressed their investments as a percentage of the fund assets at the time of the investment decision (i.e. proportional investments). there were no other design differences between the groups. 2.1. participants the participants were 87 students from stockholm university, 22 male and 65 female. the average age was 25.78 years (sd = 7.28) with a range from 19 to 53 years. there were 47 participants in the percent condition and 40 participants in the sek condition. participation was rewarded with course credits. one participant misunderstood the instructions and was excluded. another 5 participants who completed less than 14/18 of the fund investments were also excluded.1 2.2. problems there were 18 different fund investment problems. each problem consisted of two consecutive 5-year accumulation periods (figure 1). the participants’ main task was to decide how much of the assets accumulated in a fund during the first 5 years they would like to reinvest in that same fund for the second 5 years. during the first period (before the reinvestment opportunity) there was always the same annual interest rate throughout the period. the interest rates were either a gain or a loss of -20%, -10%, -1%, +1%, +10%, or +20%. during the second period (the reinvestment period, years 6 – 10) two possible outcomes were presented, one gain outcome and one loss outcome. the annual interest rate of the gain and loss outcomes were of the same numerical percentage (e.g. +10% and -10%). the percentages for the second period were ±1%, ±10%, and ±20%. the gain and loss outcomes had always equal probability (p = 0.5) of occurring (see figure 1). the experiment included all combinations of the first period annual interest rates (6 levels) and the second period annual gain and loss interest rates (3 levels). hence, a factorial design with 18 problems was generated. 2.3. procedure first, the participants signed an informed consent form to participate in the study. then, they received information about fund asset accumulations, followed by general information about the investment problems in the experiment. participants were not allowed to use any aids, or make notes. before making an investment in a fund, participants were asked to judge the fund assets accumulated from the beginning of the first year up until the end of year five. this was the only question added to the problem formulation that was used in earlier studies (figure 1). participants also judged the accumulated assets at the end of year 10 (i.e. second period gain and loss outcomes). asset judgments were made with the assumption that all assets had been kept in the fund during the entire 10-year period (i.e. 100% was reinvested for years 6 – 10). after judging the asset accumulations of a fund, participants made their investment decision for that fund. the only difference between the percentage and sek conditions was the investment response format; everything else was identical between conditions. 1 reasons for excluding investments were (number of investments excluded): the investment was below 0% of judged available assets (5) or above 100% (13), the judged available assets were 0 (27), the judged available assets indicated loss when there was gain (14) or gain when there was loss (27), judgment of available assets was missing (2), and judgments of available assets were above or below 5 sd of the mean (5). 92 after the investment problem task, participants were asked to decide how much to reinvest in fund accounts that guaranteed gain for the 5-year investment period. in this task, the assets that could be reinvested for years 6 – 10 was always sek 10 000. the different annual interest rates for the investment period were 1%, 10% and 20%. the task was formulated similarly to the main fund investment task. the participants expressed their investments in the same format (sek or percentage) as in the main task; see figure 3 for an example. this task was added to the design of the previous studies with the same fund investment problems (gonzalez, 2017; gonzalez % svenson, 2014), as a measure of time preference. figure 3 – example of an investment problem with guaranteed gain 3. results the result section is divided into three subsections. each section addresses a main topic in relation to the investment decisions. the first section addresses the effect of response format, that is, nominal (sek) or proportional (percent) investments. the second section addresses the participants’ judgments of accumulated value after different periods of annual interest rates. the third section addresses time preference. each section starts with aggregate analyses (group data) and then proceeds with analyses of each individual’s use of the numerical information. group analyses are useful to find general trends while individual analyses can give a clearer picture of specific strategies. specifically, individual analyses can find investment strategies that may be lost in group analyses. both methods were used to cover the research question as thoroughly as possible. to compare investment-response formats (sek or percent) the sek responses were converted to percentages. that is, the investment responses in sek were divided by the judged available assets (fund value at the end of year five). invested percentage was used as the operationalization of investment size in all analyses. 3.1. response format and fund information 3.1.1. group analysis the first research question was if the response format would have an effect on investments. the participants’ average reinvested proportion of fund assets was greater in the sek group (m = 58.33%, sd = 24.89, n = 38) compared to the percent group (m = 48.83%, sd = 25.72, n = 43), but the difference was not statistically significant. to investigate if investments varied depending on gain and loss interest rates and response format, a mixed anova was computed with the following factors; response format (percentage/sek), sign (+/-), absolute interest rate years 1–5 (1%, 10%, 20%), interest rate of gain and loss outcomes years 6–10 (1% 10%, 20%). note that response format was a between subjects variable while the gain and loss information were within subjects variables. 93 investments were affected by the historical sign (η2 = .071) and absolute percentage (η2 = .057), significant at the 5% level.2 the fact that the sign accounted for most of the variance (7%) replicates the findings of gonzalez and svenson (2014) and gonzalez (2017)3. however, in contrast to these previous studies, the absolute size of the gain or loss interest rate explained as much as 6% of the variance. investments increased when the annual gain or loss increased. no prior hypothesis was formulated regarding this finding. therefore, the effect of absolute interest rate needs further investigation before reliable conclusions can be drawn. average investments calculated separately for each fund can be found in appendix table a1. to summarize, on average, the sek group invested 9.5% more of their accumulated assets than did the percent group, but this difference was not statistically significant. in general, investments were greater following prior gains, compared to prior losses. investments also increased as the gains and losses increased. the effects of gain/loss and increasing gains and losses were significant on the 5% level. forecasted outcomes were found not to affect investments. 3.1.2. individual analyses this study was designed to find out different investment strategies among individuals. to find out how different participants used information cues as basis for their investment decisions, the correlations between each of the investment problem cues and the size of the investments were calculated separately for each participant. for the first period (historical information) the cues were (1) sign (gain/loss), (2) annual absolute interest rate, (3) annual interest rate (sign and percentage), and (4) judged accumulated assets at the end of the first five years. for the second period, for which the investments were made, the cues were (1) annual percentage of change for the gain and loss outcomes, (2) judged gain outcome, and (3) judged loss outcome. note that all the cues were manipulated within the experimental design (objective information) except for the judged outcomes which were judged by the participants themselves (subjective information). in the following, all correlations are pearson’s correlations, if nothing else is stated. if a cue accounted for at least 50% of the investment variance (−0.707 ≤ r ≥ 0.707) that cue was classified as highly important for that individual. the 50% variance threshold was used so that no other unrelated variable could account for more of the investment variance, and this criterion was used by gonzalez (2017). highly important cues were found only for a small amount of participants, see appendix table a2 for a summary. this indicates a generally low reliance on specific information. however, forecasted fund development was highly important for more participants in the sek group sek group 7/38 (18.4%) compared to the percent group 2/43 (4.7%) (z = 1.9679, p < .05). this indicates that focusing on the nominal value of the investment, rather than the proportional value, may increase the likelihood that investors use forecasted interest rates as information to rely on for their investment decisions. it is important to note that, of the participants giving high importance to forecasted interest rates in the sek group, three participants invested more with increasing rates, while 4 participants invested less. in the 2 there was a significant three-way interaction effect of the sign the first five years, the first period percentage and the second period percentage. this interaction explained less variance than the sign or the first period percentage f(4, 316) = 2.708, p < .05, η2 = .033. therefore, no further interpretation will be made regarding this result. 3 we analyzed a restricted set of data with only the same stimuli as in gonzalez (2017), that is, percentages were equal across the entire 10 years. only participants with complete data were used. a repeated measures anova showed a significant effect of sign f(1, 59) = 5.741, p < .05, η2 = .089. no other main effects or interactions were found (second greatest η2 in the model was .008). hence, this data replicates the findings of gonzalez (2017). 94 percent group, there was one participant investing more, and one investing less, with increasing interest rates. because greater gain and loss interest rates lead to a greater risk in this context, these findings indicate there was an equal distribution of risk averse and risk seeking individuals among the participants that gave high importance to forecasts. in other words, the participants were influenced in opposite directions by this information. this replicates findings by gonzalez (2017) who also found that participants were influenced in the opposite direction of each other by the same information. because people tend to behave differently within the domain of gains and the domain of losses (tversky & kahneman, 1992), individual correlations were also separately computed for gains and losses, respectively. this analysis revealed that several participants completely ignored information (r = 0) within at least one of the gain or loss domains. importantly, the frequency of ignoring information was different between the sek and percentage conditions (table 1). table 1 – frequencies of participants who completely ignored information for their investment decisions in the percentage and sek condition condition period 1 gain only period 1 loss only percentage period 1 percentage period 2 percentage period 1 percentage period 2 percentage (n = 43) 12 7 10 9 sek (n = 38) 7 10 13 19 note: the frequencies indicate the number of participants that showed r = 0 between information cue and investment size. frequencies marked in bold differ significantly, p < .01. if there had been a previous loss, the forecasted interest rates were completely ignored to a greater extent by participants in the sek condition 19/38 (50%) compared to the percent condition 9/43 (21%), significant on the 1% level (z = 2.745). four participants reinvested the same proportion in all funds. hence, these participants ignored all variations in fund information. investing the same proportion in all funds will be called a fixed investment strategy in the following text. three participants reinvested all their assets in all funds; all of them where in the sek group. only one participant did not reinvest anything in any fund, and this participant was in the percent group. note that to achieve the greatest ev from investments, reinvesting all assets was always the correct strategy, see equation (1). fixed investment strategies were also analyzed separately for funds with prior gains and funds with prior losses. maximum investments in loss funds were more common in the sek group 6/38 (16%) compared to the percentage group 1/43 (2%), and this difference was significant on the 5% level (z = 1.983). to summarize, the sek group more frequently ignored forecasts for the investment period than the percent group did. the sek group also followed a fixed investment strategy more frequently than the percent group did. this suggests that the sek condition may have triggered a more categorical way of thinking about the different funds as good or bad to invest in. furthermore, the sek group tended to rely on forecasts to a greater extent than the percent group did. this indicates a greater future orientation, or focus on risks, in the sek group, compared to the percent group. 3.2. judgments of accumulated value in addition to the fund information given to the participants in each problem (objective information), the participants judged the fund value at the end of year 5 and year 10. thus, the 95 participants generated subjective information. this information may, or may not, be relied upon when making investments. this was the research question for the following analyses. 3.2.1. group analysis first, across all participants and fund problems, the investments were correlated with the judged assets at the end of year 5 and the gain and loss outcomes at the end of year 10. second, investments were correlated with the subjective expected value derived from the judgments at the end of year 10 by computing (gain outcome + loss outcome)/2, and the subjective expected marginal gain (subjective expected value at the end of year 10 judged assets at the end of year 5).4 the correlations showed that only 0.3 % to 0.8 % of the variance in the investments was accounted for by these different judgment measures. a similar absence of correlation was found for both the sek group and the percent group, see appendix table a3 for details. this indicates that asset judgments were of little, if any, importance for investment decisions. 3.2.2. individual analyses the correlations between the different measures of judgments of accumulated assets and the investments were calculated separately for each participant. that is, the same procedure was used as for the objective information in section 3.1. if an information cue explained 50% of the variance or more (−0.707 ≤ r ≥ 0.707) that cue was classified as having high importance for that participant’s investments. the number of participants that gave high importance to an asset judgment cue (or derived cue) ranged between 0 – 6 within each condition (sek and percent). that is, very few participants relied upon their own judgment of accumulated asset cues. furthermore, there were no indications of reliable group differences regarding these cues. details can be found in appendix table a4. 3.3. time preference in this section the relationship between time preference, asset judgments, and investments were investigated. asset judgments were measures of beliefs about the objective true future value while time preference is a personal preference regarding those values. previous studies (gonzalez, 2017; gonzalez & svenson, 2014) found no relationship between asset judgments and investments. to investigate investors’ future oriented thinking further, the concept of time preference was added in this study. to measure time preference, participants were asked how much of sek 10 000 they would save in funds that guaranteed a gain (example in figure 3). there were three different funds with the annual interest rates 1%, 10%, and 20%.5 3.3.1. time preference and judgments of accumulated assets each of the three measures of time preference were correlated with each of the judgments of asset accumulations at year 5, year 10 gain outcomes, and year 10 loss outcomes. these analyses were calculated separately for the sek and percent group. this means that there were 4 we compared asset judgments at the end of year 10 to judgments at the end of year 5. a judgment at year 10 was excluded if, there had been a loss during years 6 – 10 and the judgment was greater than the year 5 judgment (40 excluded) and vice versa for gain outcomes (24 excluded). we also excluded judgments after 10 years of growth smaller than assets at the beginning of year 1 (sek 10 000) after 10 years of growth (3 excluded) and judgments greater than sek 10 000 after 10 years of decline (6 excluded). finally, 16 judgments of accumulated assets at the end of year 10 above or below 5 sd of the mean were excluded. 5 for the time preference analysis the following were excluded, 10 participants that gave investments that were lower for higher interest rates than for lower interest rates, and 4 investments above 100% of available assets. 96 9 correlations calculated within each group. asset judgments shared less than 1.9% of the variance with time preference in all of the computations. the full correlation matrix can be found in appendix table a5. the low correspondence between time preference and asset judgments may indicate that the exponential growth bias is not a preference-driven bias. in other words, time preference for future assets and judgments of future assets seems to arise from different cognitive processes. 3.3.2. time preference and investments to find out the relationship between time preference and investments, investments across all funds were correlated with each of the three time-preference measures (guaranteed annual gain of 1%, 10% and 20%). the correlations were calculated for the sek and percent groups separately. all correlations were positive and statistically significant at the 5% level. the shared variance between time preference and investments were between 6% and 10%, except for the 1% guaranteed gain in the sek group (3% shared variance), see appendix table a6 for details. it should be noted that there was a strong correlation between the funds with guaranteed annual gain of 10% and 20%, which shared 57% variance. the 1% guaranteed gain fund shared only 7% and 4% of the variance with the funds of 10% and 20% respectively.6 this indicates that the time preference for savings with low interest rate (1%) is somewhat different than for higher interest rates (10% and 20%), and that there is not much difference when the guaranteed gain annual interest rate reaches a certain point. to summarize, the present results indicate that time preference for saving over long horizons (five years in this study) is related between investments with risk and no risk. however, time preference is vaguely related to judgments of asset accumulations. this acts as a control of the investment data because it should be expected that a person who does not want to save their money even with guaranteed gains should not be willing to risk assets over time either. this also indicates that the exponential growth bias found in the asset judgments is not driven by time preference. 4. discussion the primary aim of this study was to investigate to what extent the response format (sek or percent) can influence investment decisions made by individual investors. response format was investigated in conjunction with how people use information about interest rates, historical and forecasted, when they make fund investments. judgments of asset accumulations and time preference were also investigated. investment strategies varied in several ways between the sek and the percent group. forecasted gain and loss interest rates were used by more investors who expressed their investments in sek compared to investors expressing investments as a percentage of fund assets. however, only a few participants found forecast to be highly important. interestingly, it was also more common that sek investors completely ignored the forecasted interest rates, and reinvested all assets after losses. a person who has lost assets in an investment may want to regain those assets to avoid it to appear as a bad investment decision. this is known as the disposition effect (shefrin & statman, 1985). because the nominal capital can be perceived as more salient, the losses may have been perceived as worse for the sek participants than for the 6 pearson’s r between guaranteed gain investments of 10% and 20% was, r(77) = .752, p < .001, between 1% and 10% was , r(76) = .263, p < .05, and between 1% and 20% was , r(76) = .209, p = .07. 97 percent participants. hence, the salience may have driven more sek participants to keep their remaining assets in the fund in hope of regaining their lost assets. 4.1. aggregate group analyses vs. individual analyses in the aggregate group data analyses, average investments were greater following gains (57% reinvested) compared to losses (50% reinvested). greater investments after gains are known as the house-money effect (thaler & johnson, 1990). that is, the house-money effect is the opposite of the disposition effect. hence, the house money behavior that was indicated by the aggregate group-level analyses is in contrast to the individual-level analysis that indicated a strong disposition behavior for approximately half of the sek condition participants. this illustrates how group averages can be misleading when interpreting data to draw conclusions about how different individuals actually act. hence, analyzing the investment pattern of individuals can show a more detailed picture of different strategies, and a better differentiation of strategies between individuals. it should be noted that the participants were instructed to assume their personal finances could handle an eventual loss from their fund investments. this instruction may have led some participants to consider the fund assets as money to gamble with (i.e. house money). other studies have found a disposition effect for stocks and a house-money effect for mutual funds (bailey et al., 2011). the disposition effect has been found to reverse (to a house-money effect) when the responsibility is shifted away from the investor (aspara & hoffmann, 2015). because funds are often managed by fund managers, who can be seen as responsible for the performance of a fund, the feeling of responsibility may lower for fund investments compared to stock investments. the house-money effect is also closely related to trend chasing (bailey et al., 2011) and a typical way of focusing too much on past performance. hence, the participants may generally have felt low responsibility for their assets and chosen to chase trends (aggregate results). however, for a substantial amount of participants the losses became an important factor when their investments where expressed in sek and they therefore tried to regain assets after losses (individual results). 4.2. asset judgments and time preference judgments of accumulated fund asset outcomes were investigated in relation to the fund investment decisions, as well as time preference. interestingly, judged asset outcomes have earlier been shown to have a very weak relationship with investments in the judged fund (gonzalez, 2017; gonzalez & svenson, 2014). similar results were found in the present study as well. less than 1% of the investment variance was accounted for by the asset judgments. because people often underestimate the accumulated change in value to a great extent (benzion, shachmurove &yagil, 2004; doerr, 2006; timmers & wagenaar, 1977; wagenaar & sagaria, 1975), judgments of accumulated value should not be used as a basis for investment decisions. hence, it can be a good thing that investors have been found to mostly ignore their own judgments when deciding how much to invest. interestingly, exponential growth bias has been found to correlate negatively with positive household finance behaviors (stango & zinman, 2009). however, these findings do not necessarily contradict the findings in the present study. in the present study, the asset outcomes of the funds that investments were made for were judged, while the stango & zinman (2009) study investigated judgments more generally in relation to several different behaviors. it may be that individuals who have a better general understanding of compound interest rates also have a better understanding of finance in general. this can occur without using one’s own judgment of asset outcomes as information to rely on for specific financial tasks. 98 to gain further understanding about asset judgments, investments and future-oriented thinking, time preference was also investigated. the time preference measure was how much a person would invest if a gain was guaranteed in five years. the task was similar to the main investment problem, but without risk of losing. thus, it was designed to measure only the impatience for receiving their assets, that is, reluctance to wait for the assets to accumulate over the five-year investment period. interestingly, time preference and judgments of asset outcomes barely shared any variance. this indicates that time preference is distinctly different from judgments of asset accumulation. it should be noted that participants did not judge asset accumulation for the specific time preference investment questions, which would have enabled even better separation of the concepts. furthermore, hypothetical questions pose some risk of limited generalizability, although time preference has been found to be similar in hypothetical and real reward settings (johnson & bickel, 2002). to the extent that the present study investigated time preference and asset judgments, the findings support killeen’s (2009) claim that it is the subjective utility of assets that is discounted over time, not the actual value of the assets. importantly, time preference correlated positively with investments, and accounted for up to 10% of the investment variance. the present study aimed to find out if time preference was a driving factor in investments, because of earlier findings that asset judgments were not. however, there was a limitation of the experimental design in that time preference was always measured last. hence, there is a risk that the investment task influenced the time-preference task, and not the other way around. nevertheless, if the time-preference task managed to actually capture impatience in the investors, it may be part of how much people invest when risk is involved as well. however, other factors can be more relevant for specific sets of risky fund investments. that being said, the most central finding was that the asset judgments was found to be separate from both time preference and investments. 5. conclusion to summarize, the present study indicates that expressing investments in nominal terms, as opposed to proportional terms, may influence investors in several ways. investors expressing nominal investments ignored more information and relied more on specific types of information. furthermore, these investors showed a greater disposition effect, which may be an indicator of wanting to regain losses because they are more salient when thought of in nominal terms instead of proportional terms. forecasted fund outcomes were generally not important, but when they were, it was primarily to nominal investors, and not to proportional investors. judged asset accumulations were found to be unrelated to investment decisions, and to time preference. however, the willingness to invest in funds involving risk is related to a person’s time preference, as should be expected. an illustration of the relationship between the different factors is found in figure 4, which is a restructured version of the introductory figure 2. to conclude, because different investors may behave in different ways, even if they are provided with the same information, investment advisors need to be careful when giving advice to lay people. furthermore, the response format seems to have an effect on how people think about fund investments. importantly, people can be affected very differently by the different formats. hence, it may be advisable to ask investors to rethink their investment in both nominal and proportional terms. thinking in both nominal and proportional terms may help investors towards a more complete understanding of their own decisions. this, in turn, may help investors to make investments more in line with their own preferences. a conjunction of the two response 99 formats can be one of many ways to keep investigating how people make long term investment decisions. figure 4 – illustration of the relationships between the different variables of this experiment. note: on average, the participants were influenced the most by past information, and invested more following gains compared to losses. some individuals relied heavily on the forecasted interest rates, but these were primarily found in the sek group. time preference was related to investments. asset judgments were unrelated to investments as well as time preference. the solid frames indicate experimentally manipulated variables, the large dotted frame indicates the main dependent variable (investments), and the 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(2018). affect heuristic and format effect in risk perception. social behavior and personality: an international journal, 46(8), 1331–1344. 34. 102 appendix table a1 – average investments in the 18 fund investment problems. averages described separately for participants expressing their investments as sek and as a percentage of assets sek group percent group historical forecasted annual interest rate (years 6 – 10) annual interest rate (years 1 – 5) ±1% ±10% ±20% ±1% ±10% ±20% 20% 57,56 63,23 65,29 51,46 64,05 57,86 10% 69,92 58,44 58,06 53,30 58,45 48,90 1% 56,60 63,97 51,07 49,95 49,28 46,51 -1% 47,70 55,74 57,93 42,68 45,97 42,82 -10% 47,37 56,90 55,63 40,48 43,90 46,60 -20% 63,08 65,51 58,66 46,89 48,05 47,28 table a2 – descriptive statistics of participants’ individual correlation coefficients between fund information cues and investments period 1 period 2 percentage group sign percentage interest rate percentage average correlation .184 .116 .191 -.017 sd .371 .347 .410 .321 n 43 43 43 43 frequencies r ≥ 0.707 0 2 3 1 −0.707 < r < 0.707 42 41 39 41 r ≤ −0.707 1 0 1 1 sek group average correlation .056 .070 .029 -.004 sd .390 .304 .304 .412 n 38 38 38 38 frequencies r ≥ 0.707 1 2 0 3 −0.707 < r < 0.707 37 36 36 31 r ≤ −0.707 0 0 2 4 note: bold text indicates a significant difference, p < .05, of the proportion of participants giving high importance (r ≥ 0.707 and r ≤ −0.707) to a cue in the percent group (1+1)/43 compared to the sek group (3+4)/38. the sign refers to only the sign (+/-). percentage refers to the absolute annual percentage, that is, the percentage magnitude independent of sign. interest rate refers to the annual change (including the sign +/-). 103 table a3 – pearson correlations between investments and judgments of accumulated assets, and derived expected value measures judgments of accumulated assets derived from judgments end of year 5 end of year 10 gain outcome end of year 10 loss outcome ev marginal expected gain overall r .056* .058* .069* .076** .092** n 1367 1332 1322 1294 1294 percentage group r .064 .049 .083* .068 .065 n 728 702 696 676 676 sek group r .041 .054 .074 .081* .127** n 639 630 626 618 618 note: correlations were calculated across all participants and problems, * p < .05, ** p < .01. ev was derived from the asset judgments by the following calculation (judged gain outcome + judged loss outcome)/2. marginal expected gain was derived from the asset judgments by the following calculation (ev judged judged assets at the end of year 5). table a4 – descriptive statistics of participants’ individual correlation coefficients between judgments of accumulated assets and investments judgments of accumulated assets derived from judgments percentage group end of year 5 end of year 10 gain outcome end of year 10 loss outcome ev marginal expected gain average correlation .208 .198 .186 .201 .050 sd .393 .393 .387 .397 .294 n 43 43 43 43 43 frequencies r ≥ 0.707 4 4 3 4 0 −0.707 < r < 0.707 37 39 39 38 43 r ≤ −0.707 2 0 1 1 0 sek group average correlation .037 ,040 ,042 ,048 -,019 sd .426 .469 .371 .440 .312 n 38 38 38 38 38 frequencies r ≥ 0.707 2 2 1 1 0 −0.707 < r < 0.707 34 35 36 36 37 r ≤ −0.707 2 1 1 1 1 note: some participants are counted as giving high importance (r ≥ 0.707 and r ≤ −0.707) in several variables because of the collinearity between the judgments. ev was derived from the asset judgments by the following calculation (judged gain outcome + judged loss outcome)/2. marginal expected gain was derived from the asset judgments by the following calculation (ev judged judged assets at the end of year 5). 104 table a5 – pearson correlations between investments in funds with guaranteed gain (time preference measure) and the main fund task judgments of accumulated assets after 5 years and 10 years annual gain of funds with guaranteed gain for 5 years (time preference measure) percentage group +1% +10% +20% judged assets at the end of year 5 r .056 .076 .075 n 626 643 643 judged assets at the end of year 10 (gain outcome) r .074 .123** .118** n 620 638 638 judged assets at the end of year 10 (loss outcome) r ,021 -,040 -,030 n 615 632 632 sek group judged assets at the end of year 5 r -.028 .026 .018 n 581 581 565 judged assets at the end of year 10 (gain outcome) r -.092 .027 -.006 n 579 581 563 judged assets at the end of year 10 (loss outcome) r .137** .115** .127** n 577 579 561 note: ** p < .01 table a6 – pearson correlations between investments in funds with guaranteed gain (time preference measure) and investments in funds with risk (the experiments main task) annual gain of funds with guaranteed gain for 5 years (time preference measure) investment format +1% +10% +20% percent invested proportion r 0.270*** 0.310*** 0.262*** n 609 625 625 sek invested proportion r 0.180*** 0.259*** 0.241*** n 557 556 541 note: *** p < .001 microsoft word 8 (20-20) binder c.docx 97 women’s presence on european boards and the performance cycle of value creation as an instrument to achieve the gender quotas bettina c.k. binder pforzheim university, germany received: august 12, 2020 accepted: october 2, 2020 online published: november 30, 2020 abstract value creation is a major claim of most companies. mahajan (2017) argues that “value and value creation are natural to and basic in human behaviour and endeavour”, nevertheless women are often marginalized and impeded in their advancement towards leadership positions, where they could shape and influence the process of value creation. many large companies in europe include mainly men in supervisory boards and the women quota is often lower than 20 %. we offer an overview of the women’s presence on the boards of the euro stoxx 50 companies and we develop a model, which presents eight steps in a strategic performance cycle showing how more women can be integrated in supervisory and management boards so that they can contribute to a better company value in general. the main contribution consists in offering companies a strategic instrument and concrete advices on how the women presence can be increased company-wide and the gender quota on boards can be achieved. keywords: strategic performance cycle; value creation; women on supervisory boards; key performance indicators; gender quota; euro stoxx 50. 1. introduction value creation is a major claim of most companies and when leafing through the annual reports of companies one encounters expressions such as “value to our shareholders”, “we provide value for our customers”, “we create value for our employees, shareholders, business partners, neighbors and the public”, etc. while it seems to be clear for whom value is created, the concept of “value” itself is subjected to various interpretations and is regarded in the literature as ambiguous (lepak, smith, & taylor, 2007; marinova, larimo, & nummela, 2017). mahajan (2017) argues that “value and value creation are natural to and basic in human behavior and endeavor”, nevertheless women are often marginalized and impeded in their advancement towards leadership positions, where they could shape and influence the process of value creation. the urge to better use the talent pool represented by women was voiced by many international journal of economic behavior, vol. 10, n. 1, 2020, 97-111 98 actors: the organization for economic co-operation and development ([oecd], 2016) for example emphasized that women “can provide society with different perspectives and approaches to management, organization and business issues”. in order to change the organizational culture of all-male boards, positive actions such as gender quotas were introduced in many european countries. the present paper looks at the companies of euro stoxx 50 index in the year 2015 and offers an overview of women representation on the boards of these 50 companies, the index being described as a “blue-chip representation of supersector leaders in the eurozone” (stoxx.com). the author of this paper deems the presence of women on corporate boards as valuable in itself and argues that images such as the “white, heterosexual, western, middle/upper class, able man” (zanoni, janssens, benschop, & nkomo, 2010 p. 13) ought to be challenged in international business. the paper draws on existing literature in the field of key performance indicators (kpis), diversity management, women quota and supervisory boards and it is structured as follows: in a first step, value and value creation is described on the basis of the annual reports of the 50 euro stoxx companies. by reading the annual reports, it also became evident, that some of the companies employ the value-based management approach, and therefore, one section is dedicated to this aspect. in a second step, a short literature review about the presence of women on boards and its relevance will be presented. based on a strategic performance cycle with eight steps, this paper envisages measures and solutions for companies aiming to achieve a high women quota and to increase at the same time the companies’ value. finally, a correlation analysis is conducted in order to see, whether there is a relationship between the number of women on supervisory boards and financial performance of the companies under scrutiny. the last sections is dedicated to the findings and it also shows the limitations of this study and offers suggestions for future research. 2. value, value creation and value understanding 2.1. the concept of “value” and its use by companies the centrality of value creation is incontestable for companies and management and organizational scholars alike. generating value is seen to positively impact the stakeholders, employees, customers, partners and ceos, society, companies and shareholders (mahajan, 2016). the author of this article acknowledges the significance of the monetary component of value creation, in line with the definition offered by lepak, smith and taylor: “value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation – whether individual, organization, or society – and that this subjective value realization must at least translate into the user’s willingness to exchange a monetary amount for the value received” (2007, p. 182). the ceo should avoid value destruction by focusing on the customer and using financial and non-financial assets and measures (mahajan 2016, p. 69). most of the companies of the euro stoxx 50 index1 use in their annual reports the word “value”, be it in the sense of monetary worth, importance in the eyes of someone, or principle or belief. airbus for instance focuses on delivering value for shareholders as in “value to our shareholders through our share buybacks, with an additional €1 billion launched in october 2015” (airbus group, 2015, p. 19). airbus also claims to “recognize the value that diversity 1 the companies, which were part of the euro stoxx 50 index in 2015, can be seen in the second table. 99 brings” and therefore “is committed to advancing women in the workplace and developing female talent” (airbus group, 2015, p. 26). other companies of the euro stoxx 50 index claim in their annual reports to being committed to value creation. nokia states for example the following: “we aim for all our business groups to be innovation leaders, drawing on our frontline r&d capabilities to deliver leading products and services for our customers, and ultimately ensure the company’s long-term value creation” (nokia, 2015, p. 40). what should be pointed out is the tendency of using words in a loose or even misleading manner in some of the annual reports. fresenius for example had at the end of 2015 an all-male supervisory board, being actually the only company of the euro stoxx 50 index in this situation. yet, in its annual report, it is emphasized that “fresenius values a culture of diversity2. the interplay of a wide range of views, opinions, cultural backgrounds, experiences, and values help us to achieve our full potential and contributes to our success” (fresenius, 2015, p. 27). while the words “value” and “value creation” appear in most annual reports of the companies of euro stoxx 50 index, some companies even employ a value-based management (vbm) metric. the next section of this paper gives a short overview on vbm and the euro stoxx 50 companies using this approach. 2.2. vbm, its kpis and the euro stoxx 50 companies the following table shows the eight companies of the euro stoxx 50 index, which according to their annual reports were using vbm in 2015. table 1 – overview of the euro stoxx companies using vbm in 2015 no. company name country sector vbm 1 airbus group se fr industrial goods and services  2 basf de chemicals  3 bayer de chemicals  4 bmw de automobiles and parts  5 daimler de automobiles and parts  6 deutsche telekom de telecommunications  7 sap de technology  8 unicredit it banks  source: own representation based on the information provided in the annual reports of all 50 euro stoxx companies one can find many definitions of vbm in the literature. according to firk, schrapp and wolff “vbm is a holistic managerial approach that aims to align corporate action with value creation” (2016, p. 42). the driving philosophy of companies using vbm is to “maximize shareholder value by producing returns in excess of the cost of capital” (simms, 2001). in order to maximize shareholder value “vbm links the company’s strategic objectives to a coherent set of performance measures through cause-and-effect chains (‘value drivers’) that include all relevant processes and all pertinent information systems across a company” (burkert & lueg, 2013, p. 5). among the most known kpis associated with vbm are economic value added (eva), discounted cash flow (dcf) and cash flow return on investment (cfroi). eva is the most common method, and a registered trademark of stern stewart & company. to calculate the eva, capital losses are deducted from capital profit. it is considered a simple 2 original emphasis. 100 method, which can be advantageous. however, the existence of a market and book value in the calculation of the eva can lead to a lack of transparency. capital profit in opposition to the profit from a balance sheet, is a kpi that describes the profit with interest rates. capital losses are calculated from the capital multiplied with the capital margin. yet, only figures taken out from the profit and loss statement or the balance sheet are not sufficient for doing vbm, and calculating the eva. when using the dcf method cash flow becomes the central kpi and an equity or an entity approach can be here employed. discounted rates and the net present value are for the calculation essential. the advantage of the dcf is its acceptance internationally; it is often employed e.g. in mergers and acquisitions valuations. disadvantages of the dcf-method are that the expected cash flows are uncertain and can change yearly or even during the year. companies sometimes use the cfroi method for vbm as well. developed by the boston consulting group, kpis like the cash value added (cva), free cash flow, weighted average costs of capital (wacc) and the gross investments are used for calculating the cfroi. advantages are that cash flow values can be internally or externally calculated and used by managers and investors to indicate liquidity and solvency. the disadvantages of the cfroi-method are the slightly more complex formulas for calculation. vbm is, however, ‘not just about the numbers’ as haspeslagh, noda and boulos (2001) noted: “a successful vbm program is really about introducing fundamental changes to a big company’s culture. and therein lies the reason for most of the failures: transforming beliefs in a large organization is arguably the most difficult of all managerial challenges”. in the following paragraphs the understanding of vbm as described in the annual reports of the euro stoxx companies using this approach is presented. airbus states that “among other indicators, the group uses a value based management approach in order to guide the company towards sustainable value creation by generating financial returns above the cost of capital” (airbus, 2015, p. 61). the kpis employed by airbus are return on capital employed (roce), ebit pre-goodwill impairment and exceptionals and free cash flow. the german company basf considers vbm an essential part of its strategy: the company’s slogan “we add value as one company” is regarded as one of the four principles, which contribute to the company’s “we create chemistry” strategy (basf, 2015, p. 30). the annual report describes vbm as a holistic approach, implemented at all levels of the company: “according to our valuebased management concept, all employees can make a contribution in their business area to help ensure that we earn the targeted premium on our cost of capital. we pass this value-based management concept on to our team around the world through seminars and training events, thereby promoting entrepreneurial thinking at all levels within basf” (basf, 2015, p. 30). as a steering parameter, basf uses ebit after cost of capital (basf, 2015, p. 30). bayer is another german company of euro stoxx index, which uses vbm (six out of the eight companies employing vbm are german). according to the annual report, “one of the prime objectives of the bayer group is to steadily increase enterprise value” (bayer, 2015, p. 55). the steering parameters involved in reaching this objective are cva and cfroi: “these indicators support management in its decision-making, especially in the areas of strategic portfolio optimization and the allocation of resources for acquisition and capital expenditures” (bayer, 2015, p. 55). bmw writes that “the business management system applied by the bmw group follows a value-based approach, with a clear focus on achieving profitable growth, increasing the value of the business for the capital providers and safeguarding jobs” (bmw, 2015, p. 20). while declaring that the kpis engaged in measuring value creation are defined for each controlling level, bmw employs not only financial indicators, such as roce, and return on equity (roe), but also non-financial indicators, such as the size of the group’s workforce (bmw, 2015, pp. 20-21). 101 daimler too uses kpis which are oriented “toward our investors’ interests and expectations and provide the foundation of our value-based management” (daimler, 2015, p. 77). at the core of daimler’s performance measurement system is value added which is “calculated as the difference between operating profit and the cost of capital of average net assets” (daimler, 2015, p. 77). deutsche telekom states that in order to “set and achieve [its] strategic goals more effectively” (deutsche telekom, 2015, p. 64) a value management approach is pursued. according to the information from the annual report, the group has a code of conduct which “defines how employees and management should practice value-based and legally compliant conduct in their daily business activities” (deutsche telekom, 2015, p. 46), and the group’s corporate governance is valueoriented (deutsche telekom, 2015, p. 63). among the kpis employed by deutsche telekom are roce, ebit, and free cash flow. dedicated to “creat[ing] long-term value by addressing future needs” sap uses vbm and it concentrates on two different goals: “we use various performance measures to help manage our performance with regard to our primary financial goals, which are growth and profitability, and our primary non-financial goals, which are customer loyalty and employee engagement” (sap, 2015, p. 59). the italian company unicredit describes in its annual report its “principles of value creation and capital allocation” (unicredit, 2015, p. 36). the main performance indicator used by unicredit is the eva. from the excerpts of the annual reports, it becomes apparent that the companies implementing vbm systems do have slightly different understandings, approaches, and kpis in use. however, as all companies of euro stoxx 50 index do claim to create value, in the next step of the paper the author analyses the degree to which these companies concentrate not only on organizational growth, but also on organizational sustainability. sustainability could be achieved if women too were given the chance to be in top positions. the next section contains a literature review with regard to the presence of women on boards and women quota. 3. women on boards and how their number can be increased 3.1. the glass ceiling a controversial issue during the past decades was women’s presence in supervisory boards. yet, gender equality is one of the founding values of the european union (eu) with the principle of equal pay being included in the treaty establishing the european economic community already in 1957 (jacquot, 2017). when looking at the corporate world, one can say that the glass ceiling is still in place, as many large companies in europe include mostly men on supervisory boards and the number of women on these boards is often low. what needs to be acknowledged is the fact that gender balance became a priority and diversifying corporate supervisory boards often represent a target to be achieved. in norway, italy, france, spain and starting with 2016 also in germany binding gender quota exist (sullivan, 2015). small improvements can be seen with a law instituted quota for women in supervisory boards (corkery & taylor, 2012). norway was the first country to legislate board quotas in 2004 (dizik, 2015) and many countries followed with law determined or optional women quotas in supervisory boards. yet, according to the “2019 report on equality between women and men in the eu” of the european commission “critical positions within boards are still rarely filled by women” (european commission, 2019, p. 30). there are studies on women in european listed companies suggesting that there are positive effects of diverse boards on corporate governance and even on firm performance (buchwald & hottenrott, 2015). the study “women matter. gender diversity, a corporate performance driver” showed that companies with a higher proportion of women in top management perform better 102 (mckinsey, 2007). however, there are also authors signaling rather the lack of evidence that female representation in supervisory boards improves profitability (ferreira, 2014). for instance, in a study with 108 german large corporations, which took place between 2009 and 2013, there was not enough evidence to indicate a significant relationship between gender diversity and firms’ financial performance (dick, 2015). moreover, it seems that men in supervisory boards have often better networks and for this reason, the male supervisory board managers often recruit male followers, which minimizes the women quota in supervisory boards on the long run (terjesen, aguilera, & lorenz, 2015). considering the urge voiced by many actors (eu, oecd, the international labour organisation [ilo]) to better use the talent pool represented by women as well as the long-term policies of the eu, which aim at advancing gender balance in decision-making, we developed a strategic performance cycle for value creation, which encourage companies to engage women sustainably in top positions. 3.2. the strategic performance cycle for value creation the following figure presents the strategic performance cycle. figure 1 – the strategic performance cycle in eight steps source: author’s creation the strategic performance cycle is an instrument, which can help companies boost the presence of women on boards by following eight steps. in the next paragraphs, each step and its implications are shortly presented: 103 1. strategic relevance many companies nowadays are interested in integrating more women in management or supervisory boards not just in countries where legislation imposes a women quota but also in countries where it is optionally expected. therefore, achieving a women quota is strategically relevant for most companies. consequently, companies search for an approach and a course of action to pursue a better integration of women into their boards and their business in general, but sometimes it is not clear which path would be the most appropriate. for instance in germany, listed companies must achieve a gender quota of 30% on their supervisory boards. for managers this means that they need to search for a solution or an implementation concept. the kpi “women quota” must therefore be integrated not just in the vision and mission statements of the companies, but also at an early stage in the strategic planning process. in the tactical planning phase, women should appear in the organization charts by name, to show that the realization of a women quota of 30 % is not just a faraway dream, but the company is actually promoting women and is envisioning a pool of women talents. in the operating planning and budgeting process more women should be hired as responsible line managers who report planning figures for their departments. moreover, the kpi women quota should be included into strategic performance management tools such as the balanced scorecard (bsc). women quota could be for instance included in the internal perspective of the bsc and increase in this way the focus on this critical area. 2. strategic model a strategic model for a period of five to ten years should be developed and evaluated. such a model could contain several strategic kpis such as the ebt, the women quota, early warning indicators, scenario targets including worst case, best case and trend scenarios. using the scenario technique or other strategic instruments, the kpi women quota can be emphasized. the slogan “what gets measured gets done” shows how relevant it is to integrate the women quota in scenarios e.g. as prognosis for the next ten years. the kpi women quota could be split into ‘smaller’ indicators such as the target for female recruitments in the overall workforce, the number of women in middle management, the number of women in the management board, the number of women in the supervisory boards, etc. the business model, together with the vision and the mission of a company should offer a comprehensive and unified image in terms of goals and messages. if the company addresses mainly female customers, the company would surely benefit from emphasizing the importance played by women leadership and the commitment towards achieving a high women quota. woman quota can be related also to other sustainability goals of the company. whether it is self-commitment or law compliance, increasing the number of women at the top of companies should be clearly communicated and lived throughout the company. moreover, a women quota can be a goal also at departmental level. the business model can stipulate that only those managers are eligible for a performance bonus (e.g. 20%) if their department or team have a women quota higher than 30%. this could be a consistent business model to increase the women quota in the long term also at management level. 3. business process analysis in the third step of the strategic performance value creation cycle a business process analysis has to be conducted. first, activities, sub-processes and main processes of different departments or of the company as a whole should be identified. this business process analysis can be done using anonymous interviews about the total headcounts in the cost centers. to know how many women headcounts work in these processes, the interviewers should keep a separate recording of male and female headcounts. the headcount data remains anonymous, but male and female capacities are distinguished for calculating the women quota for each individual activity, sub-process and main process. second, cost drivers of the processes such as number of orders, number of male or female recruitments, number of women in management positions, etc. are identified. third, the total 104 process costs should be calculated for the main processes, for the sub-processes and finally for the activities. if one considers some twenty main processes in a company, it seems easy to calculate the process costs that should be finally divided into male and female capacities. for the hundreds of sub-processes the process calculation of the total process costs split into female and male costs could be more time consuming. the total process costs calculation for the final thousands of activities is still necessary because the activities are allocated at the end to sub processes and main processes differentiated in male and female process costs. fourth, the process cost rate must be calculated so that finally it can be said what are the process costs for one order execution, etc. the process cost rate divided into male and female costs can identify processes e.g. with a high performance and show if these processes have a high women quota too. fifth, the allocation of activities to sub-processes and finally to main processes can show the male process costs and the female process costs e.g. for one order. in companies with a low women quota, the female process costs over all activities seem low compared to the male process costs. at the latest at this point it should be clear that the women quota must be increased by starting to recruit more women into management and supervisory boards and to the departments and teams too. the process cost rates can be implemented into a product calculation instead of the burden rates used for the indirect areas. process cost rates e.g. for the sales process costs, the maintenance process costs or the security process costs are always interesting when they are integrated in a product calculation. divided into male and female process costs additional information can be made available. 4. relevant kpis for increasing the women quota, it is necessary to measure a special kpi, which we call “women process performance management (wppm) index”. this kpi should increase over a long strategic planning period and has the following formula: 𝑊𝑃𝑃𝑀 = 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐼𝑚𝑝𝑜𝑟𝑡𝑎𝑛𝑐𝑒 × 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑆𝑎𝑡𝑖𝑠𝑓𝑎𝑐𝑡𝑖𝑜𝑛 𝑃𝑟𝑜𝑐𝑒𝑠𝑠 𝐶𝑜𝑠𝑡 𝑅𝑎𝑡𝑒 (𝑊𝑜𝑚𝑒𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑖𝑒𝑠) ÷ 𝐵𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝐶𝑜𝑠𝑡 𝑅𝑎𝑡𝑒 (𝑊𝑜𝑚𝑒𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑖𝑒𝑠) with the help of a customer survey, two kpis are to be measured: the customer importance related to one process and the customer satisfaction attributed to it. it is important to measure both these kpis because the customer should be able to evaluate whether e.g. an order process is important for him and whether he is satisfied with the order fulfillment in time. the customer survey should be accompanied by a business process analysis as described above. the result of this business process analysis should be the process cost rate, this time calculated considering the women capacities. by comparing this process cost rate based on women capacities with a benchmark process cost rate of women capacities of another company, a quotient can be built and a final equivalence number can be calculated. if the women wppm index is higher than 1, the strategic performance and value creation is good. if the index is lower than 1, then the qualitative and quantitative premises should be optimized. a better position in comparison with the main benchmark competitor should be achieved for instance by improving the process cost rate via better recruitment of qualified women or improving customer experience. 5. controlling system the controlling system consists of the planning process, the cost accounting process and the reporting process. the wppm index can be integrated into a planning system. this means that the yearly budgeting process includes the women quota and the wppm index and incorporates these two kpis for the next fiscal year for each department of an enterprise. 105 in the cost and managerial accounting process cost types, cost centers and cost objects are identified. these cost elements are planned including additional kpis like the women quota and the wppm index for each cost center. for example, the cost center, order management must plan the costs, the relevant budget with the number of orders, the women quota as target for this cost center and the wppm index. to calculate the wppm index it must be ensured that the cost center is big enough and that customer contact (of internal or external customers) is fostered. additionally when a process cost rate and a benchmark cost were identified, the wppm index can be calculated and planned. the relevant kpis should be integrated in the monthly reporting process. a special chapter for important qualitative kpis in each month end report ensures that the women quota and the women ppm index are continuously measured and a development trend can be registered. this is important when these two figures are also considered in determining the management variable remuneration. 6. harmonized teams once processes are identified and kpis are defined in a controlling system, the employees should be aware of them and consider them in their daily work. harmonized teams where women and men work together often achieve better results and the defined kpis like ebt, cost target and women quota are achieved easier. when women work together with several male team members, extraordinary ideas, remarkable product and process innovations take place and the team comes to unique results. in most cases, critical questions outside specifications are raised by women, and discussed together in the mixed teams. to design a harmonized team it must be clear that the management supports harmonized teams formed by both men and women. starting from the top management level, women should work together with men in management boards and supervisory boards but also at lower management level and throughout the entire company. moreover, it is recommendable to integrate women into the structural organization and to show women and men by name in the company organigram. in process-oriented organizations, a harmonized team can be linked to a project or a process and should be led by a process responsible. the more process responsible are female, the better the kpi women quota becomes. furthermore, the number of women in harmonized teams can be measured project based (short term) or process bases (in the long run). 7. incentive scheme external factors can influence the number of women in companies. for example, more lectures can be held at universities to attract more academic women, there should be more job ads looking for the best women in the media or more transparent information in the year-end reports about the number of women or the women quota in management or supervisory boards. internally there should be a consistent target setting process supported for instance by management by objectives (mbo) meetings. managers and employees should meet at least twice a year to discuss about the already achieved personal targets and about the future expectations until end of the year. it is not enough to discuss only kpis like the achieved profit, contribution margin or the sales figures. additionally, the women quota, the wppm index should be measured and based on target achievement, the variable part of the annual remuneration should be granted or not. 8. structural re-organization the result of a process-based analysis should be to obtain a better effectivity and a higher efficiency company-wide. the kpis women quota and wppm index can be measured based on processes, at team level, at departmental level and for the entire enterprise. process optimization teams (pots) can be created to design the actual order process, the ideal process flow and the optimized standard process cycle. it should be ensured that an optimized standard process cycle includes the kpis women quota and the wppm index. 106 4. the euro stoxx companies and women presence on their boards in the following section of the article we will shortly present the euro stoxx 50 index and its companies and the women quota on their boards. the euro stoxx 50 index was selected to represent the performance of the 50 largest companies among 19 supersectors in the year 2015. there are enterprises of seven eurozone countries which are integrated in this index. this index has a fixed number of components and is part of the stoxx blue-chip index family. moreover, euro stoxx 50 index is one of the most liquid indices for the eurozone and serves for benchmarking purposes. the index is a financial control index, which ensures stable and up-to-date figures. it represents the performance of only the largest and most liquid companies in a sector (stoxx.com). the following table gives an overview of the 50 companies, which are part of the euro stoxx index, their sector of activity, country of origin, the percentage of women on their supervisory boards and the names of these women. table 2 – overview of the euro stoxx companies in 2015 and their women on board no. company name sector country represent. of women on board names of women on board 1 air liquide chemicals fr 41.7% geneviève berger, sin-leng low, siân herbert-jones, annette winkler, karen katen 2 airbus group se industrial goods & services fr 16.7% anne lauvergeon, maría amparo moraleda martinez 3 allianz insurance de 30.8% christine bosse, gabriele burkhardtberg, ira gloe-semler, renate köcher 4 anheuserbusch inbev food & beverage be 14.3% maria asuncion aramburuzabala, michele burns 5 asml hldg technology nl 33.3% pauline f.m. van der meer mohr, clara (carla) m.s. smits-nusteling 6 assicurazion i generali insurance it 40.0% alberta figari, ornella barra, sabrina pucci, paola sapienza 7 axa insurance fr 35.7% isabelle kocher, suet fern lee, deanna oppenheimer, doina palicichehab, dominique reiniche 8 basf chemicals de 25.0% dame alison carnwath, anke schäferkordt, denise schellemans 9 bayer chemicals de 20.0% simone bagel-trah, petra kronen, sue h. rataj, petra reinbold-knape 10 bco bilbao vizcaya argentaria banks es 25.0% belén garijo lópez, lourdes máiz carro, susana rodríguez vidarte 11 bco santander banks es 36.4% sol daurella comadrán, esther giménez-salinas i colomer, belén romana garcía, isabel tocino biscarolasaga 12 bmw automobiles & parts de 30.0% christiane benner, susanne klatten, renate köcher, simone menne, dominique mohabeer, brigitte rödig 13 bnp paribas banks fr 50.0% monique cohen, marion guillou, nicole misson, laurence parisot, daniela schwarzer, sandrine verrier, fields wicker-miurin 14 carrefour retail fr 25.0% diane labruyère-cuilleret, mathilde lemoine, patricia lemoine, anneclaire taittinger 107 15 daimler automobiles & parts de 25.0% sari baldauf, petraea heynike, andrea jung, elke tönjes-werner, sabine maaßen 16 danone food & beverage fr 38.5% marie-anne jourdain, gaëlle olivier, isabelle seillier, mouna sepehri, bettina theissig 17 deutsche bank banks de 31.8% dina dublon, katherine garrett-cox, sabine irrgang, martina klee, henriette mark, louise m. parent, gabriele platscher 18 deutsche post industrial goods & services de 35.0% simone menne, katja windt, andrea kocsis, anke kufalt, sabine schielmann, helga thiel, stefanie weckesser 19 deutsche telekom telecommunica tions de 40.0% sari baldauf, monika brandl, nicole koch, petra steffi kreusel, sylvia hauke, sibylle spoo, ines kolmsee, waltraud litzenberger 20 e.on utilities de 16.7% denise kingsmill, karen de segundo 21 enel utilities it 33.3% giulia de martino, lidia d'alessio 22 engie utilities fr 57.9% isabelle kocher, ann-kristin achleitner, françoise malrieu, mariejosé nadeau, barbara kux, stéphane pallez, mari-noëlle jégo-laveissière, caroline simon, lucie muniesa, catherine gouillouard, anne-marie mourer 23 eni oil & gas it 20.0% karina a. litvack 24 essilor internation al health care fr 18.8% maureen cavanagh, juliette favre, louise fréchette 25 fresenius health care de 0.0% 26 grp societe generale banks fr 50.0% barbara dalibard, kyra hazou, ana maria llopis rivas, nathalie rachou, alexandra schaapveld, france houssaye, béatrice lepagnol 27 iberdrola utilities es 38.5% inés macho stadler, samantha barber, maría helena antolín raybaud, georgina kessel martínez, denise mary holt 28 industria de diseno textil sa retail es 25.0% flora pérez marcote, irene r. miller 29 ing grp banks nl 25.0% isabel martín castellá, mariana gheorghe 30 intesa sanpaolo banks it 26.3% rosalba casiraghi, rossella locatelli, beatrice ramasco, marcella sarale, monica schiraldi, 31 l'oreal personal & household goods fr 40.0% ana sofia amaral, belén garijo, françoise bettencourt meyers, sophie bellon, virginie morgon, christiane kuehne 32 lvmh moet hennessy personal & household goods fr 23.5% delphine arnault, bernadette chirac, marie-laure sauty de chalon, mariejosée kravis 33 muenchener rueck insurance de 40.0% ann-kristin achleitner, benita ferrero-waldner, ursula gather, anne horstmann, ina hosenfelder, beate 108 mensch, gabriele sinz-toporzysek, angelika wirtz 34 nokia technology fi 25.0% elizabeth nelson, elizabeth doherty 35 orange telecommunica tions fr 40.0% helle kristoffersen, mouna sepehri, anne lange, ghislaine coinaud, lucie muniesa, claudie haigneré 36 philips industrial goods & services nl 33.3% neelam dhawan, orit gadiesh, christine poon 37 safran industrial goods & services fr 23.5% monique cohen, odile desforges, élisabeth lulin, astrid milsan 38 saint gobain construction & materials fr 40.0% isabelle bouillot, anne-marie idrac, sylvia jay, pamela knapp, agnès lemarchand, olivia qiu 39 sanofi health care fr 35.7% bonnie bassler, claudie haigneré, fabienne lecorvaisier suet-fern lee, carole piwnica 40 sap technology de 22.0% margret klein-magar, anja feldmann, gesche joost, christine regitz 41 schneider electric industrial goods & services fr 38.5% betsy atkins, magali herbaut, linda knoll, cathy kopp, lone fønss schrøder, 42 siemens industrial goods & services de 30.0% birgit steinborn, bettina haller, nicola leibinger-kammüller, güler sabancı, nathalie von siemens, sibylle wankel 43 telefonica telecommunica tions es 11.0% eva castillo sanz, sabina fluxà thienemann 44 total oil & gas fr 33.3% patricia barbizet, marie-christine coisne-roquette, anne-marie idrac, barbara kux 45 unibailrodamco real estate fr 36.4% mary harris, jacqueline tammenoms bakker, dagmar kollmann, sophie stabile 46 unicredit banks it 20.0% maria enrica spinardi 47 unilever nv personal & household goods nl 54.6% laura cha, ann fudge, louise fresco, judith hartmann, mary ma, hixonia nyasulu 48 vinci construction & materials fr 40.0% graziella gavezotti, marie-christine lombard, josiane marquez, ana paula pessoa, pascale sourisse, yannick assouad 49 vivendi media fr 42.9% nathalie bricault, yseulys costes, aliza jabès, cathia lawson-hall, virginie morgon, katie stanton 50 volkswagen pref automobiles & parts de 15.0% annika falkengren, babette fröhlich, louise kiesling source: own representation based on the information from: https://www.stoxx.com/index-details?symbol=sx5e and the annual reports of the respective companies; retrieval date: 03/03/2017 as it can be seen, though some companies have a high percentage of women on their supervisory boards (for instance, the french companies engie and bnp parisbas), there is still much work to do, especially in companies such as fresenius. only claiming that diversity is important, is not enough. companies need to rethink their visions and women need to be considered equal creators of the future. 109 5. discussion and conclusion the present article explored meanings of value creation as understood by the companies of euro stoxx 50 index. it tried to relate the concept of value creation with the presence of women on the boards of companies, it developed a model, which can help companies increase women presence at top level, and it presented the gender quota of euro stoxx 50 companies. one of the contributions of this article is rising awareness on how companies choose to report on their activity in the annual reports. what value means can differ from company to company, while stating that diversity and gender are important for a company still can be meaningless if it is not backed up by concrete actions. the presence of women on boards can be manifested not only by positively influencing a financial kpy, but also by bringing a change in the leadership style or in the strategic orientation of a company. the strategic performance cycle is in this sense a main contribution of the article, as it aims at helping companies to increase the number of women on boards, but this only if there is a real commitment of the company on this issue. moreover, the legal environment should be also considered. for instance, during 2015 there were many discussions in germany about introducing a binding women quota for the supervisory boards of big listed companies, but the quota became obligatory 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(2005). l’impresa commerciale minore in italia. cedam, padova. microsoft word 4 (17-35) keikoh       51  theoretical research on organizational ethical climate: applications and practices of japanese enterprises in china ryu keikoh waseda university, japan received: august 8, 2017 accepted: september 26, 2017 online published: october 2, 2017 abstract organizational ethical climate, a concept first developed by bart victor and john cullen nearly 30 years ago based on renato tagiuri and george litwin’s theory of organizational climate, continues to serve as an important predictor of employee behavior as well as individual and organizational performance. with greater emphasis placed on business ethics, the theory of organizational ethical climate has also been receiving tremendous attention in china primarily in the context of psychology and management research. this paper offers an overview of recent developments in organizational ethical climate research by western and chinese scholars, with a particular focus on its application to japanese enterprises doing business in china, and proposes various measures and strategies to help managers cultivate effective human resource practices. keywords: organizational ethical climate, organizational commitment, anti-ethical behavior, organizational performance, human resource management. 1. the theory of organizational ethical climate generally speaking, the theory of “organizational climate” is concerned with the objective circumstances of an organization’s environment as perceived by individuals working in the organization (tagiuri & litwin, 1968). according to tagiuri and litwin, organizational climate influences decision-making by generating certain beliefs about the consequences that will follow from specific actions. in 1981, other theorists expanded on this theory by claiming that an organization’s ethical climate may also have an impact on the ethical behavior of individual members (see, e.g., murphy, 1981). the notion of “organizational ethical climate” thereby came to embody the commonly shared experiences of an organization’s members concerning what constitutes ethical behavior, as well as the ways in which ethical issues are addressed by the organization itself (trevino, 1986). then, in 1987, a revolutionary study was conducted which contextualized organizational ethical climate by explaining how individuals come to understand their “expected behavior” international journal of economic behavior, vol. 7, n. 1, pp. 51-62, 2017 52  over the course of their efforts to adapt to the organization’s environment (victor & cullen, 1987). for victor and cullen, the concept of organizational ethical climate refers to both the jointly-held beliefs of individual members with respect to what constitutes ethical behavior, as well as the process through which ethical issues are addressed by the organization. under this theory, different organizations have different ethical climates, which in turn leads to differences in how they go about resolving ethical conflicts through various management practices1. numerous studies have since explored the concept of organizational ethical climate based on victor and cullen’s research, with their findings summarized in the table 1. table 1 – definitions of organizational ethical climate research definitions victor & cullen (1987) defines organizational ethical climate as the jointly-held cognitive and behavioral perceptions of an organization’s employees concerning what constitutes ethical behavior, as well as the organization’s approach to addressing and resolving ethical issues. wimbush & shepard (1994) defines organizational ethical climate in terms of how employees as a group handle ethical dilemmas and make ethical decisions, as opposed to individual feelings or attitudes, based on a normative approach to moral conduct. falkenberg & herremans (1995) defines organizational ethical climate as an informal system of dealing with personal and organizational problems involving ethical issues, in which the influence of such a system eclipses that of an organization’s official guidelines and standards. malloy & agarwal (2001) defines organizational ethical climate as a psychological perception structure focused on the ethical behavior of individual members, which can be used to enhance employees’ understanding of shared values involving what constitutes ethical and unethical behavior, ways to address and resolve ethical problems, as well as their awareness of personal responsibility. source: author’s collection as evident from the above, the theory of organizational ethical climate is generally concerned with the perceptions shared by an organization’s individual members, as well as its effect on organizational decision-making, rather than any written codes of conduct or standards for judging morality. as such, it is focused on a shared awareness of what ethical conduct is and how to resolve ethical problems, which necessarily varies across different organizations and which informs the attitudes, beliefs, motivations and behavior of individual members, including colleagues, partners and superiors (malloy & agarwa, 2001). as for its practical applications, the theory can be used to strengthen and improve the social and ethical culture of an organization by developing management practices and codes of conduct to promote effective decisionmaking. in effect, by encouraging specific types of ethical behavior through various human resources management strategies, organizations should be able to cultivate an ethical climate more conducive to higher levels of employee satisfaction as well as individual and organizational performance. 1 other approaches are also worth noting, such as the notion of ethical climate as the status linking the thoughts, emotions and behavior of an organization’s individual members, as measured by their morale, attitudes and cohesion (denison, 1996), as well as its impact on members’ attitudes and behavior as a prediction of individual and organizational performance (wu hongmei, 2005).       53  2. the typology of organizational ethical climate the typology developed by victor and cullen (1987) divides organizational ethical climate into nine categories based on ethical criteria and locus of analysis. in terms of ethical criteria, this typology draws heavily from lawrence kohlberg's theory involving stages of moral development, which characterizes ethical standards in terms of egoism, benevolence and principles. while “egoism” seeks to maximize the pursuit of self-interest at the expense of others, “benevolence” is concerned with the common interests of the community, and “principle” emphasizes the adherence to regulations and procedures. these three criteria, which victor and cullen treat as standards of moral judgment, necessarily determine the different types of organizational ethical climate. as for locus of analysis, victor and cullen make use of alvin gouldner's cosmopolitanlocal framework, which posits that organizations and its members take various considerations into account when making ethical decisions. specifically, just as “individual” considerations such as moral beliefs can form the basis of ethical decisionmaking, such decisions can also be based on the “local” organization’s code of ethics, regulations and policies, as well as “cosmopolitan” considerations derived from other organizations and individuals (which itself stems from the sociological theory of reference groups and their role in the social system for shaping different behaviors and attitudes). therefore, depending on the various ethical criteria and locus of analysis discussed above, the typology developed by victor and cullen is composed of nine distinct ethical climate types, as set forth in table 2. table 2 – victor and cullen’s theoretical framework for organizational ethical climate locus of analysis ethical criteria individual individual individual egoism egoism egoism egoism benevolence benevolence benevolence benevolence principle principle principle principle source: victor and cullen (1987); victor and cullen (1988). based on the above findings, victor and cullen also developed an ethical climate questionnaire (ecq) in order to better understand individual members’ perceptions concerning an organization’s ethical climate. a series of surveys conducted by victor and cullen in 1987, 1988 and 1993 indicated that “efficiency” plays an insignificant role and that “friendship” and “team interest” are regarded as one and the same, which led them to conclude that only seven out of the nine ethical climate types above have practical implications. following additional research, these seven types were further refined into the following five dimensions: instrumentalism, caring, independence, rules, and laws and codes. “instrumentalism” refers to a belief in the supremacy of individual and/or organizational interests as maximized through business activities and with no consideration for the consequences; “caring” refers to an emphasis on altruistic principles in which both managers and employees are focused on maximizing their collective interests; “independence” enables individual members to develop their own standards of morality based on personal value judgments which are respected by the organization and immune to the influence of others; “rules” require strict adherence to the rules, procedures and codes of conduct established by the organization, whose interests necessary take precedence over those of individual members; while “laws and codes” require obedience to laws and professional standards developed outside of the organization, which takes a backseat approach to regulating the conduct of its members. 54  3. empirical studies on organizational ethical climate empirical studies performed on the basis of this theoretical framework have broken down organizational ethical climate into independent, intermediary and moderating variables, each of which are discussed below and applied to chinese enterprises. 3.1. independent variables of organizational ethical climate 3.1.1. the impact of organizational ethical climate on ethical behavior in terms of their impact on employees’ ethical decision-making, organizational ethical climate and individual moral behavior are closely related (trevino & youngblood, 1990). according to trevino (1986), since employees’ perceptions necessarily determine their behavior, cultivating an awareness of what constitutes ethical behavior is of primary importance, while murphy (1993) and others have emphasized the effect of unfavorable ethical climates on unethical behavior. in either case, studies clearly show that changes to an organization’s ethical climate tend to cause corresponding changes in individuals’ ethical behavior. more specifically, numerous studies have demonstrated a positive correlation between a caring organizational ethical climate and the ethical behavior of individual members (see, e.g., murphy, 1993; wimbush & shepard, 1994; loch & conger, 1996; peterson, 2002). a study by okpar (2002) concluded that organizations with more caring ethical climates tend to have employees who exhibit higher levels of job satisfaction and engage in less anti-ethical behavior. researchers in china have also reached similar conclusions. wang chunyan (2010), for instance, has shown that caring ethical climates have a positive influence on organizational citizenship behavior, in which employees share a stronger sense of community and are more likely to help each other accomplish organizational goals. at the same time, as demonstrated in a study by chao gang (2013), a caring ethical climate can also have a chilling effect on ethically deviant behavior while encouraging employees faced with ethical decisions to take the interests of others into account. organizational ethical climate based on independence, rules and laws and codes have also been shown to have a significant impact on the ethical behavior of individual members. a study conducted by wimbush (1997) found a negative correlation between independent ethical climates and anti-ethical behavior. as for ethical climates characterized by laws and codes, craig (2006) and others have also found relatively high levels of moral conduct and few instances of anti-ethical behavior among employees (see, e.g., fan liqun, 2006; domingo & ma lu, 2014). with respect to instrumentalism, however, an analysis of the connection between organizational ethical climate and individual behavior by wimbush and shepard (1992) showed that the overriding focus on egoism tends to result in greater violations of ethical standards and behavioral norms. therefore, unlike the climate types discussed above, there appears to be a strong positive correlation between instrumental ethical climates and immoral behavior, with the level of immorality increasing along with the degree of instrumentalism. for example, vardi (2001) found that anti-ethical behavior such as cheating is more common with instrumental climates, while sackett (2006) concluded that employees working under such climates are less subject to ethical constraints on their behavior. according to li dengyue (2012), however, instrumental ethical climates can be further subdivided into “organization interest-oriented” and “personal interest-oriented,” with only the latter shown to encourage deviant behavior. this makes sense, as an ethical climate in which the pursuit of self-interest is paramount necessarily allows individuals to pursue their own goals at the expense of other individuals, groups and organizations.       55  3.1.2. the impact of organizational ethical climate on employee job satisfaction and organizational commitment a considerable amount of research has also focused on the various ways in which organizational ethical climate can impact employee job satisfaction and organizational commitment. studies by vitell and davis (1990) and kroeck and sims (1994), for instance, concluded that organizational ethical climates more in line with the preferences of individual employees tend to contribute to greater job satisfaction and organizational commitment. a study on taiwan’s banking sector by xie kaixu (2010) also found a positive correlation between employees’ agreement with an organization’s ethical climate, job satisfaction and organizational commitment, while interviews with managers from a large non-profit organization conducted by deshpande (1996) showed that changes in an organization’s ethical climate can significantly impact job satisfaction. as with the impact of organizational ethical climate on individual behavior discussed above, research by kelly and dorsch (1991), whose findings have since been corroborated by cullen (2003) and others, has suggested a positive correlation between caring ethical climates and organizational commitment, and a negative correlation between instrumental ethical climates and organizational commitment. similar studies have also shown that rule-based ethical climates have a positive impact on the organizational commitment of professional’s study, while instrumental ethical climates tend to negatively correspond with job satisfaction and relationships between colleagues (see, e.g., deshpande, 1996; woodbine, 2006). finally, a cross-cultural study on the organizational ethical climates of us, chinese and japanese banks found that all three exhibited a positive correlation between caring ethical climates and external job satisfaction, chinese and japanese banks showed a positive correlation between caring ethical climates and internal job satisfaction, and us and chinese banks showed a positive correlation between ethical climates based on laws and codes and external job satisfaction. perhaps not surprisingly, such research has also overwhelmingly demonstrated a positive correlation between job satisfaction, organizational commitment and ethical climates based on collectivism, rules, efficiency, independence and compassion, and a negative correlation between organizational commitment and ethical climates based on egoism and instrumentalism. according to a study by heng shupeng (2008), for example, ethical climates driven by altruism tend to enhance employee job satisfaction as well as emotional commitment to the organization, while liu feng (2010) found a significant positive correlation between caring ethical climates and affective and moral organizational commitment. 3.1.3. the relationship between organizational ethical climate, individualorganization fit, and individual and organizational performance as sims and keon (1997) have pointed out, if the ethical climate of an organization reflects individual employees’ ethical standards and beliefs, the level of individual-organization fit will be improved. valentine and barnett (2003) have also found a positive correlation between organizational ethical climate and individualorganization fit based on a strong employee preference for favorable ethical climates, while a study by lopez (2009) concluded that the type of ethical climate cultivated by an organization has a significant impact on perceptions involving individualorganization fit. taking it a step further, recent research by yang chunjiang (2014) has also found that caring and rule-based ethical climates, as opposed to climates based on the pursuit of self-interest, can both lead to significant improvements in individualorganization fit and employee job satisfaction, thereby enhancing the interaction between organizations and their members. through there are few studies focused specifically on china, research has also shown a similar correlation between organizational ethical climate and individual and organizational 56  performance. wimbush and shepard (1994), for example, found that altruistic ethical climates help improve organizational performance by promoting ethical behavior among employees, as opposed to climates based on self-interest which contribute to anti-ethical behavior and diminish performance. moreover, according to a study on the relationship between organizational ethical climate and the ethical traits of successful managers, employees of organizations with a caring ethical climate tend to associate ethical behavior with professional achievement, while employees working under instrumental climates attribute success to a lack of ethical behavior (deshpande, 1996). this is why henry silverman (2000) has suggested that incorporating ethics into the management and development strategies of organizations is essential for enhancing its competitiveness. 3.2 intermediary and moderating variables of organizational ethical climate a study involving a chain of u.s. convenience stores indicates that personal morality only plays a role in determining employee’s ethical decision-making and behavior under specific ethical climates, suggesting that organizational ethical climate has a direct impact on employees’ job satisfaction and organizational commitment (herndon, 1992). according to tim and chery (2000), social responsibilities as well as law and code-oriented ethical climates also play an important role in regulating employees’ ethical decisions and behavioral intention. at the same time, studies have shown that job satisfaction can affect individual productivity as well as corporate profit margins (see, e.g., zhang qiuhui & sun xin, 2010). therefore, not only does organizational ethical climate have a direct effect on job satisfaction, it may also have an indirect impact on organizational performance. 3.3 the role of organizational ethical climate in china as evident from the above, western scholars have made enormous progress in developing the theory of organizational ethical climate, which has generated great interest in china. that said, cultural differences between china and the west should not be ignored, and the role of ethical climate in chinese enterprises necessarily differs from that of their western counterparts. in order to account for these differences, chinese scholars have therefore proposed a number of changes to the theory as formulated by victor and cullen. according to heng shupeng (2008), based on a comprehensive analysis of the internal structure of chinese culture, organizational ethical climate in china can be divided into five components: “self-oriented,” “altruisticoriented,” “organization-oriented,” “independent-oriented” and “law and code-oriented,” the first three of which roughly correspond with the “instrumentalism,” “caring” and “rules” under victor and cullen’s typology. based on a study of private enterprises in wenzhou, liu feng (2010) has more recently reconfigured these categories into: “regulation-oriented,” “caringoriented,” “independent-oriented,” “organization-interest oriented” and “self-interest oriented,” thereby collapsing the “rules” and “law and code” components of victor and cullen’s formulation into a single category (“regulation-oriented”) and subdividing “instrumentalism” into two separate categories (“organization-interest” and “self-interest oriented”). this typology was adopted by li dengyue (2012) in his study of the relationship between organizational ethical climate and employees’ deviant behavior. research has shown that, out of the five categories discussed above, the organizational ethical climate of chinese enterprises tends to be largely regulationoriented. according to a study on high-end chinese hotels by yu zhiyuan (2009), employees of chinese enterprises are subject to an extensive system of laws, rules and codes which define and delineate what should be considered ethical behavior. a study by liu feng (2010), in which questionnaires were handed out to employees of small and medium-size enterprises (smes) in china, similarly suggests an organizational ethical climate dominated by rules, codes and regulations, albeit with       57  some evidence of independent-oriented, organization-interest oriented and self-interest oriented climates, and little to no evidence of caring-oriented climates. several studies have also concluded that different organizational ethical climates can coexist within the same chinese enterprise, which is consistent with research involving western companies. heng shupeng (2008) found that regulation-oriented and independent-oriented climates tend to coexist, with their respective impact on employee job satisfaction and organizational commitment dependent on the level of altruism within an organization. where this altruism is lacking, even in a regulation-oriented climate involving enforced compliance with strict rules, job satisfaction and organization commitment will remain low. according to liu feng (2010), independentoriented climates also tend to coexist with organizationalinterest and self-interest oriented climates, while jing runtian and liu wenbin (2010) have found that employees largely regulate their ethical behavior based on the dominant ethical climate despite the presence of other climates within the same organization. 4. the organizational ethical climate of japanese enterprises in china the management and operations of japanese-funded enterprises in china have undergone enormous changes since china’s adoption of the reform and opening up policy in 1978. during the initial phase of the policy between 1978 and 1995, china’s market potential was restricted by low income levels and market imperfections, while japanese investment in china focused primarily on taking advantage of its preferential policies and cheap labor to establish production facilities. during the second phase from 1996 through 2001, japanese enterprises’ interest in china gradually expanded from production to the establishment of promotional, pricing and sales channels which laid the foundation for subsequent growth. then during the third phase between 2001 and 2008, known as the market development period, efforts by japanese enterprise to expand their footprint in china were driven by the establishment of nationwide merchandise networks. at this point, a wide range of products and services, from cars, electronics and furniture to medicine and food, became an indispensable part of china’s economic development. more recently, the global financial crisis of 2008 along with increasing labor costs led to a decline in the number of japanese production facilities in china, though japan’s interest in the chinese market as a whole has shown no signs of slowing down. according to data released by japan’s ministry of economy, for example, in 2011 there were 5,878 japanese enterprises in china (including hong kong and macau), accounting for 30.5% of all overseas japanese corporations, which increased to 7,700, or 33% of all overseas firms, in 2012. though japan was one of the first countries to express an interest in the chinese market, research on japanese-funded enterprises in china did not begin until the third phase of the reform and opening up period in 2001. moreover, early studies focused primarily on issues involving localization and diversification, and were therefore illequipped to address some of the more pressing problems currently faced by japanese enterprises operating in china. while many of these problems stem from political tension between the two countries as well as japan’s economic downturn, they are also a reflection of japanese companies’ failure to adapt to china’s changing policies on investment, environmental protection, technological innovation and foreign trade as part of its increasing focus on sustainable development. of course, corporations from around the world have all had to adjust their strategies to adapt to these changes, but japanese enterprises continue to face fierce competition from china as well as south korea and europe. as discussed below, one way to effectively improve their prospects is through a greater emphasis on ethics and culture, of which additional research on organizational ethical climate is essential. first, while the two countries are geographic 58  neighbors, differences in traditional chinese and japanese culture should not be ignored. efforts must therefore be made to strengthen understanding between japanese enterprises and their chinese employees, with a particular emphasis on maintaining a positive corporate culture while enhancing the cultural sensitivity and adaptability of individual employees. in this respect, it would be productive for japanese enterprises to identify the types of organizational ethical climates preferred by chinese employees, which will help improve individualorganization fit and reduce turnover while increasing job satisfaction and organizational commitment. second, while the cultures of both countries have to some extent emphasized collectivism over individualism, japan’s so-called “collectivist culture” remains central to the growth and development of japanese enterprises. for japanese employees, this sense of collectivism means that they are expected to maintain a loyal and selfless devotion to the organization while fulfilling their individual potential. in china, however, work is simply viewed as a source of livelihood, which means that employees prefer to spend more time with their family and enjoying leisure activities (jin cheng, 2011). this suggests that in order to prevent unethical behavior, japanese enterprises in china must do more than cultivate a caring ethical climate more in line with chinese cultural norms, and that offering chinese employees emotional support and intellectual stimulation is not enough. in a survey of 43 japanese enterprises in china, xue jun and nishimura howe (2006) found that dissatisfaction with income and benefits remains the most common reason for chinese employees to quit. measures must therefore be taken to ensure that these employees are paid well enough to support themselves and their families. third, yu zhiyuan (2009) has argued that independent-oriented ethical climates tend to promote organizational commitment among employees. yet for most japanese enterprises doing business in china, there is little opportunity for promotion among chinese employees, with most senior management positions being filled by japanese. yin jinghui (2006) has similarly noted that the corporate culture of japanese enterprises continues to be characterized by an overriding emphasis on japanese identity which is coupled with an underlying mistrust of non-japanese employees, a finding which has been corroborated by various other studies (see, e.g., song deling & yue dazhi, 2006; kim yong, 2007; niu jing, 2008). this failure to grant chinese employees equal rights and promotional opportunities has prevented the development of a positive ethical climate, while hampering individual productivity and organizational commitment. japanese enterprises must do more to enhance cultural inclusiveness through education and training, while cultivating an ethical climate which strives to satisfy the needs of all employees. finally, commercial enterprises need to realize, if they haven’t already, that they can no longer afford to limit themselves to the pursuit of profit above all else, and that business ethics, along with an emphasis on social progress and development, has become central to their success. yet several japanese enterprises with operations in china have been mired in ethics scandals involving everything from substandard quality and safety failures to employee strikes over overtime and unequal pay. the safety problems reported by toyota in 2010 and the toto strikes of 2014, for example, directly reflect ongoing problems with the organizational ethical climate of japanese enterprises as well as their failure to fully integrate into chinese society. according to liu songbo (2013), effective moral leadership can help counteract employees’ perceptions of a self-interest oriented ethical climate and reduce anti-ethical behavior. japanese executives must therefore do more to cultivate climates which place a greater emphasis on social development and the need to pass on positive values to their employees. additional research on how the existing ethical climates formed, as well as effective mechanisms to       59  improve related management practices, should also help ensure the sustainable long-term development of japanese enterprises in china. 5. the development of organizational ethical climate and challenges to human resource management while numerous studies have confirmed the existence of a strong correlation between ethical climate and individuals’ behavior, attitude and performance, research into human resources management practices has largely ignored the theory of organization ethical climate. this clearly needs to change, and the following recommendations are intended to address the various ways in which human resource managers can foster more positive ethical climates. as a preliminary matter, the concept of individual-organization fit must be made more of a priority, which requires that organizational ethical climate be more in line with individual employees’ perceptions. as discussed above, studies have shown that ethical behavior is largely determined by ethical perceptions, and that when the ethical climate reflects these perceptions, levels of job satisfaction, organizational commitment and ethical behavior tend to be higher (see, e.g., vitell & davis, 1990; sims & kroeck, 1994). moreover, because these perceptions necessarily depend on employee training and other human resource practices, human resource management systems play an important role. managers must therefore make an effort to better understand the ethical climate of their organization through interviews, questionnaires and/or employee attitude surveys, and then seek to strengthen those management policies and practices which can have a positive impact on it through employee education and training. second, the development of an ethical climate more conducive to the promotion of ethical behavior among employees is essential. as discussed in greater detail above, studies have shown that levels of individual ethical behavior, attitudes and performance tend to be higher under both caring and law and code-oriented ethical climates, with instrumentalism more likely to promote anti-ethical behavior. in terms of human resources management, this means that performance evaluations should be geared toward providing employees with positive reinforcement as well as more opportunities to feel appreciated and gain a sense of accomplishment in their work. in particular, outcome-oriented evaluations should be replaced by more comprehensive incentive systems in an effort to minimize the role of instrumentalism as a component of organizational ethical climate. third, employees should be granted enough discretionary authority to be able to use their own independent judgment at work. studies have shown that independent ethical climates tend to enhance employees’ emotional commitment to the organization (yu zhiyuan, 2009), and that if they feel more trusted and respected in the workplace, individual performance will likely be enhanced. management should therefore arrange for ethics lectures and other training opportunities geared toward developing independent thinking and judgment among employees. and given that independent judgment in itself is not enough, they should also empower employers by offering them greater discretion with respect to daily decision-making opportunities. this will help increase their emotional commitment to the organization while improving both individual and organizational performance. at the same time, the establishment of human resource departments focused exclusively on the enforcement and promotion of a consistent code of ethics is also required. a study by mcdonald and zepp (1990) 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(2010). a research on the influence of organizational ethics on job satisfaction. human resource development of china, ,05:97-100. 0 _16-00_ editorial this issue of the international journal of economic behavior comprehend several topics that provide a special stimulus for future research on economic behavior and management. the international journal of economic behavior is multidisciplinary in nature and the papers collected in this issue comprehend nine contributes, among which six have been selected from the 8th euromed academy of business conference, held in verona, italy on september 16 submission to the journal and a double blind review. the first paper by dimitrios a. chatzoudes and prodromos d. chatzoglou proceeds in developing and testing an original conceptual framework, which explores the impact of csr practices on various measures of consumer behaviour. the proposed conceptual framework was tested on a consumers. results underline the significance of csr practices in an economy under crisis, the effect of gender, and the shift from the classic paradigm of the second paper authored by relationship via discourse analysis of 750 entries of consumer statements about their beloved brands. results propose differences between brand love and interpersonal love, highlighting brand related factors as well as consumer related factors that affect the development of love relationship with brands. the main objective of the third paper by randrianasolo-rakotobe and nalini r analytical model of the relevant factors which adoption of agricultural practices by farmers. results emphasize a importance of formal network the fourth paper written by davide pellegrini and francesca de canio investigates the effects of e through a netnography on 20 worldwide crowd demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and reduce the d between market and society. the fifth paper, written by their purchase decision of beauty products (the face concept). using factor analysis on data collected through extracted. then, the authors decision making process of female consumers in the uk and bangladesh, finding differences just for one factor labelled as editorial of the international journal of economic behavior comprehend several topics that provide a special stimulus for future research on economic behavior and the international journal of economic behavior is multidisciplinary in nature and the papers collected in this issue comprehend nine contributes, among which have been selected from the 8th euromed academy of business conference, ly on september 16-18, 2015. three more papers submission to the journal and a double blind review. imitrios a. chatzoudes and prodromos d. chatzoglou proceeds in developing and testing an original conceptual framework, which xplores the impact of csr practices on various measures of consumer behaviour. the proposed conceptual framework was tested on a sample of 473 greek consumers. results underline the significance of csr practices in an economy under crisis, the effect of gender, and the shift from the classic paradigm of the second paper authored by ulun akturan explores the consumer relationship via discourse analysis of 750 entries of consumer statements about their beloved brands. results propose differences between brand love and interpersonal love, highlighting brand related factors as well as consumer related the development of love relationship with brands. the main objective of the third paper by maryem and nalini rakotonandraina is to propose and test an analytical model of the relevant factors which can help to better adoption of agricultural practices by farmers. results emphasize a importance of formal networks in knowledge transfer. the fourth paper written by davide pellegrini and francesca de canio investigates the effects of e-wom (electronic-word of mouth) of individuals through a netnography on 20 worldwide crowd-sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and reduce the d between market and society. the fifth paper, written by shahina pervin, is focused on consumers their purchase decision of beauty products (the face concept). using factor analysis on data collected through a structured questionnaire survey, five factors were xtracted. then, the authors compared the degree of face concept and its impact on decision making process of female consumers in the uk and bangladesh, finding differences just for one factor labelled as ‘brand link to personal satisfaction’. 1 editorial of the international journal of economic behavior comprehend several topics that provide a special stimulus for future research on economic behavior and the international journal of economic behavior is multidisciplinary in nature and the papers collected in this issue comprehend nine contributes, among which have been selected from the 8th euromed academy of business conference, more papers followed a imitrios a. chatzoudes and prodromos d. chatzoglou proceeds in developing and testing an original conceptual framework, which xplores the impact of csr practices on various measures of consumer behaviour. sample of 473 greek consumers. results underline the significance of csr practices in an economy under crisis, the effect of gender, and the shift from the classic paradigm of csr. explores the consumer-brand love relationship via discourse analysis of 750 entries of consumer statements about their beloved brands. results propose differences between brand love and interpersonal love, highlighting brand related factors as well as consumer related the development of love relationship with brands. aryem cherni, hanitra to propose and test an can help to better understand the adoption of agricultural practices by farmers. results emphasize a great the fourth paper written by davide pellegrini and francesca de canio word of mouth) of individuals sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and reduce the distance consumers transfer in their purchase decision of beauty products (the face concept). using factor analysis five factors were compared the degree of face concept and its impact on decision making process of female consumers in the uk and bangladesh, finding satisfaction’. 2 the sixth paper, written by giovanni ossola, guido giovando and chiara crovini, aims at monitoring the role of net loans for banks in terms of impact on total assets. at the same time it investigates the correlation between loans and their related reserves for impaired loans. based on data extracted from bankscope during the period 2005 – 2013, findings emphasize a strong concern regarding the steady increase of impaired loans and consequently the increasing possibility of mergers as one solution for pursuing a more efficient risk policy. finally, in this issue of the journal, three regular papers have been included. the seventh paper by lukman raimi, bolaji cole, morufu oladimeji shokunbi and moshood adeniji bello is based on a qualitative research method aiming at shedding light on indigenous entrepreneurs and their battle for competitive edge with the multinational corporations (mncs) in nigeria. the authors suggest that indigenous entrepreneurs lost competitive edge because of unequal balance of power with mncs linked to lack of advanced technologies, poor managerial knowledge, low international social networks and inadequate institutional support from the government. the eight paper by tonino pencarelli and mauro dini is based on an empirical analysis aiming at investigating the relationships between travel agencies (ta) and tour operators (to) in the italian tourism intermediation system. results highlight that, although the products supplied by tos are fundamental to ta turnover, in most cases the channel relationships are of short duration and highly variable. finally, the paper by maria cecilia coutinho de arruda and mirian palmeira aims is to describe the customers and street retailers’ perceptions related to fast fashion. the results, through qualitative and quantitative research, show that one of the major differentials of fast fashion (f/f) in brazil could be credit conditions. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present positive perception of f/f quality, design and price. retail companies should focus on the timing of the collections. the issue is to show how important is the business schools’ role in a way to develop contents linked to fashion and its different categories, such as fast fashion retailing and to prepare the future professionals to deal with such different façades of fashion. the managing editors of the special section want to thank the editor-in-chief of international journal of economic behavior, fabio musso, the managing editor, barbara francioni and all the reviewers and authors involved in this journal issue. demetris vrontis, alberto ferraris guest editors microsoft word 3 (17-24) francioni.docx       39  the italian sounding phenomenon: the case of germany barbara francioni carlo bo university of urbino, italy giovanna albanesi carlo bo university of urbino, italy received: april 12, 2017 accepted: september 10, 2017 online published: september 26, 2017 abstract the main objective of this paper is to consider the role of made in italy in foreign markets, especially in the german one. the focus is on the italian sounding phenomenon, which is mainly affecting the italian food sector. to deeply understand this phenomenon and its consequences, an online survey has been carried out in germany. by analyzing results, the fact that consumers do not pay attention to the label while purchasing has been confirmed. in this way, the strategy of italian sounding damages both the perception of made in italy goods and the whole italian economy. for those reasons, the italian sounding should be minimized by using specific marketing activities, until consumers understand the real quality of the authentic made in italy. keywords: italian sounding; made in italy, country of origin, germany. jel classification: m3 1. introduction in recent years, attention has increasingly been drawn on the origin of goods, especially in the food sector, driving consumers’ choices while purchasing. among many parameters to consider, it is important to mention extrinsic factors like country of origin, used by consumers to evaluate products. in brief, in respect of other studies and the literature, the country of origin is usually abbreviated as “coo”, which refers to the country that manufactures, designs or assembles a product or brand with which it is associated (lee & lee, 2009). the country of origin effect has indeed a strong impact on purchasing decisions. a particular aspect related to coo is the italian sounding phenomenon, which consists in exploiting names, colours and images to imitate real italian products, but having nothing to do with the original made in italy quality, culture and tradition. the implementation of the sounding strategy constitutes a threat not only to the italian exporting companies but also to consumers: damages are caused to italian producers by references being made to well-known international journal of economic behavior, vol. 7, n. 1, pp. 39-50, 2017 40  italian brands or by the use of specific wordings which give the impression that a product is italian when it is not, thus misleading consumers. italian sounding is a tangled issue, especially because nowadays global sourcing is a common practice: supply chains are frequently spread across countries, thus, determine the true country of origin (coo) of a product is more complicated than before. interestingly, some authors precisely suggest that companies located in countries that do not benefit from a positive country image, can take advantage of the positive perception associated to another nation (zeugner-roth, diamantopoulos & montesino, 2008). the present paper is meant to provide an overview of the positioning of the made in italy in foreign markets, through the analysis of the consequences of the so-called italian sounding phenomenon. starting from a literature review concerning the coo effect, the paper will provide a deepening in the italian sounding phenomenon moreover, an online survey has been carried out in germany, and people have answered questions regarding their behavior in supermarkets and their expectations about made in italy goods. feedbacks and data from german consumers have been considered to better analyse the italian sounding phenomenon, evaluating both risks and opportunities. 2. literature review 2.1. country of origin coo has been defined by nagashima (1970) as the picture, reputation or the stereotype that businesspersons or consumers attach to products of a specific country. in addition, country image is one of the first variables that researchers test in accordance to foreign product and carry on in international business and consumer behavior studies (kotler, 2011). moreover, it is highlighted how the image of the country of origin is affected by national characteristics, as well as the economic and political background, the history and tradition of the country. according to papadouloulus and louis (1993) this principle is the result of the perceived national identification or affiliation of a product by consumers regardless of any explicit or implicit and real or false claims inherent in the product or its associated promotion. the coo of a good or service is simply whatever a consumer perceives it to be. moreover, the coo serves as an indirect indicator of the product quality, as it attests benefits and performances, ensuring costumers expectations. therefore, information relating to the origin of products plays a crucial role in developing positive or negative prejudices on goods, driving consumers purchasing choices (bursi et al., 2012). the coo effect can have a positive or negative impact on customer intention, per every effect that the country of manufacture has on the perception of the buyers (thakor and lavack, 2003). as claimed by some academics, if the image of a country is perceived in a positive way from the target, a company can take advantage of this situation, using the image as a mean to add value to the product in the commercialization phase (speece & nguyen, 2005). therefore, information concerning products’ origin influence the purchasing decision: the coo undertakes a prominent role and for this reason, companies should consider consumers’ perceptions in developing marketing activities. another important factor to consider is the push towards globalization, which is not affecting the prominent position of coo, as the territorial identity acts as an intrinsic factor, enlarging or diminishing the product value. as nardin (2012) states, coo is an important informative factor, as territories became a symbol of identity in a globalized market. globalization does not flatter, but indicates a degree of difference among products instead. thus, the origin became a quality mark, which represents all the companies operating in the same territory.       41  the so-called halo effect takes place when consumers evaluate a country’s unfamiliar product using their perceived country image that is based on whatever knowledge they have about the country itself (bertoli & resciniti, 2012). the halo effect is therefore a concern of great importance, especially for italian small and medium-sized enterprises (smes) which have limited resources and competences to set appropriate communication policies to reach foreign markets; on the other hand, they can take advantage of the origin of products to better communicate the quality and reliability level, differentiating their products in globalized markets. 2.2. made in italy italian products have gained a widely-recognized reputation over the years, which made it possible to obtain a commercial advantage to made in italy products. in general, italian products are characterized by a high creative content of the industrial process, validating the term “italian style”. to the made in italy concept are related the sensory experiences of consumers, as well as common stereotypes of the coo, which significantly affect the consumers’ decision making process (dona, 2009). moreover, the italian specialization in food, furniture and clothing sectors have reached high standards all over the world. these specific skills are considered as core competences of made in italy, even more than technical qualities and technological performances (guerini & uslenghi, 2006). it is therefore possible to state that coo exerts a special influence on consumers when referring to specific sectors. the problem arises, and indeed exists, for small business which are affected by legislation: on one hand, large business groups save money by outsourcing certain production steps; on the other hand, small businesses produce entirely on the italian market, affording high costs for maintenance and labor. smes are indeed overpowered by large business groups which can cope with the present economic situation, granting a competitive price but providing the same quality standards as the one of smes. however, the halo effect helps smes to be competitive as much as multinationals and in building relations with foreign markets. 2.3. italian sounding the chamber of commerce of parma (magagnoli, 2013) defined italian sounding as a phenomenon based on the capability of offering products with italian features, regardless of quality, taste and place of production. in addition, magagnoli (2013) stressed the fact that it is important to distinguish italian sounding from counterfeiting, which is legally enforceable and it consists in illegal imitations of brands and designs identified as italian products but effectively produced in other countries. moreover, the possibility of legally pursuing these actions considering the italian sounding is often precluded. foreign companies adopting the sounding strategy misuse distinguishing signs and informative descriptions which lead to the italian country, using market techniques that can mislead consumers, competing in an unfair way in the market, gaining a competitive advantage with respect to the whole competition. this especially happens in product categories where a country excels in expertise and traditions, as the italian agri-food products. the sounding strategy can allow firms to meet the demand, guaranteeing high profits and it is in fact used when importing an original product which is too expensive and therefore not competitive. on this respect, coldiretti (2014) underlines that the common denominator in cases of counterfeiting and imitation is the opportunity for a foreign company to obtain in its reference market a competitive advantage by unduly associating the image of made in italy to its products, having no real connections to the italian productive system and competing in an unfair way with italian producers, who are committed to ensuring high quality standards. 42  in respect of this phenomenon it is considered appropriate to specify three different imitation categories. the first one is referred to the use of non-registered italian recipes: it should be made clear to consumers that specific wordings on the label such as “bolognese sauce” are just a reference to the italian country and not a real italian product. although the use of even real italian recipes may not be prohibited, it represents a useful mean for the enhancement of real italian products. the second category is related to markings which induce the idea of italy, such as the italian tricolor, pictures of locations and famous monuments. the last one concerns the use of italian names and surnames addressed to both products and brands, aiming to recall the italian country (canali, 2013). the implementation of the above-mentioned practices is a clear herd behavior and an abusive use of the italian products’ reputation that misleads consumers. consequently, this information asymmetry represents an opportunity for companies to modify their supply strategies, addressing their offer to foreign markets and not to the domestic one, because they are prompted by the need of cutting production costs. this is therefore a risk both for the agricultural italian sector (in economic and employment terms) and for consumers who based their purchasing choice on prices because they are not able to distinguish between a real italian product and a fake one. if on one hand a legislation to protect intellectual property and trade dress exists, it is impossible on the other hand to have a law in a wider sense: if a single producer can register its brand, packaging or design in more than one country, nothing can be done when the same brand is implied in another country to represent another product category, or in the case where a competitor produces a given good using a similar name. the term trade dress refers to the overall commercial image of a product that indicates or identifies the source of the product and distinguishes it from those of others. it may include the design or configuration of a product, product labeling and packaging and even the décor or environment in which services are provided. moreover, trade dress can consist of elements such as size, shape, color and texture, to the extent that such elements are not functional. if a competitor markets a product with a packaging that is similar to the original one, the recourse to trademark legislation is necessary. the italian chamber of commerce for germany presented a statement describing different criteria for italian sounding judgement: fake designation of origin is an element that is sufficient to lead the court to issue a measure against the producer, whereas elements such as fake italian recipes, italian tricolor, packaging with typical italian images, names or specific italian wordings are judged in different ways, depending on the situation; the thing that matters the most is the general impression created in consumers’ mind by the packaging of a given good. 2.3.1. market data the chamber of commerce of parma indicates that, despite the economic crisis, in 2013 made in italy food products represent one of the major contribution to the total national export (7%). three years later, in 2016, the agri-food exports continue to be one of the most dynamic components of the italian economy, reaching for value 9% of the total exports, as stated iotti (2016). however, this data cannot be considered positive if compared to the total annual turnover of products sold through the sounding strategy. according to data gathered in 2012 by federalimentare (the italian food industry federation), market share of italian sounding detraction from italian industry is estimated at around 61 billion euro per year. this phenomenon assumes a great importance at world level, especially in europe and north america, where the 97% of pasta-sauces are imitations of italian products; moreover, nomisma       43  (2015) stated that in usa, for each dollar earned by real italian products, 11 dollars are earned thanks to imitative goods. if on one hand data confirmed a huge appreciation of made in italy food, on the other hand there is a great potential for italian export expansion. as the myth of made in italy food is everyday more rooted abroad, foreign producers attempt to implement the sounding strategy, causing high risks for italian production; related to this trend, coldiretti reported that now two out of three products sold in the international market are fake products. 2.3.2. solutions the ministry of italian economic development reported some solutions that have been implemented to contrast the italian sounding phenomenon: the dglc-uibm, in collaboration with federalimentare, was concerned in the period 2011 2013 with two projects: the first one began in june 2011, directed at canada on the occasion of italy's taking part in the "sial" show in toronto. this project aimed at promoting and enhancing the products of the agri-food supply chain of italian origin, educating the end consumer to recognize the origin and the difference in quality of the italian product, carrying out promotional activities at the outlets of the mass retailers and a publicity campaign in the principal cities: montreal and toronto. the second project, which was motivated by the positive experience in canada, was carried out in russia in 2013. the choice of russia derived from the market's growing interest in the italian food industry, arising from the increasing appreciation by russian consumers of the quality of italian products. on this occasion, as well as promoting the image of original italian products, information seminars were held by the most famous chefs from italian restaurants in moscow, in order to educate the russian consumer, with the intention of fighting back against the imitation of italian food products. moreover, custom and excise agency, together with coldiretti carried out the “falstaff project” whose objective was to inform the young target about dangers arising from the purchase of non-compliant products, which are a real threat for both health and safety of consumers. the “food act” project, promoted and advanced by the italian government, is part of the legacy left behind by expo milan 2015. as well as above-mentioned projects, also in this case the aim is to promote “made in italy” and increase the level of quality of italian cuisine abroad, through the italian know-how in the food sector. it must be mentioned that, according to gentiloni (2016), exports in the agri-food sector are worth about €37 billion per year and that this number is bound to increase thanks to the effort spent by the italian ministries of agricultural policy and economic development through the plan for the extra-ordinary promotion of made in italy. one of the most complete solution is the one proposed by federalimentare (2012) composed by the following issues: the strengthening of legislative instruments worldwide, the reintroduction of anti-counterfeiting desks in countries where the phenomenon is more widespread, the implementation of products protection clauses in bilateral free trade agreements, the strengthening of relations with foreign markets through participation in fairs and the realization of informative social campaigns to better communicate the high value of real italian products, in order to educate the end consumer. regarding counterfeiting, iotti (2016) reported what the president of federalimentare luigi scordamaglia argued, in other words, the goal is not only to sell products, but also to stress the importance of italian history, values, know-how, tradition as well as the increasing innovation and advanced technology behind real italian products. another corrective action carried out by the italian government is the plan for made in italy promotion, which aims to inform and promote italian productive system abroad, to reinforce 44  italian products identity all over the world. in addition, a successful example is the association of italia del gusto: as volpe (2015), the italian general manager explained, manufacturers of various product categories have decided to get together and present a united front to reach foreign markets. despite all these actions, it must be clear that the abolition of the italian sounding does not automatically imply an increase in export sales: on this purpose, nomisma (2015) argued that as the italian business fabric is mostly composed by smes which struggle to export, it is in any case difficult to face the global market. for this reason, the main solution needed is to act on both fronts: the dimensional growth of enterprises and their commercial aggregation on one side, and trademark protection and tariff barriers limiting italian export on the other. positive results came from auricchio, an italian company that implement a three-key point’s strategy to increase revenue abroad. the ceo of the company explained during an interview (2015) that the strategy consisted in acquiring local importers and other companies in order to broaden the offer, fighting italian sounding and realizing a made in italy system. in this perspective, the dairy sector, the company acquired its importer in the united states in 2015, as the american market accounts for a fifth of its turnover, supporting distributor with domestic staff. however, these operations are not implementable everywhere for economic reasons. 3. research methodology 3.1. market selection with regard to ismea and cogea-databank (2005) analysis relative to made in italy positioning in foreign markets, it has been highlighted how italian agri-food is positioned as up-market products. the strength points of made in italy are related to both organoleptic quality and aspects concerning the public imagination, thus the country of origin effect. on the other hand, the only weakness identified is the high price of goods. according to istat data of 2007, germany turns out to be the first importer of italian products at world level, with 14.8% of italian export shares. according to federalimentare (2015), in 2014 germany has been confirmed as the major target market for italian export concerning the agri-food sector, as well as in 2015, with a share of 19,1% with respect to other target markets, as reported by istat (2016). with particular reference to the product “pasta”, italy is the leader in terms of sales in germany, well above the average of other countries; same results are reported for fruits and vegetables. moreover, german agents ascribe a prominent role both to notoriety and price: brand reputation is the most important element in the decision-making process, immediately followed by the price. as data shows, the german market is characterized by a strong presence of made in italy products, appreciated for their quality, origin and brands notoriety (ismea and cogea-databank, 2005). made in italy export of agri-food is one of the main component affecting the italian balance of trade in a positively way. however, it is from this huge economic value that imitation and counterfeiting problems arise; foreign producers try to take advantage of this situation and of the great appeal italian products exert on consumers, making quick profits. 3.2. data collection the italian origin represents a strong incentive to buy for a german consumer, but this is not reflected in supermarkets where it is common to find imitation of italian products. on this respect, the italian chamber of commerce for germany explained that in germany, unlike other countries, the protection against counterfeit constitutes exclusively a tort, meaning that there is       45  no intervention of public authorities. so, the italian producer is asked for individual activity for the involvement of the german producer in the proceedings; on the contrary, if the same situation occurs in italy there is the possibility of antitrust intervention. to better understand the italian sounding phenomenon in the german market an online survey was carried out. the main objective of the research was to identify how the sounding strategy affects the market and if consumers are aware of it. respondents indicated their perceptions about made in italy and their purchasing behaviors in supermarkets. moreover, the research allowed to detect the work of associations for the safeguard of both consumers and companies settled in the considered territory. the questionnaire was divided into four parts: personal data, image of italy and its products, evaluation of italian products and italian sounding phenomenon. the final sample consisted in 118 persons, 36 men and 82 women, aged from 15 and 72 years old, mostly single. in addition, 80% of the sample identified its tax bracket between 0 – 20,000 euros per year. finally, 105 persons out of 118 have been at least one time in italy. 4. results and discussion the first relevant results showed the made in italy consideration and the relative impact it has on the decision-making process in supermarkets, with particular reference to agri-food products. respondents were asked to use a five point likert scale, where 1 indicated “not at all” and 5 “a lot”. with reference to table 1, it is clear the positive way in which products are considered: the mean of values assigned to certain characteristics was between 3 and 4 points out of 5. by analyzing results, respondents gave positive values to the above-mentioned characteristics: in particular, the technological and innovative level of italian products is considered to be quite high, with a medium score of 3.04 and 2.97 out of 5. moreover, german consumers identified made in italy as an exclusive feature: 63.6% assigned 3 points and 16.1% assigned 4 points out of 5. the highest medium value goes on the adjective “reliable”, with a medium score of 3.14 out of 5 points. table 1 – made in italy products: characteristics moreover, positive values were assigned to the quality of made in italy products: the 55.1% of respondents evaluate them as “high quality”; this issue is connected to the one relative to the price of italian goods, considered “very expensive” from the 47.5%. these data show the upmarket positioning of made in italy, that can be considered as a niche product if compared to the low prices of sounding goods. question score avg 1 2 3 4 5 value italian products are: technologically advanced 1.7% 19.5% 51.7% 27.1% 0.0% 3.04 innovative 3.4% 24.6% 47.5% 20.3% 4.2% 2.97 reliable 4.2% 16.1% 43.2% 33.9% 2.5% 3.14 exclusive 3.4% 10.2% 63.6% 16.1% 6.8% 3.13 46  a key point is represented by the same evaluation on price that has been made by respondents identified in the upper income brackets, meaning that italian products are characterized by high prices for all the population. as concerns the brand notoriety, even if not in line with the wide spreading sounding phenomenon, the 75% can identify real italian brands in supermarkets, meaning that italian smes have effectively gained foothold on the german market. finally, consumers have been questioned about which italian products they buy, considering different sectors: results show that food is what they associate and buy the most, followed by clothing, cosmetics and electronic products. relevant data gathered in the third part of the survey concerned the evaluation of italian products (table 2). positive values have been assigned to italian products, with a medium value of 3.85, which are considered to be definitely better than the german ones by 33.1% of respondents. however, consumers would not pay a premium price for real italian pasta: all consumers assigned values between 1 and 2 points out of 5 to this question. the reason behind this result could be ascribed to the high prices of made in italy products, respondents may not want to pay a lot for essential goods. table 2 – made in italy products: evaluation questions score avg 1 2 3 4 5 value 1) do you assign positive value to italian products? 0.8% 1.7% 26.3% 54.2% 16.9% 3.85 2) do you consider italian food to be better than the german food? 2.5% 4.2% 23.7% 36.4% 33.1% 3.93 3) do you feel like an italian person when you eat pasta? 8.5% 9.3% 38.1% 26.3% 17.8% 3.36 4) would you pay more to have a real italian pasta package? 56.8% 43.2% 0.0% 0.0% 0.0% 1.43 the last part of the questionnaire referred specifically to the italian sounding phenomenon: results highlighted the fact that german consumers did not always check the label to understand the real origin of goods. therefore, if the brand is not known and the origin is not checked, the possibility to be misled by the packaging is considerably high, in addition if the variable of the price is considered in the decision-making process, the possibility of buying a sounding product is even higher. thus, 65% of respondents confirmed that they have involuntarily bought a sounding product at least one time. the products affected by the italian sounding strategy the most are pasta, cheese and sauces. moreover, to confirm the results of the previous parts, it has been asked which are the features that characterized the most made in italy goods and once again the 60.1% identify italian product as high-qualitied, with high price (36.5%) and safe (3.4%). in the last part of the questionnaire there were two images of sounding products marketed in germany, and people were supposed to recognize the real origin. both brands implement the italian sounding strategy but results are slightly different. regarding the first figure, it is possible to say that the reason behind the fact that fewer people than expected have been misled by the strategy is the brand notoriety. however, 24%       47  did not recognize the real german origin, because of the presence of specific wordings, colors and other elements related to the sounding strategy. the first element to consider is the name, which is typical italian and captions state “the original” as well as “with original dressing”. moreover, the italian flag is well visible on the packaging. the production site and a caption stating “inspired by the italian recipe” are written with a small font on one side of the package. the intent of the german producer is therefore clear to imitate a real italian product, so that more hasty consumers will buy the product expecting to find characteristics reported on the packaging. the second image is a sounding product but in this case the brand is not known and therefore the 52% of respondents believed this product as a real italian, as it is a glaring example of the implementation of the italian sounding strategy. also in this case, there are evident references to the italian country, as the tricolor, the italian name and a caption stating “authentic italian”. 5. conclusions, limitations and future research directions the italian sounding phenomenon is based on the sounding strategy which implies as key points a low price and italian graphic elements misleading consumers (dona, 2009), and it can be described as a way of counterfeiting products as it consists in giving italian features to food products that are not truly italian (cembalo, cicia, del giudice, scarpa & tagliaferro, 2008). there is a market share where the demand is not completely met, therefore foreign producers take advantage of this situation to attract the attention on sounding products, which apparently have the same characteristic of italian goods but with a lower price. the situation is difficult to resolve, but asking for intervention on some points, such as the removal of the italian flag from cheeses, as well as to veto the use of any graphics on the packaging that recall italian country. the italian sounding is also due to wrong strategies made in the past, focused on export ‘second choice’ products. today it is not so: the best products are exported, because to succeed abroad the main way is to focus on excellence. another important issue is to offer a full range of products, because a company that has a large range is more credible in the eyes of the foreign customer. according to link (2016), italy has set itself the ambitious goal to increase agri-food product export to 50 billion euros by 2020, representing a potential benefit not only for italian products consumers, but also for import and distributing companies. as link (2016) explained, there is concrete commitment of the italian government, which in the 2015 budget law provided a significant allocation of 220 million euros related to the propagation of “made in italy”. in particular, the italian investment aims to focus on high-potential geographic markets, usa and canada in the first place; to activate promotional campaigns intended to influence opinion leaders and to involve importers and large retail chains and support smes that often lack in skills and resources to soundly access foreign markets. italian companies should therefore organize themselves in order to grab every opportunity that foreign markets offer and that the huge turnover of italian sounding seems to testify. data gathered through the survey conducted on the german market showed how the phenomenon acts, and also the way in which italian producers lose their potential market shares. the studied phenomenon confirmed that the real made in italy agri-food sector can be wider than it is now, and potential market shares stolen by sounding products could have a great impact on the total italian export, affecting italian economy positively. the united states, canada and mexico are the biggest consumers of products made locally but carrying italian-sounding names. but the phenomenon is also growing in crisis-hit europe, where local consumers spend a total €21 billion per year on fake cheap food against €13 billion 48  on original italian cheese, pasta sauce and other popular meals, according to figures by agriculture and food organization coldiretti. italy sought support from several countries ahead of a possible international agreement discussed during expo 2015. but some countries have been reluctant to agree on such a delicate issue, which raises protectionist fears and affects domestic economic interests. coo food labelling is also one of the contentious issues at the heart of negotiations for an ambitious bilateral free trade deal between eu and the us, also known as transatlantic trade and investment partnership, but us has not yet formally agreed to his proposal to create a common front against fake food, as reported lombardy region governor maroni in 2014 during an interview. latest data exposed by cavestri (2017) show that in total, the “made in italy” sector in the us is worth €40 billion, up 10.5% compared to €36 billion in 2015. meanwhile in 2014 italian exports were close to €30 billion, up 10% compared to 2013. this was a progression that analysts had forecast also for 2017-2019 (with an annual increase of more than 7%). according to italian food sector association federalimentare, of more than €38.4 billion of food and farming exports in the world, italy sells €3.8 billion in the us. even though an agreement has not been reached yet, looking at the list of the roughly 90 products on which the us administration could impose tariffs up to 100%, more than 75 are food-related products. the italian sounding should be minimized through information and education campaigns, marketing activities aimed at promoting the real italian quality, know-how and tradition, in order to 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(2014, june). la lotta alla contraffazione in italia nel settore agroalimentare. retrieved from http://www.uibm.gov.it/iperico/home/rapporto%20iperico%20lotta%20alla%20contraffazione%20nel%20settore%20agroalimentare_definitivo.pdf (accessed 20 october 2016). 21. nagashima, a. (1970). a comparison of japanese and us attitudes toward foreign products. the journal of marketing, pp. 68-74. 22. nardin, g. (2012). “l’effetto coo e la globalizzazione”. in: bursi, t., s. grappi, e. martinelli (2012). effetto “country of origin”. un’analisi comparata a livello internazionale sul comportamento d’acquisto della clientela. bologna: il mulino. 23. nomisma. (2015). il futuro del made in italy risiede nell’export. retrieved from http://magazine.expo2015.org/cs/exponet/it/economia/giulio-santagata--il-futuro-delmade-in-italy-risiede-nell-export. (accessed 20 october 2016). 24. papadopoulos n. and louis a.h. (1993). product and country images: research and strategy. new york: the haworth press. 50  25. speece, m. & nguyen, d. p. (2005). countering negative country-of-origin with low prices: a conjoint study in vietnam. journal of product & brand management, 14(1), pp. 39–48. 26. thakor, m. v., & lavack, a. m. (2003). effect of perceived brand origin associations on consumer perceptions of quality. journal of product & brand management, 12(6), pp. 394407. 27. zeugner-roth, k. p., diamantopoulos, a., & montesino, m. a. (2008). home country image, country brand equity and consumers‘product preferences: an empirical study. management international review, 48(5), pp. 577 – 602. 6 _16-13_ ossola def analysys of gross loans and reserves for impaired loans of received: august 1, 2015 accepted: this study aims at monitoring the role of net loans for banks in terms of impact on total assets and, consequently, the trend of period between 2005 and 2013 related reserves for impaired loans, by using the pearson correlation extracted from bankscope, a database containing comprehensive information on financial companies in italy. our findings raise important issues on the administrative supervision of banks and the financial system in general. a strong concern regarding t impaired loans emerged and consequently the possibility of mergers has become one of the solutions for pursuing a more efficient risk policy keywords: gross loans; assets; correlation. 1. introduction banks, like any other business, have been changing continuously with the surrounding environment. in fact, there are several inputs, such as production factors, constraints and conditions that, through a process of transformation, g 2013). along with insurance, financial intermediaries, banks are part of the so "financial system" (giovando and venuti, 2014). the financial system connects the entire economic system through the financial report the financial statements of banks present content that make it suitable for the specific type of business (bocchino, 2013). international journal of economic behavior, vol analysys of gross loans and reserves for impaired loans of italian listed banks giovanni ossola university of turin, italy guido giovando university of turin, italy chiara crovini university of turin, italy accepted: november 27, 2015 online published: abstract this study aims at monitoring the role of net loans for banks in terms of impact on total consequently, the trend of gross loans and the reserves for impaired loans period between 2005 and 2013. we also investigate the correlation between loans and their related reserves for impaired loans, by using the pearson correlation extracted from bankscope, a database containing comprehensive information on financial our findings raise important issues on the administrative supervision of system in general. a strong concern regarding the steady increase of impaired loans emerged and consequently the possibility of mergers has become one of the solutions for pursuing a more efficient risk policy. gross loans; assets; reserves; impairment; banks; italian stock exchange; banks, like any other business, have been changing continuously with the surrounding environment. in fact, there are several inputs, such as production factors, constraints and conditions that, through a process of transformation, generate a series of outputs ( ). along with insurance, financial intermediaries, banks are part of the so "financial system" (giovando and venuti, 2014). the financial system connects the entire economic system through the financial reports. al statements of banks present peculiarities of composition, exposure and content that make it suitable for the specific type of business (bocchino, 2013). international journal of economic behavior, vol 6, n. 1, pp. 73-84 73 analysys of gross loans and reserves for impaired loans of italian listed banks giovanni ossola university of turin, italy guido giovando university of turin, italy chiara crovini university of turin, italy online published: june 22, 2016 this study aims at monitoring the role of net loans for banks in terms of impact on total the reserves for impaired loans in the . we also investigate the correlation between loans and their related reserves for impaired loans, by using the pearson correlation ratio. data were extracted from bankscope, a database containing comprehensive information on financial our findings raise important issues on the administrative supervision of he steady increase of impaired loans emerged and consequently the possibility of mergers has become one of the eserves; impairment; banks; italian stock exchange; banks, like any other business, have been changing continuously with the surrounding environment. in fact, there are several inputs, such as production factors, constraints and enerate a series of outputs (brusa, ). along with insurance, financial intermediaries, banks are part of the so-called "financial system" (giovando and venuti, 2014). the financial system connects the entire peculiarities of composition, exposure and content that make it suitable for the specific type of business (bocchino, 2013). 84, 2016 74 indeed the bank balance sheet follows an order of presentation of the items, essentially based on a policy of decreasing liquidity, with cash and cash equivalents reported as the first entry (bank of italy, circular no. 262, 22 december 2005). our empirical study bases its theoretical rationale on the necessity to strengthen with further demonstrations the importance and the strategic role of loans and the several implications of a specific loan policy on the profitability of each bank. in fact loans are an essential item of the balance sheet of banks, as being one of the most representative items heavily influencing both stability and profitability of this system. the international accounting standards aim at giving a true and fair representation of the above-mentioned item. in accordance to ias 39, the procedure of impairment requires to divide the credits into two large groups: exposures (the so-called "non-performing loans") and those who have not brought individually to objective evidence of impairment (performing loans or "performing"). in this connection there is a specific provision for doubtful accounts in order to show a true and fair view of the same. moreover, in order to define the adjustment and the associated value loss, we proceed by deleting the receivables for which the impairment is considered complete and definitive or devaluing (individually or collectively, depending on the method applied) claims for which it is made necessary rectification. the sample chosen is that of all the banks listed on the italian stock market in the period between 2005 and 2013. consequently we have formulated two different hypotheses and in order to start analysing the results we used the pearson correlation ratio. this research differs from previous studies, proposed in the following literature review, in terms of empirical analysis. first of all, the current sample is particularly representative as it includes all the banks listed on the italian stock exchange. in addition, this study was conducted on the financial statements of those banks and the analysis covers a very long period. this analysis allowed us to monitor the changes in balance sheet items considered and the evolution that occurred in the surrounding environment in that period. moreover, we try to evaluate the effects caused by the global financial crisis that has particularly affected the financial sector and consequently those companies operating in our market. this last element can help us introduce the limits of this research. first of all we should underline that it is the first phase of a far deeper analysis on the banking system. therefore we carried out a simple empirical analysis in order to create the groundwork for further research. moreover bankscope, the database from which we took the data, did not provide all the information required for each bank. this is the reason why we decided to use the mean of each item. the remainder of this study is organised as follows. in section 2, we provide the literature review of the topic presented. the definition of the sample of companies and the methodology are described in section 3. in this section, we also include the presentation of the research questions and of the phases of analysis. our findings are presented in section 4. discussions are in section 5 and conclusions in the last part of the research. 2. literature review many analyses have been conducted to study the bank in its entirety (koch and macdonald, 2007). over the years many scholars have studied the bank account (bocchino et al 2013), its performance (barros et al 2007; berger, 2005; boubakri et al., 2005) and its financial analysis (hartvigsen, g., 1992). some researchers have analyzed the performance of the banks belonging to individual countries (faisal et al 2015; 2007; barros ferreira and williams international accounting standards (dezzani et al 2014) and other specific studies are foc on a thorough analysis of the assets and liabilities of the balance transfer. in addition other researchers have recently analyzed the impacts of the new capital requirements under basel iii on bank lending rates and loan growth. as a result higher ca requirements, raising the marginal cost of bank funding, have been leading to higher rates (cosimano, et al., 2011; elliott, 2009; some studies focused on how some banking entities have faced this moment of global crisis (crowley, 2015; costa and thegeya, studies have concentrated on this period of financial crisis, highlighting the c by the liquidity risk in the stability of a bank, and more generally in the financial system. some have tried to locate the perimeter within which identify the financial risk and study of methods for good management, in accordance with t rossignolo 2015; angelini, et al. 2011, a major study found that the systemically important banks eurozone during the period 2007 and 2013 are well capitalized with respect to market risk undercapitalized credit and counterparty (kahlert et al, 2015). the accumulation of reserves in the banking system of the united states during the financial crisis increased concerns that the policies of the federal reserve may stimulate the flow of credit to the economy: banks, apparently, are accumulating funds instead of loan out (keister and mcandrews, 2009). although credit risk is an important factor that financial institutions must cope with the determinants of bank problem, loans have been little studied. a smaller proportion of studies focused on loans in the bank balance some scholars employ granger relationships among loan quality, cost efficiency, and bank capita 1997). other studies analyzed the trade using a unique data set that is able to identify individual bank loan exposures to different industries, to different sectors, and to different geographical regions (acharya et al, 2003). some studies have analyzed the types of loans to customers and the different types of credit between different regions (salas and saurina, 2002). important studies analysed banks in many countries (foos et al, 2010; bushman and williams that the loan growth leads to an increase in provisions for credit losses over the next three years, to a decrease in interest income related, and lower capital ratios. further analysis shows that lending growth has also a negative impact on net interest income risk leads to the conclusion that the growth of loans is an important drive banks. el sood (2012) focused his analysis on the relationships between loan growth and tier 1 capital ratio, loan growth with the tier 1 capital component, loan loss provisions and the change in nonperforming loans and loan loss prov beccalli, casu and gilardone (2006) investigated the determinants of bank performance and their relationship with share prices. this paper extends the literature on market accounting to examine the relati monitors if the changes in stock performance can be explained by changes in operating efficiency, derived by parametric and non ountries (faisal et al 2015; iqbal, and raza, 2009; ali 2007; barros ferreira and williams, 2007). recent studies have analyzed the bank in terms of international accounting standards (dezzani et al 2014) and other specific studies are foc on a thorough analysis of the assets and liabilities of the balance transfer. in addition other researchers have recently analyzed the impacts of the new capital requirements under basel iii on bank lending rates and loan growth. as a result higher ca requirements, raising the marginal cost of bank funding, have been leading to higher rates elliott, 2009; laeven and valencia, 2008). some studies focused on how some banking entities have faced this moment of global and thegeya, 2013; avdjie et al 2012; caprio et al, 2011). many studies have concentrated on this period of financial crisis, highlighting the c by the liquidity risk in the stability of a bank, and more generally in the financial system. some have tried to locate the perimeter within which identify the financial risk and study of methods for good management, in accordance with the requirements of basel (álvarez and rossignolo 2015; angelini, et al. 2011, strahanb and cebenoyan, 2004). a major study found that the systemically important banks eurozone during the period 2007 and 2013 are well capitalized with respect to market risks, but what about the risks undercapitalized credit and counterparty (kahlert et al, 2015). the accumulation of reserves in the banking system of the united states during the financial crisis increased concerns that the policies of the federal reserve may stimulate the flow of credit to the economy: banks, apparently, are accumulating funds instead of loan out (keister and mcandrews, 2009). although credit risk is an important factor that financial institutions must cope with the s of bank problem, loans have been little studied. a smaller proportion of studies focused on loans in the bank balance sheets some scholars employ granger-causality techniques to test four hypotheses regarding the uality, cost efficiency, and bank capital (berger and de young, other studies analyzed the trade-off between (loan portfolio) focus and diversification using a unique data set that is able to identify individual bank loan exposures to different stries, to different sectors, and to different geographical regions (acharya et al, 2003). some studies have analyzed the types of loans to customers and the different types of credit between different regions (salas and saurina, 2002). nalysed in depth how loan growth affect the riskiness of individual banks in many countries (foos et al, 2010; bushman and williams, 2012). the study notes that the loan growth leads to an increase in provisions for credit losses over the next three to a decrease in interest income related, and lower capital ratios. further analysis shows that lending growth has also a negative impact on net interest income risk leads to the conclusion that the growth of loans is an important driver of the riskiness of el sood (2012) focused his analysis on the relationships between loan growth and tier 1 capital ratio, loan growth with the tier 1 capital component, loan loss provisions and the change in nonperforming loans and loan loss provisions and the change in securities to loans. beccalli, casu and gilardone (2006) investigated the determinants of bank performance and their relationship with share prices. this paper extends the literature on market accounting to examine the relationship between stock prices and efficiency. specifically, it monitors if the changes in stock performance can be explained by changes in operating efficiency, derived by parametric and non-parametric methods. 75 bal, and raza, 2009; ali and ansari, , 2007). recent studies have analyzed the bank in terms of international accounting standards (dezzani et al 2014) and other specific studies are focused in addition other researchers have recently analyzed the impacts of the new capital requirements under basel iii on bank lending rates and loan growth. as a result higher capital requirements, raising the marginal cost of bank funding, have been leading to higher rates some studies focused on how some banking entities have faced this moment of global caprio et al, 2011). many studies have concentrated on this period of financial crisis, highlighting the crucial role played by the liquidity risk in the stability of a bank, and more generally in the financial system. some have tried to locate the perimeter within which identify the financial risk and study of he requirements of basel (álvarez and a major study found that the systemically important banks eurozone during the period s, but what about the risks the accumulation of reserves in the banking system of the united states during the financial crisis increased concerns that the policies of the federal reserve may have failed to stimulate the flow of credit to the economy: banks, apparently, are accumulating funds instead although credit risk is an important factor that financial institutions must cope with the sheets. in particular causality techniques to test four hypotheses regarding the l (berger and de young, off between (loan portfolio) focus and diversification using a unique data set that is able to identify individual bank loan exposures to different stries, to different sectors, and to different geographical regions (acharya et al, 2003). some studies have analyzed the types of loans to customers and the different types of credit in depth how loan growth affect the riskiness of individual 2012). the study notes that the loan growth leads to an increase in provisions for credit losses over the next three to a decrease in interest income related, and lower capital ratios. further analysis shows that lending growth has also a negative impact on net interest income risk-adjusted. all this r of the riskiness of el sood (2012) focused his analysis on the relationships between loan growth and tier 1 capital ratio, loan growth with the tier 1 capital component, loan loss provisions and the isions and the change in securities to loans. beccalli, casu and gilardone (2006) investigated the determinants of bank performance and their relationship with share prices. this paper extends the literature on market-based onship between stock prices and efficiency. specifically, it monitors if the changes in stock performance can be explained by changes in operating 76 however, none of these types of analyses concentrated on italian banking firms in the period considered. more specifically, our research considers the period between 2005 and 2013, a very long period that allows to overcome the cyclical trends in the short term, on a large sample of italian banks, generating incremental results than existing literature from an empirical point of view. moreover our research monitors the correlation between gross loans and reserves for impaired loans over a very long period. we aim at analysing how and if reserves have the same trend of loans and, consequently, if they have a huge impact on them. consequently, the results provide a ''snapshot” of the economic situation of the italian banks. 3. methodology the following paragraphs describe the sample and the data, research questions and phases of analysis and the statistical techniques used to conduct our research. 3.1. sample and data this analysis focuses on the group of banks listed on the italian stock exchange. in particular, we have chosen those listed on the sectoral index called ftse banks. we focused on the analysis of the gross loans and the related reserves for impaired loans in the period between 2005 and 2013. moreover this study can help us understand the context and the main business in which banks operate. data were extracted from bankscope, which is a database containing comprehensive information on financial companies (banks and insurance companies) in italy. we used the consolidated balance sheets of all companies and we focused on information about gross loans, reserves for impaired loans and total assets of the balance sheet of the groups of banks companies. we want to specify that data provided in our figures all refer to the mean of the single element analyzed for the specific sector. table 1 shows all the italian banks of the sample analyzed. table 1 – italian banks listed on the bank sectoral index of the italian stock exchange banks banca finnat euramerica spa banca popolare dell'etruria e del lazio soc. coop. banca popolare di milano scarl banca popolare di sondrio societa cooperativa per azioni banca popolare dell'emilia romagna banca profilo spa banco di desio e della brianza spa-banco desio banco di sardegna spa banco popolare società cooperativa-banco popolare banca carige spa credito emiliano spa banca piccolo credito valtellinese credito valtellinese soc coop finecobank banca fineco spa-banca fineco spa intesa sanpaolo spa mediobanca spa banca di credito finanziario società per azioni banca monte dei paschi di siena spa gruppo monte dei paschi di siena unione di banche italiane scpaubi banca unicredit spa 3.2. research questions and phases of analysis the present research is based on the following main hypothesis: the assets of banks listed on the sectoral index called ftse banks are mainly represented by loans. to reach the goals of this study, we need to formulate two research questions: rq1: what is the role of net loans for banks in terms of impact on total assets? and, consequently, what is the trend of the reserves for impaired loans? rq2: is there a correlation between the credits and their related reserves of impaired loans? the research methodology phase 1: definition of the items monitored. as we analyse the annual financial reporting standards of a group of italian listed companies, we refer to the ias et al, 2014), and in particular to ias 1, instruments. recognition and measurement phase 2: empirical analysis and derived from the sample. the research only uses the information provided in the consolidated financial statements because it is sufficient to answer the research questions. with reference to rq1, we fir particularly significant in the evolution and we make a comparison with the percentage of reserves of impaired loans to the total gross loans in the period considered. with reference to rq2, we calculate the pearson correlation ratio between gross loans and reserves for impaired loans. thanks to this ratio, we can analyse the impact of gross loans on the reserves for impaired loans in order to e loans policy. as mentioned above, the pearson correlation ratio (p) is used to identify a positive or negative correlation between the gross loans necessary to underline the following conditions: if p > 0 there is a direct correlation; if p = 0 there is no correlation; if p < 0 there is a indirect correlation; if 0 < p < 0.3 the correlation is weak; if 0.3 < p < 0.7 the correlation is moderate; if p > 0.7 the correlation is strong. phase 3: conclusions and limitations of the research. 3.3. statistical techniques in phase 2, after a brief analysis of the data obtained, we focused our empirical work on the analysis of the pearson product linear correlation between two variables inclusive, where 1 is total positive correlation, 0 is no correlation, and correlation. pearson's correlation ratio their standard deviations. the form of the definition involves a "product mean of the product of the mean the correlation coefficient ranges from describes the relationship between research questions and phases of analysis the present research is based on the following main hypothesis: the assets of banks listed on the sectoral index called ftse banks are mainly represented by loans. to reach the goals of this study, we need to formulate two research questions: is the role of net loans for banks in terms of impact on total assets? and, consequently, what is the trend of the reserves for impaired loans? rq2: is there a correlation between the credits and their related reserves of thodology followed three phases: : definition of the items monitored. as we analyse the annual financial reporting of a group of italian listed companies, we refer to the ias-ifrs principles (dezzani et al, 2014), and in particular to ias 1, presentation of financial statement instruments. recognition and measurement. : empirical analysis and findings. it involves an analysis of the information derived from the sample. the research only uses the information provided in the consolidated financial statements because it is sufficient to answer the research questions. , we firstly want to demonstrate that the amount of net loans is the bank balance sheets. afterwards we want to monitor their make a comparison with the percentage of reserves of impaired loans to the in the period considered. , we calculate the pearson correlation ratio between gross loans and reserves for impaired loans. thanks to this ratio, we can analyse the impact of gross loans on the reserves for impaired loans in order to evaluate the effects of a specific gross as mentioned above, the pearson correlation ratio (p) is used to identify a positive or negative correlation between the gross loans and the reserves for impaired loans nderline the following conditions: if p > 0 there is a direct correlation; if p = 0 there is no correlation; if p < 0 there is a indirect correlation; if 0 < p < 0.3 the correlation is weak; if 0.3 < p < 0.7 the correlation is moderate; 0.7 the correlation is strong. conclusions and limitations of the research. in phase 2, after a brief analysis of the data obtained, we focused our empirical work on the analysis of the pearson product-moment correlation coefficient, which is a measure of the between two variables x and y, giving a value between +1 and inclusive, where 1 is total positive correlation, 0 is no correlation, and −1 is total negative is the covariance of the two variables divided by the product of . the form of the definition involves a "product moment", that is, th of the product of the mean-adjusted random variables. the correlation coefficient ranges from −1 to 1. a value of 1 implies that a linear equation describes the relationship between x and y perfectly, with all data points lying on a 77 the present research is based on the following main hypothesis: the assets of banks listed on to reach the goals of this study, we need to formulate two research questions: is the role of net loans for banks in terms of impact on total assets? and, consequently, what is the trend of the reserves for impaired loans? rq2: is there a correlation between the credits and their related reserves of : definition of the items monitored. as we analyse the annual financial reporting ifrs principles (dezzani presentation of financial statement, ias 39 financial findings. it involves an analysis of the information derived from the sample. the research only uses the information provided in the consolidated financial statements because it is sufficient to answer the research questions. stly want to demonstrate that the amount of net loans is bank balance sheets. afterwards we want to monitor their make a comparison with the percentage of reserves of impaired loans to the , we calculate the pearson correlation ratio between gross loans and reserves for impaired loans. thanks to this ratio, we can analyse the impact of gross valuate the effects of a specific gross as mentioned above, the pearson correlation ratio (p) is used to identify a positive or and the reserves for impaired loans. for this, it is in phase 2, after a brief analysis of the data obtained, we focused our empirical work on the ion coefficient, which is a measure of the y, giving a value between +1 and −1 −1 is total negative of the two variables divided by the product of moment", that is, the −1 to 1. a value of 1 implies that a linear equation perfectly, with all data points lying on a line for 78 which y increases as x increases. a value of −1 implies that all data points lie on a line for which y decreases as x increases. a value of 0 implies that there is no linear correlation between the variables. more generally, (xi − x)(yi − y) is positive if and only if xi and yi lie on the same side of their respective means. thus the correlation coefficient is positive if xi and yi tend to be simultaneously greater than, or simultaneously less than, their respective means. the correlation coefficient is negative if xi and yi tend to lie on opposite sides of their respective means. moreover, the stronger is either tendency, the larger is the absolute value of the correlation coefficient. this ratio was developed by karl pearson (1895) from a related idea introduced by francis galton in the 1880s (1877; 1855; 1886). early work on the distribution of the sample correlation coefficient was carried out by gayen (1951) and fisher (1915; 1921) from the university of cambridge. as regards the topic of this research, the pearson correlation ratio was used by bushman and williams (2012), who examined banks across 27 countries, estimating two measures of the forward-looking orientation reflected in discretionary loan provisioning practices within a country. they used this parametric correlation between their two measures of discretionary provisioning and measures of countries’ bank regulatory regimes and other country-level institutions. el sood (2012) instead used this ratio between his sample of data. in particular he focused his analysis between loan growth and tier 1 capital ratio, loan growth with the tier 1 capital component, loan loss provisions and the change in nonperforming loans and loan loss provisions and the change in securities to loans. beccalli, casu and gilardone (2006) used the pearson correlation ratio in their research in which they investigated the determinants of bank performance and their relationship with share prices. this paper extends the literature on market-based accounting to examine the relationship between stock prices and efficiency. specifically, it monitors if the changes in stock performance can be explained by changes in operating efficiency, derived by parametric and non-parametric methods. our research instead differs from previous studies because it monitors the correlation between gross loans and reserves for impaired loans over a very long period. we aim at analysing how and if reserves have the same trend of loans and, consequently, if they have a huge impact on them. 4. findings 4.1. results first of all, before analysing the data obtained, we want to give further details and definitions. the gross loans include loans, finance leases, factoring transactions, debt securities, the variation margins with clearing in front of derivative transactions and operating receivables associated with the provision of financial services. the gross loans are initially recognised at fair value which corresponds to the amount disbursed, or subscription price, plus any transaction costs and revenues directly attributable. at the end of each accounting period an assessment is made regarding the loss of value of the entire loan portfolio. the amount of the loss is recognised in the income statement. the evaluation of the impairment loss on the entire loan portfolio is made taking into account these distinctions: non-performing loans (non substandard loans, restructured loans, loans past due the applicable regulatory reporting performing loans (or performing): as for non assessment, analytically attributed to each individual position, is performed, for loans that exceed the threshold of significance, d relative timing of receipts. starting with rq1, figure 1 emphasis balance sheets in the period between 2005 and 2013. the data refer to the average of the sample for each year. the figure confirms our main hypothesis, therefore, in the sample of banking firms considered, it can be noted that gross loans were a significant part of the total assets. moreover there was a direct correlation between the two. in fact when total assets increased too. obviously, the trend of total assets was also influenced by other items such as financial assets, classified as trading). moreover, despite the and 2009, the sample of italian banks increased its gross loans, in opposition to what happened on the sample of american banks (keister and mcandrews, 2009). figure 1 – the impact of net loans to total asset figure 2 shows the trend of gross loans and reserves for impaired loans during the same period. the data refer to the mean of the sector for each year. performing loans (non-performing): this category includes the suffering tructured loans, loans past due/overdue (past due), as defined the applicable regulatory reporting; performing loans (or performing): as for non-performing loans (excluding past due) assessment, analytically attributed to each individual position, is performed, for loans that exceed the threshold of significance, determining the expected cash flows and the relative timing of receipts. , figure 1 emphasises the weight of net loans to total assets of bank balance sheets in the period between 2005 and 2013. the data refer to the average of the the figure confirms our main hypothesis, therefore, in the sample of banking firms considered, it can be noted that gross loans were a significant part of the total assets. moreover there was a direct correlation between the two. in fact when gross loans went up, total assets increased too. obviously, the trend of total assets was also influenced by other items such as financial assets, classified as afs (available for sale) or trading). moreover, despite the initial phase of the financial crisis in the period between 2007 and 2009, the sample of italian banks increased its gross loans, in opposition to what happened on the sample of american banks (keister and mcandrews, 2009). the impact of net loans to total assets figure 2 shows the trend of gross loans and reserves for impaired loans during the same period. the data refer to the mean of the sector for each year. 79 performing): this category includes the sufferings, /overdue (past due), as defined by performing loans (excluding past due) assessment, analytically attributed to each individual position, is performed, for loans etermining the expected cash flows and the es the weight of net loans to total assets of bank balance sheets in the period between 2005 and 2013. the data refer to the average of the the figure confirms our main hypothesis, therefore, in the sample of banking firms considered, it can be noted that gross loans were a significant part of the total assets. gross loans went up, total assets increased too. obviously, the trend of total assets was also influenced by other (available for sale) or hft (held for crisis in the period between 2007 and 2009, the sample of italian banks increased its gross loans, in opposition to what happened on the sample of american banks (keister and mcandrews, 2009). figure 2 shows the trend of gross loans and reserves for impaired loans during the same 80 figure 2 – the trend of gross loans and reserves for impaired loans the two figures demonstrate that the initial main hypothesis is true. in addition, it is important to understand the relationship in the balance sheets of banks between credits and the related reserves. this graph introduces the answer to rq2. in fact, by analysing their evolution, we can affirm that the two items were interrelated in the period considered. we can notice that the reserves gradually increased between 2005 and 2013, while credits did not have the same plain growth. in 2009 the development stopped and then started increasing again, but in 2011 the amount of gross loans began decreasing. it is therefore clear that in a period of crisis, such as the one that we have been through, banks have increased their reserves for impaired loans and have decided to reduce their risks. table 2 shows the percentage of impaired loans to gross loans, referring to the sample analysed. as we can notice, the amount of reserves has increased over the years. in fact it passed from 2.6% in 2005 to 6.4% in 2013. in particular, in 2008 there was a peak, clearly determined by the general situation of crisis of that year. table 2 – percentage of reserves for impaired loans to gross loans of the banks of the sample as mentioned in previous paragraph, in order to demonstrate the hypothetical correlation between gross loans and their related reserves, we decided to use the pearson correlation ratio (p) in the period between 2005 and 2013. table 3 shows the results deriving from the correlation between gross loans and reserves for impaired loans. 2005 2006 2007 2008 2009 2010 2011 2012 2013 reserves of impaired loans 2,6% 2,5% 3,3% 4,4% 3,1% 3,4% 3,9% 4,9% 6,4% table 3 – pearson correlation ratio between gross loans and reserves for impaired loans of the banks of the sample the table confirms there is a strong year the correlation overcomes 0.9, case, the pearson correlation ratio of each year confirms what before. on the one hand the average of the allocations increases over the years and on the other the correlation is very strong. 4.2. discussions our research and its results confirm what many previous studies have stated before: loans are an essential item of the balance sheet on average more than 50 percent of total assets (keister and mcandrews, 2012). nowadays the balance sheet of banks is formed mainly by that item. but pr these reasons reserves for impaired loans have had an increasing importance. indeed provisions to reserves for impaired loans reveals that they will be one of the most strategic items of bank balance sheets. under these provisions, administrato income statement of these financial institutions our findings raise importan as early warning indicators. thanks to our study, we realis between 2005 and 2013 the gross loans of the group of banks considered grew, even if between 2010 and 2013 they slightly decreased for impaired loans had the same constant positive trend. we have also noticed that the pearson correlation ratio underlines that the growth of gross loans is strongly positively correlated to the increase reserves for impaired loans. especially in the period between 2010 and growth of the related reserves underline that the italian financial system is blocked. as a consequence the crisis of recent years has generated strong concern regarding gross loans and their potential loss. the overall situation and this strong concern in the financial system the topic of bank mergers. business combination would bring benefits aggregation of credit, liquidity and operational 2005 2006 g ro ss l oa ns 2005 0,94 2006 0,93 2007 2008 2009 2010 2011 2012 2013 pearson correlation ratio between gross loans and reserves for impaired loans of reserves for impaired loans the table confirms there is a strong positive correlation between the two variables. every the correlation overcomes 0.9, rising from 0.94 in 2005 to 0.98 in 2013. case, the pearson correlation ratio of each year confirms what we have just commented one hand the average of the allocations increases over the years and on the other our research and its results confirm what many previous studies have stated before: loans are an essential item of the balance sheet of banks reaching in some years a percentage on average more than 50 percent of total assets (keister and mcandrews, 2012). nowadays the balance sheet of banks is formed mainly by that item. but pr these reasons reserves for impaired loans have had an increasing importance. indeed provisions to reserves for impaired loans reveals that they will be one of the most strategic items of bank balance sheets. under these provisions, administrators will influ income statement of these financial institutions. our findings raise important bank supervisory policy issue: the use of bank level variables . thanks to our study, we realised that in italy in the period etween 2005 and 2013 the gross loans of the group of banks considered grew, even if between 2010 and 2013 they slightly decreased. moreover the related reserves for impaired loans had the same growth in the period considered, but they had a we have also noticed that the pearson correlation ratio underlines that the growth of gross loans is strongly positively correlated to the increase reserves for impaired especially in the period between 2010 and 2013, the decrease in gross loans and the growth of the related reserves underline that the italian financial system is blocked. as a consequence the crisis of recent years has generated strong concern regarding gross and this strong concern in the financial system has also an impact on the topic of bank mergers. business combination would bring benefits , liquidity and operational risks and their management. 2006 2007 2008 2009 2010 2011 0,93 0,96 0,98 0,99 0,99 0,98 81 pearson correlation ratio between gross loans and reserves for impaired loans of correlation between the two variables. every rising from 0.94 in 2005 to 0.98 in 2013. even in this we have just commented one hand the average of the allocations increases over the years and on the other our research and its results confirm what many previous studies have stated before: the gross reaching in some years a percentage on average more than 50 percent of total assets (keister and mcandrews, 2012). nowadays the balance sheet of banks is formed mainly by that item. but precisely for these reasons reserves for impaired loans have had an increasing importance. indeed provisions to reserves for impaired loans reveals that they will be one of the most strategic rs will influence the : the use of bank level variables ed that in italy in the period etween 2005 and 2013 the gross loans of the group of banks considered comprehensively . moreover the related reserves growth in the period considered, but they had a steady and we have also noticed that the pearson correlation ratio underlines that the growth of gross loans is strongly positively correlated to the increase reserves for impaired 2013, the decrease in gross loans and the growth of the related reserves underline that the italian financial system is blocked. as a consequence the crisis of recent years has generated strong concern regarding gross has also an impact on the topic of bank mergers. business combination would bring benefits related to the management. in fact recent 2012 2013 0,99 0,98 82 events demonstrated that in some cases the only way to deal with past due and sufferings was to merge with other banks. 5. conclusions the present research first concentrates on the analysis of the gross loans and the related reserves for impaired loans in the period between 2005 and 2013. this study aims at monitoring the role of net loans for banks in terms of impact on total assets and, consequently, the trend of the reserves for impaired loans. our findings raise important issues on the administrative supervision of banks and on the system in general. a strong concern regarding the steady increase of impaired loans emerged and consequently the possibility of mergers has become one of the solutions for pursuing a more efficient risk policy. the sample chosen is that of all the banks listed on the italian stock market in the period between 2005 and 2013 and data were extracted from bankscope, a database containing comprehensive information on financial companies in italy. we have formulated two different hypotheses and, in order to start analysing the results, we used the pearson correlation ratio between loans and their related reserves for impaired loans, by using the pearson correlation. this research differs from previous studies in terms of empirical analysis. first of all, the current sample is particularly representative as it includes all the banks listed on the italian stock exchange. in addition, this study was conducted on the financial statements of those banks and the analysis covers a very long period. this research allowed us to monitor the changes in balance sheet items considered and the evolution that occurred in the surrounding environment in that period. moreover, we try to evaluate the effects caused by the global financial crisis that has particularly affected the financial sector and consequently those companies operating in our market. what we have analyzed also allows us to introduce all the limits of this research. first of all, this study represents the first step of a much deeper analysis that can consider other variables, financial indicators and margins. we carried out a simple empirical analysis in order to create the groundwork for further research. in addition bankscope, the database from which we took the data, did not provide all the information required for each bank. this is the reason why we decided to use the mean of each item. as regards the future developments of this research, it might be interesting to compare and contrast the italian situation with that of other european countries, such as england, france and germany. moreover, it may be useful to understand the impact of the annual 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(2004). risk management, capital structure and lending at banks. journal of banking and finance, 28 (1):19-43. microsoft word 2 (17-40) franca.docx 25 linking entrepreneurial orientation to knowledge’s exploitation alexandra frança polytechnic institute of porto, portugal orlando lima rua polytechnic institute of porto, portugal received: january 17, 2017 accepted: september 26, 2017 online published: september 29, 2017 abstract the processes for exploitation of knowledge became an essential element for firms to adapt to changes in the competitive environment. the exploitation of this knowledge should be undertaken with proactivity, innovation and risk-taking. building on well established theories, our research explores the influence of entrepreneurial orientation in exploitation of knowledge of portuguese small and medium enterprises (smes) of footwear associated to the portuguese footwear, components and leather goods association (apiccaps). based on survey data from 42 firms, and employing the partial least squares structural equation modeling (plssem) technique, our empirical results indicate that the entrepreneurial orientation’s dimensions that have a positive and significant influence on knowledge’s exploitation are innovation and risk-taking, and that on the contrary proactiveness has a negative and a not significant influence on it. keywords: entrepreneurial orientation, absorptive capacities, knowledge’s exploitation, smes, portuguese footwear industry, pls-sem. 1. introduction in a dynamic and turbulent environment, knowledge represents a critical resource to create value and to develop and sustain competitive advantages (teece, pisano and shuen, 1997). however, fast changing environments, technologies and competitiveness intensify the challenges firms face in attaining self-sufficiency in knowledge creation (camisón and forés, 2010). entrepreneurial orientation is a strategic orientation of a company that encompasses specific entrepreneurs aspects such as style, methods and decision-making practices (frank, kessler and fink, 2010), constituting a capacity that can attract resources to exploit opportunities (alvarez and busenitz, 2001). literature in the field of strategic management has focused on dynamic capabilities (for a review see barreto, 2010). the firms’ success depends not only on its’ resources and capabilities, but also the ability to adapt itself to the industry international journal of economic behavior, vol. 7, n. 1, pp. 25-38, 2017 26 contingencies and the markets in which operates. firms may possess resources but must display dynamic capabilities otherwise shareholder value will be destroyed (bowman and ambrosini, 2003). it is in this context that emerges the dynamic capabilities view (dcv) (amit and schoemaker, 1993; teece et al., 1997) to support the adjustment to environmental change. some researchers are establishing the link between entrepreneurial orientation (eo)knowledge, namely knowledge transfer (or sharing) (hormiga, de saá-pérez, díaz-díaz, ballesteros-rodríguez and aguiar-diaz, 2017; rezazadeh and mahjoub, 2016), knowledge acquisition (fuentes-fuentes, bojica and ruiz-arroyo, 2015; song, g. min, s., lee, s. and seo, 2016), or knowledge creation process (yong-hui, jing-wen and ming-tien, 2009). thus, there is a gap in the literature regarding the relationship between entrepreneurial orientation and knowledge exploitation. dcv is not divergent but rather an important stream of resource-based view (rbv) to gain competitive advantage in increasingly demanding environments (ambrosini and bowman, 2009; barreto, 2010; eisenhardt and martin, 2000; wang and ahmed, 2007). monteiro, soares and rua (in press) defend that in versatile markets the firms’ capabilities should be dynamic and managers must display the ability to ensure consistency between the business environment and strategy in order to continuously renew skills. dynamic capabilities as a mind-set constantly integrate, reconfigure, renew and recreate its core capabilities in response to the ever changing environment in order to achieve and sustain competitive advantage (wang and ahmed, 2007). moreover, these capabilities sense and shape opportunities and threats, seize opportunities, and maintain competitiveness by enhancing, combining, protecting, and reconfiguring the businesses’ intangible and tangible resources (teece, 2007). absorptive capacity (ac) has become one of the most significant constructs in the last twenty years. absorptive capacity is the dynamic capability that allows firms to gain and sustain a competitive advantage through the management of the external knowledge (camisón and forés, 2010). building on well established theories, our research aims at exploring the influence of entrepreneurial orientation in exploitation of knowledge of portuguese smes exporting footwear, by analysing the contributions of this capability in such construct. 2. theoretical framework 2.1. entrepreneurial orientation entrepreneurial orientation emerged from entrepreneurship definition which suggests that a company’s entrepreneurial degree can be measured by how it take risks, innovate and act proactively (miller, 1983). entrepreneurship is connected to new business and entrepreneurial orientation relates to the process of undertaking, namely, methods, practices and decisionmaking styles used to act entrepreneurially. thus, the focus is not on the person but in the process of undertake (wiklund, 2006). companies can be regarded as entrepreneurial entities and entrepreneurial behaviour can be part of its activities (covin and slevin, 1991). entrepreneurial orientation emerges from a deliberate strategic choice, where new business opportunities can be successfully undertaken (lumpkin and dess, 1996). thus, there is an entrepreneurial attitude mediating the vision and operations of an organization (covin and miles, 1999). several empirical studies indicate a positive correlation between entrepreneurial orientation and organizational growth (e.g. miller, 1983; covin and slevin, 1991; lumpkin and dess, 1996; wiklund, 2006; davis, bell, payne and kreiser, 2010; frank, kessler and fink, 2010). similarly, other studies also confirm that entrepreneurial orientation has a positive 27 correlation with export’s performance, enhancing business growth (e.g. zahra and garvis, 2000; okpara, 2009). the underlying theory of entrepreneurial orientation scale is based on the assumption that the entrepreneurial companies are different from the remaining (kreiser, marino and weaver, 2002), since such are likely to take more risks, act more proactive in seeking new businesses and opportunities (khandwalla, 1977; mintzberg, 1973). entrepreneurial orientation has been characterized by certain constructs that represent organization’s behaviour. starting from the miller (1983) definition, three dimensions were identified: innovation, proactiveness and risk-taking, which collectively increase companies’ capacity to recognize and exploit market opportunities well ahead of competitors (zahra and garvis, 2000). however, lumpkin and dess (1996) propose two more dimensions to characterize and distinguish entrepreneurial process: competitive aggressiveness and autonomy. in this study only innovation, proactiveness and risk-taking will be considered, as they are the most consensual and used dimensions to measure entrepreneurial orientation (e.g. covin and miller, 2014; covin and slevin, 1989, 1991; davis et al, 2010; frank et al, 2010; kreiser et al, 2002; lisboa, skarmeas and lages, 2011; miller, 1983; okpara, 2009; wiklund and shepherd, 2005; zahra and covin, 1995; zahra and garvis, 2000). 2.2. absorptive capacity of knowledge’s exploitation in order to survive certain pressures, companies need to recognize, assimilate and apply new external knowledge for commercial purposes (jansen, van den bosch and volberda, 2005). this ability, known as absorptive capacity (cohen and levinthal, 1990), emerges as an underlying theme in the organizational strategy research (jansen et al., 2005). cohen and levinthal (1990) conceptualize acap as the firms’ ability to identify, assimilate, and exploit knowledge aquired from external sources. as such, acap facilitates knowledge accumulation and its subsequent use. thus, this ability access and use new external knowledge, regarded as an intangible asset, is critical to success and depends mainly on prior knowledge level, since it is this knowledge that will facilitate the identification and processing of new one. this prior knowledge not only includes the basic capabilities, such as shared language, but also recent technological and scientific data or learning skills. by analysing this definition is found that absorptive capacity of knowledge only three dimensions: the ability to acquire external knowledge; the ability to assimilate it inside; and the ability to apply it (cohen and levinthal, 1990). zahra and george (2002) broaden the concept of acap from the original three dimensions (identify, assimilate, and exploit) to four dimensions (acquire, assimilate, transform, and exploit). ac is a good example of a dynamic capability since it is embedded in a firm’s routines. it combines the firm’s resources and capabilities in such a way that together they influence “the firm’s ability to create and deploy the knowledge necessary to build other organizational capabilities” (zahra and george, 2002, p. 188). according to zahra and george (2002) ac is divided in potential absorptive capacity (pac), including knowledge acquisition and assimilation, and realized absorptive capacity (rac) that focuses on transformation and exploitation of that knowledge. pac reflects the companies’ ability to acquire and assimilate knowledge that is vital for their activities. knowledge acquisition the identification and acquisition and assimilation is related to routines and processes that permit to analyse, process, interpret and understand the external information. rac includes knowledge transformation and exploitation, where transformation is the ability to develop and perfect routines that facilitate the integration of newly acquired knowledge in existing one, exploitation are routines which enhance existing skills or create new ones by incorporating acquired and transformed knowledge internally. 28 jansen et al. (2005) defend that, although company’s exposure to new knowledge, is not sufficient condition to successfully incorporate it, as it needs to develop organizational mechanisms which enable to synthesize and apply newly acquired knowledge in order to cope and enhance each acap dimension. thus, there are coordination mechanisms that increase the exchange of knowledge between sectors and hierarchies, like multitasking teams, participation in decision-making and job rotation. these mechanisms bring together different sources of expertise and increase lateral interaction between functional areas. the system mechanisms are behaviour programs that reduce established deviations, such as routines and formalization. socialization mechanisms create a broad and tacit understanding of appropriate rules of action, contributing to a common code of communication. studying absorptive capacity offers fascinating insights for the strategic management literature and provide new information regarding how firms may develop important sources of sustainable competitive advantages (jansen et al., 2005). in this paper the focus is on the exploitation of knowledge. 3. hypotheses and research model dynamic capabilities refer to “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (teece et al., 1997, p. 516). barreto (2010, p. 271) argued that a “dynamic capability is the firm’s potential to systematically solve problems, formed by its propensity to sense opportunities and threats, to make timely and market-oriented decisions, and to change its resource base”. on the other hand, dynamic capabilities enable companies to create, develop and protect resources allowing them to attain superior performance in the long run, are constructed (not acquired in the market), dependent on experience and are embedded in the company’s organizational processes (ambrosini and bowman, 2009), not directly affecting the outputs, but contributing through the impact they have on operational capabilities (teece et al., 1997). these capabilities refer to a firm’s capacity to deploy resources, usually in combination, using both explicit and tacit elements (such as know-how and leadership). for this reason, capabilities are often firmspecific and are developed over time through complex interactions between the firm’s resources (amit and schoemaker, 1993). maintaining these capabilities requires a management that is able to recognize adversity and trends configure and reconfigure resources, adapt processes and organizational structures in order to create and seize opportunities, while remaining aligned with customer preferences. indeed, dynamic capabilities allow businesses to achieve superior long-term performance (teece, 2007). firms, therefore, need to continually analyse and interpret changing market trends and quickly recognize new opportunities in order to create competitive products (tzokas, kim, akbar and al-dajani, 2015). the ac construct encompasses an outward-looking perspective that deals with the identification and generation of useful external knowledge and information and an inward-looking component that is related with how this knowledge is analysed, combined with existing knowledge, and implemented in new products, new technological approaches, or new organizational capabilities (cohen and levinthal, 1990). ultimately, the following hypothesis is tested: h1: innovation influences positively knowledge’s exploitation. h2: proactiveness influences positively knowledge’s exploitation. h3: risk-taking influences positively knowledge’s exploitation. 29 we present in figure 1 the theoretical model that will be explored in this research, which represents the explanatory variables (innovation, proactiveness and risk-taking) and explained variables (knowledge’s exploitation). figure 1 research conceptual model key: innov – innovation; proa – proactiveness; riskt – risk-taking; kex – knowledge’s exploitation. 4. methodology 4.1. setting and data collection to test the hypothesis a sample of portuguese footwear companies was used, that meet the following criteria: companies in which at least 50% of income comes from exports of goods, or companies in which at least 10% of income comes from exports of goods and the export value is higher than 150.000 euros (ine, 2011). data collection was implemented through electronic questionnaire, associating a link to the survey that was online. to reduce misunderstandings, the questionnaire was validated by the research department of portuguese footwear, components and leather goods association (apiccaps). we were provided with a database of 231 companies (company name, telephone contact, email, economic activity classification, export markets, export intensity and capital origin). only 167 companies fulfilled the parameters, and were contacted by email by apiccaps to respond to the questionnaire. subsequently, all companies were contacted by the authors via email and telephone, to ensure a higher rate of valid responses. the questionnaires began on april 22 and ended on july 22, 2014. after finishing the data collection period, 42 valid questionnaires were received, representing a 25% response rate. this response rate is considered quite satisfactory, given that the average of top management survey response rates are in the range of 15%-20% (menon, bharadwaj, adidam and edison, 1999). in this investigation we chose a non-probabilistic and convenient sample since it respondent were chosen for being members of apiccaps. h 1 h 2 h 3 30 4.2. measures for assessment of entrepreneurial orientation was used covin and slevin’s scale (1989), that consists in nine items: three for innovation, three for proactiveness and three for risk-taking, having been used a five point likert scale, where 1 means “strongly disagree” and 5 “strongly agree”. to measure of knowledge’s exploitation, and based in jansen et al. (2005), it was operationalized the company’s ability to explore new external knowledge into their current operations, through six questions (e.g. jansen et al., 2005; zahra and george, 2002). a five point likert scale was used to measure each item, where 1 means “strongly disagree” and 5 “strongly agree”. 5. results 5.1. descriptive analysis findings show that the sample is mostly composed by small firms, where 93% are smes and 7% micro businesses. regarding their experience in foreign markets, we found that 69% have exported for over 15 years, 19% between 11 and 15 years, 5% between 6 to 10 years, while only 7% have less than 5 years’ experience. regarding their sales, more than 50% revenues are from exports. smes in our sample export up to 6 or more countries (67%), being europe the main market, followed by asia and africa. table 1 – mean, standard deviation and correlation coefficients item (1) (2) (3) (4) (1) proa 1.000 (2) innov -.016 1.000 (3) riskt -.064 -.056 1,000 (4) kex .161 .532* .161 1.000 mean 3.97 2.83 2.74 3.87 standard deviation .764 .671 .946 .736 n 42 42 42 42 * all relationships are statistically significant at the p<0.01 level. table 1 presents descriptive statistics and the correlations between the items. we have used a non-parametric test, spearman correlation, due to the nature of variables (ordinals), data and sample size (marôco, 2011; pestana and gageiro, 2008). even though correlations being an indicator of items convergent validity, we proceed with the process of properly validate the scale. 5.2. reliability analysis in order to verify the reliability of overall variables we estimated the stability and internal consistency through cronbach’s alpha (α). generally, an instrument or test is classified with appropriate reliability when α is higher or equal to 0.70 (nunally, 1978; chin, 2010). the result of 0.855 achieved for all variables is considered excellent, confirming the sample’s internal consistency (pestana and gageiro, 2000). table 2 show all constructs largely achieved the required level. 31 table 2 cronbach’s alpha of multidimensional variables construct cronbach alpha p values innov .825 .000 proa .852 .000 riskt .821 .000 kex .898 .000 5.3. exploratory factor analysis factor analysis is a technique whose primary purpose is to organize the structure of a large number of variables by defining sets of variables that are highly interrelated, known as factors. these groups of factors are assumed to represent dimensions within the data. the general purpose of factor analytic techniques is to find a way to summarize the information contained in a number of original variables into a smaller set of new dimensions with a minimum loss of information (hair, black, babin and anderson, 2014; pestana and gageiro, 2008). common method bias (cmb) is one of the main sources of measurement error. this error threatens the validity of the conclusions about the relationships between measures (podsakoff, mackenzie, lee and podsakoff, 2003; podsakoff, mackenzie, & podsakoff, 2012). harman’s single factor test is one technique to identify cmb (podsakoff et al., 2003). factor analysis of all latent variables limited the number of factors to “1”. according to mat roni (2014) the first component of “total variance explained” should be less than 50%. hence, in this study the measurement instrument is free from significant cmb effects since the variance value is 35.518%. entrepreneurial orientation concerning the factor analysis of entrepreneurial orientation’s construct, with varimax rotation, we got a scale with 9 items, distributed by 3 factors, and there was no need to delete items, that explained 77.09% of total variance, with 35.52% of variance explained by the first factor proactiveness (saturations range between 0.887 and 0.786), 27.48% for the second factor innovation (saturations range between 0.856 and 0.840), and 14.09% by the third factor risk-taking (saturations range between 0.918 and 0.770). analysing the internal consistency of the three factors, we found that cronbach’s alphas have a reasonable internal consistency. kmo test indicates that there is a reasonable correlation between the variables (0.695). bartlett’s sphericity test registered a value of 2(36, n=42)=171.176, p<0.05, therefore it is confirmed that 2>0.952, so the null hypothesis is rejected, i.e. the variables are correlated. knowledge’s exploitation factor analysis, with varimax rotation, of these construct reveals that we got a scale with one factor and there also was no need to delete items. a scale with 6 items was obtained, which explained 66.57% of total variance, whose saturations range between 0.821 and 0.533. the internal consistency is excellent (=0.898). kmo test point to a good correlation between the variables (0.866). bartlett’s sphericity test registered a value of 2(15, n=42)=140.869, p<0.001, therefore is confirmed that 2>0.952, so the null hypothesis is rejected and the variables are correlated. 5.4. pls modeling the structural equation model is a multiple regression analysis, with reflective indicators that are presented as an image of the unobserved theoretical construct, representing observed variables or measures, with the objective of strengthening the relationship of influence between the constructs (maroco, 2010). the simple correlation between these indicators with their 32 construct must have a value equal to or higher than 0.707 so that the shared variance between the construct and their indicators is higher than the error variance (carmines and zeller, 1979). partial least squares (pls) is a technique that best fits predictive applications (exploratory analysis) and theory development when it is not soundly established (roldán and cepeda, 2014). this technique, on one hand, maximize the explained variance of the dependent variables (latent or observed, or both) and estimate structural models with small samples (chin and newsted, 1999; reinartz, haenlein and henseler, 2009). on the other hand, it estimates reflective and formative measurement models without identification problems (chin, 2010). pls appear to be a preferable option for researchers with samples below 250 observations (42 in this study) (reinartz et al., 2009). we also use the composite reliability coefficient to assess construct validity (chin, 1998). this coefficient reflects construct adequacy for a level higher than 0.6 using confirmatory factor analysis (gefen and straub, 2005), as in our case. table 3 illustrates that the studied constructs (all multidimensional) highly exceeded the minimum required for a good fit. table 3 composite reliability coefficient of multidimensional variables construct composite reliability p values innov .895 .000 proa .908 .000 riskt .881 .000 kex .922 .000 for validity assessment, two subtypes are usually examined: convergent and discriminant validity. convergent validity implies that a set of indicators represents one and the same underlying construct (henseler et al., 2009). fornell and larcker (1981) suggest using the average variance extracted (ave) criterion and that an ave value of at least 0.5 indicates sufficient convergent validity. table 4 demonstrates that only entrepreneurial orientation is below the minimum required. table 4 convergent validity construct ave p values innov .740 .000 proa .767 .000 riskt .713 .000 kex .665 .000 discriminant validity is the degree to which any single construct is different from the other constructs in the model. to have discriminant validity a construct must exhibit weak correlations with other latent variables that measure different phenomena. there are two measures of discriminant validity in pls. the fornell–larcker criterion (1981) recommends that the ave should be greater than the variance between a given construct and the other with which it shares the model. the second criterion suggests that the loading of each indicator is expected to be greater than all of its cross-loadings (henseler et al., 2009). we can observe the explanatory power of each variable in the model. entrepreneurial orientation is the only purely explanatory variable and reputational resources and absorptive capacity of knowledge exploitation the explained variables. chin (1998) distinguishes the explanatory power from moderate to substantial. table 5 expresses the good results in terms of discriminant validity of the research model, confirming that constructs do differ significantly. 33 table 5 discriminant validity fornell-larcker criterion innov kex proa riskt innov .860 kex .506 .815 proa .276 .310 .876 riskt -.100 .323 .331 .844 a mere comparison of the regression coefficients is not valid to evaluate the importance of each independent variable models, since these variables have different magnitudes. thus, it is essential to use standard variables, known as beta (β) coefficients, in the models adjustment so that the independent variables can be compared. beta coefficient allows a direct comparison between coefficients as to their relative explanatory power of the dependent variable. table 6 shows that the variables that have higher contribution to knowledge exploitation are innovation (β=0.445) and risk-taking (β=0.325). table 6 standardized beta coefficienta variables beta sig. entrepreneurial orientation innovation .445 .002* proactiveness .076 n.s. risk-taking .325 .021* * p<0.05. n.s. – non significant. a. dependent variable: knowledge’s exploitation. in order to determine the significance of the studied relationships and the confidence intervals of the path coefficients, we used bootstrapping technique. the weighted coefficients indicate the relative strength of each exogenous construct. according to chin (1998), relationships between constructs, with structural coefficients higher than 0.2, are considered robust. from table 7, we thus conclude that the original model does present only a nonsignificant path (proa --> kex). table 7 model’s path coefficients hypotheses original sample (o) sample mean (m) standard error (sterr) t statistics (|o/sterr|) p values innov --> kex .529 .514 .139 3.798 .000* proa --> kex .044 .082 .148 .299 .765*** riskt --> kex .361 .345 .203 1.781 .075** * p<0.001; ** p<0.10; *** n.s. – non significant. the significance of structural coefficients and the magnitude of the total effects enabled us to test the research hypotheses, having registered the following results: h1. innov --> +kex – this hypothesis was supported. h2. proa --> +kex – this hypothesis was not supported. h3. riskt --> +kex – this hypothesis was supported. figure 2 presents the final research structural model with the (direct) effects and explained variance of latent variables. 34 figure 2 research structural model 6. discussion and conclusions the main purpose of this study is to analyse the influence of entrepreneurial orientation on knowledge exploitation. we conducted an empirical research based on a sample of 42 companies, which were applied a questionnaire in order to exploit data to test hypotheses, using proceedings and statistical techniques. it is important to note that companies evaluated entrepreneurial orientation and exploitation of knowledge relative to their major competitors in the export market(s), so the results should be interpreted based on these two aspects. the portuguese footwear industry faces considerable challenges, not only concerning the international markets crisis, but also regarding consumption patterns. the reduction of shoe design lifecycles has consequences on the offer. on one hand, the products have to be adapted to different segments specific needs and tastes (custom design, new models in small series, etc.), on the other hand, manufacture processes must be increasingly flexible, adopt just-in-time production, invest in the brand, qualified personnel, technology and innovation (apiccaps, 2013). this study demonstrated that the company’s innovation and risk-taking have a positive and significant influence on knowledge’s exploitation. the analysed companies are able to exploit knowledge through informal knowledge gather, clear definition of tasks, analysis and discussion of market trends and new product development, among others. dynamic capabilities can take a variety of forms and be involved in different functions, but the most important common characteristics are that they are higher level capabilities which provide opportunities for knowledge gathering and sharing, constant updating the operational processes, interaction with the environment, and decision-making evaluations (easterby-smith, lyles and peteraf, 2009). however, the existence of common features does not imply that any particular dynamic capability is exactly alike across firms, rather they could be developed from different starting points and take unique paths (eisenhardt and martin, 2000). in fact, according to the industrial organization, a company should find a favourable position in its industry from which it can better defend against competitive forces, or to influence them in his favour through strategic actions such as raising barriers to entry, etc. 35 (porter, 1980). this perspective is consistent with eisenhardt and martin (2000) regarding the uniqueness of paths. the results of this study confirm that knowledge’s exploitation enable firms to achieve superior long-term performance (teece, 2007). 6.1. theoretical and practical implications it is known that strategy includes deliberate and emergent initiatives adopted by management, comprising resource and capabilities use to improve business performance (nag, hambrick and chen, 2007). the findings are a contribution to clarify the influence of entrepreneurial orientation on the company’s knowledge exploitation. this study also enabled a thorough analysis of a highly important industry for national exports, such as footwear industry, allowing understanding that entrepreneurial orientation, as an industry strategic determinant, enhancing exploitation of knowledge. jansen et al. (2005) defend that companies need to develop organizational mechanisms to combine and apply newly acquired knowledge in order to deal and enhance each absorptive capacity dimension. in this study is notorious the importance of knowledge absorptive capacity to business performance. it is essential that business owners are able to interpret, integrate and apply external knowledge in order to systematically analyse change in the target market and to incorporate this knowledge in their processes to enhance performance. in addition, the results provide guidance to business practitioners; because they indicate entrepreneurial orientation as a predictor for exploitation of knowledge. companies are a bundle of resources and capabilities (peteraf, 1993), it is essential to understand and identify which resources are relevant to gain competitive advantage and superior performance. in this study it is obvious the importance of entrepreneurial orientation to the firms’ exploitation of knowledge. business owners must be able to interpret, integrate and apply external knowledge in order to systematically analyse the changes that arise in their target market(s) and to incorporate this knowledge into their processes, to identify the present and future needs and market trends, anticipate changes in demand and seek new business opportunities. by building on the literature of entrepreneurial orientation, absorptive capacity and exploitation of knowledge, this study aims to support the strategic development of business management policies designed to increase firms’ performance in foreign markets and add value to the current context of change. 6.2. research limitations the main limitation of this study is related to the sample size, since it was difficult to find companies with the willingness to collaborate in this type of research. the sample is nonprobabilistic and convenience and cannot be used to infer to the general population. the study findings should therefore be analysed with caution. the fact that the research does not consider the effect of control variables such as size, age, location and target market of the respondents can be seen as a limitation. finally, the fact that this study considered only exploitation of knowledge as an absorptive capacity can also be appointed as a limitation. 6.3. future lines of research in future work, we suggest that the model is used in a sample with a higher number of observations to confirm these results. we further suggest pursuing with the investigation of strategic management in portugal, focusing in other sectors of national economy, so that in the future one can make a comparison with similar studies, allowing realizing and finding new factors that enhance absorptive capacity. 36 finally, the moderating effect of strategic variables (e.g. intangible resources, competitive advantage, environment hostility, level of international engagement) in the relationship between entrepreneurial orientation and knowledge’s exploitation should be studied. references 1. alvarez, s. a., & busenitz, l. w. 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(2002). absorptive capacity: a review, reconceptualization, and extension. academy of management review, 27(2), pp. 185–203. 7 _16-07_ raimi indigenous entrepreneurs and battle for competitive edge with multinational corporations in received: august 3, 2015 accepted: this paper examines the plight of indigenous entrepreneurs and their battle for competitive edge with the multinational corporations in nigeria. the research method is qualitative and analytical relying on previous scholarly works on this subject. the sourced data were analysed using critical discourse analysis. the authors found modernity theory most appropriate to underpin this study. the finding indicates that indigenous entrepreneurs lost competitive edge because of unequal balance of power with mncs linked to lack of advanced technologies, poor managerial knowledge, low international social networks and inadequate institutional support from the government. the paper concludes that for indigenous entrepreneurs to regain its competitive edge with mncs, the issues of advanced technologies, managerial knowledge, international social networks and institutional support must be addressed by the policymakers keywords: competitive edge 1. introduction nigeria is a populous country in africa, accounting for about 47 percent of west africa’s population, with a growth rate of 2.4 international journal of economic behavior, vol indigenous entrepreneurs and battle for competitive edge with multinational corporations in lukman raimi de montfort university, leicester, uk moshood adeniji university of university of keele, uk morufu oladimeji yaba college of technology bolaji m. yaba college of technology, lagos. nigeria accepted: january 15, 2016 online published: abstract this paper examines the plight of indigenous entrepreneurs and their battle for competitive edge with the multinational corporations in nigeria. the research method is qualitative and ous scholarly works on this subject. the sourced data were analysed using critical discourse analysis. the authors found modernity theory most appropriate to underpin this study. the finding indicates that indigenous entrepreneurs lost ause of unequal balance of power with mncs linked to lack of advanced technologies, poor managerial knowledge, low international social networks and inadequate institutional support from the government. the paper concludes that for indigenous to regain its competitive edge with mncs, the issues of advanced technologies, managerial knowledge, international social networks and institutional support must be addressed by the policymakers. competitive edge; indigenous entrepreneurs; multinational corporations nigeria is a populous country in africa, accounting for about 47 percent of west africa’s population, with a growth rate of 2.4 percent per annum (ukaejiofo, 2010; raimi, shokunbi international journal of economic behavior, vol 6, n. 1, pp. 85-9 85 indigenous entrepreneurs and battle for competitive edge with multinational corporations in nigeria lukman raimi de montfort university, leicester, uk moshood adeniji bello university of keele, uk morufu oladimeji shokunbi yaba college of technology, lagos, nigeria bolaji m. cole yaba college of technology, lagos. nigeria online published: june 22, 2016 this paper examines the plight of indigenous entrepreneurs and their battle for competitive edge with the multinational corporations in nigeria. the research method is qualitative and ous scholarly works on this subject. the sourced data were analysed using critical discourse analysis. the authors found modernity theory most appropriate to underpin this study. the finding indicates that indigenous entrepreneurs lost ause of unequal balance of power with mncs linked to lack of advanced technologies, poor managerial knowledge, low international social networks and inadequate institutional support from the government. the paper concludes that for indigenous to regain its competitive edge with mncs, the issues of advanced technologies, managerial knowledge, international social networks and institutional support must be multinational corporations. nigeria is a populous country in africa, accounting for about 47 percent of west africa’s percent per annum (ukaejiofo, 2010; raimi, shokunbi 96, 2016 86 and peluola; 2012). presently, nigeria’s population stood at 170,123,740 million (central intelligence agency factbook, 2011). investment is encouraged as there are several incentives and opportunities for perspective local and foreign investors (nigerian investment promotion commission, 2013). official data indicate that the micro, small and medium enterprises (msmes) sub-sector constitutes over 95% of the nation’s enterprises and proudly accounts for over 50% of formal employment (alkali, 2008). the country’s sound economic foundation was laid by the indigenous entrepreneurs at pre and post-independence era. it is therefore worthwhile investigating what accounted for the loss of competitive edge by indigenous entrepreneurs to multinational companies (mncs) in nigeria. indigenous entrepreneurship (ie, henceforth) is an emerging field of research which requires rigorous conceptual, theoretical and empirical studies from multidisciplinary lenses. studies have shown that ie leverage on cultural networks of shared language, family connections, affiliation and communal social capital. furthermore, the indigenous people in most regions of the world have created jobs; stimulate wealth creation and open-up export markets while retaining their cultural age-long cultural norms and traditions (ashoka, 2014). from the foregoing, it could be inferred that social norms and cultural factors influence the nature, governance and management structures of indigenous enterprises (bruton et al; 2008; frederick and foley, 2006; lee-ross and mitchell, 2007; rehn and talaas, 2004; peredo, et al, 2004; banerjee and tedmanson, 2007). these socio-cultural factors that have played significant role in the accomplishments ie in the past have now waned. what could be responsible for this? to reconnect with the past, governments and institutional bodies are deliberately promoting indigenous and mainstream entrepreneurs. in nigeria, the contributions of indigenous nationalities like the yorubas in western nigeria, igbo in eastern nigeria and hausa-fulani in northern nigeria to entrepreneurship have been well documented in books of history. to these three groups, entrepreneurship is a culture and habit transferred from one generation to another (raimi et al., 2012). before the advent of colonial administration and emergence of mncs, the yoruba and hausa indigenous groups were great entrepreneurs and small business owners in their respective regions. among the yoruba, the maiyegun and agbekoya farming communities were prominent in the south and east of ibadan (eades, 1980). the igbos are globally recognized for their culture of entrepreneurship and enterprise development (dana, 1995; gabadeen and raimi, 2012). the hausa-fulani communities are masters of the caravan trade and cattle-rearing. furthermore, igbo, yoruba and hausa-fulani indigenous entrepreneurs provided the platform on which the nigerian economy prospered before colonialism and after colonialism. they were involved in artisanship, food processing, crafts, farming and merchandising. those within the production line produced physical goods and sold the surplus goods to near and distant communities (raimi, et al., 2010). however, the emergence of mncs with their sophisticated business antics and foreign capital change the pendulum in their favour and consistently reduced the role of indigenous entrepreneurship in nigeria. based on the foregoing, the purpose of this paper is to examine the plight of indigenous entrepreneurs and their battle for competitive edge with the multinational corporations in nigeria. apart from the introduction section 1 above, there are five sections in this paper. section 2 focuses on conceptual issues on indigenous entrepreneurship. section 3 discusses the methodology with justification. section 4 presents the findings from the critical discourse. section 5 concludes with research implication and suggestion for future research. 2. conceptual issue and theoretical framework the mainstream entrepreneurship is viewed as a resource-based process exploited by individuals as business opportunities for the creation and nurturing of new businesses in enabling market (baliamoune entrepreneurship has a distinct and specific socio indigenous entrepreneurship therefore, it is necessary to ask: what is indigenous entrepreneurship? hindle and lansdowne (2005) define ie simply as the process of creatin managing and developing new commercial enterprises or ventures by indigenous people or communities. the definition emphasises three key points development of new ventures” entrepreneurial ventures (commercial or social enterprises) owned and managed by family members of ethnic nationalities or indigenous communities known with certain cultural orientations (berkes and adhikari, 2005). put differently, ie entrepreneurship is a set of cultural values attention and research focused on indigenous people/entrepreneurs and the need to revive indigenous entrepreneurship? indigenous peoples and their plights in entreprene community because they constitute about 5 percent of the world’s population. pathetically, when summed up they are one poor, marginalized, and vulnerable (ash suffer lower education levels, and poor health (peredo et al., 2004). from the conceptualisation of ie, indigenous entrepreneurs is a hegemonic issue; hence called modernisation theory provides theoretical underpinning for the discourse. modernisation theory is a framework for explaining transitional phases of societal development from traditional society (pre 1993; pursiainen, 2012). the theory views stages. for traditional societies to experience development and progress they must pass through certain stages that will eventuall peredo, et al., 2004). modernisation theory in its discourse makes use of structural processes terms like urbanisation, demographic development, improved living standards, industrialization, enhancement o advancement (pursiainen, 2012). the proponents of modernisation theory therefore situate ‘modernisation and development’ on the same pedestal and are synonymous terms. andorka (1993:317) provide reason for the link, that within the modernisation theoretical perspective, a society is described as modern or modernized, when five processes are identified. these include: structural changes, improvement in living standards of the people, development of a system; embedment of democracy (democratization) and development of modern values and norms. when the theory is applied to the theme of this paper, the implication is that mncs are products of modernisation and progressive society; hence they hav modernity, which gave them competitive edge over ie structurally and functionally. the ies on the other hand are still operating within the framework of traditional institutions, social network, age long traditional culture, old soc described as hindrance to progress in the modern times (peredo, et al., 2004). to enhance their economic visibility and competitiveness in the nigerian business environment, there is need for ie to transit f underpin their present operations to modern practices and standards which are the core values of the mncs. figure 1 theorizes the rational for wide gap or competitive edge between mncs and ie. the gap is historical; while the mncs operate with modern values and standards, the ie operate based on inherited traditional values and norms handed over by previous generations. from figure 1, the competitive edge of mncs manifests in three ways: enabling market (baliamoune-lutz, 2007). however, ie compared with the mainstream ntrepreneurship has a distinct and specific socio-cultural connotation. to understand indigenous entrepreneurship therefore, it is necessary to ask: what is indigenous entrepreneurship? hindle and lansdowne (2005) define ie simply as the process of creatin managing and developing new commercial enterprises or ventures by indigenous people or communities. the definition emphasises three key points “creation, management and development of new ventures” (p.133). ie therefore describes a peculiar form of epreneurial ventures (commercial or social enterprises) owned and managed by family members of ethnic nationalities or indigenous communities known with certain cultural orientations (berkes and adhikari, 2005). put differently, ie unlike the general a set of cultural values-based behaviours (dana, 2006). why has global attention and research focused on indigenous people/entrepreneurs and the need to revive indigenous entrepreneurship? indigenous peoples and their plights in entrepreneurship are important to the global community because they constitute about 5 percent of the world’s population. pathetically, when summed up they are one-third of the world’s 900 million people described as extremely poor, marginalized, and vulnerable (ashoka, 2014). apart from pang of poverty, they also suffer lower education levels, and poor health (peredo et al., 2004). from the conceptualisation of ie, the battle for competitive edge between mncs and indigenous entrepreneurs is a hegemonic issue; hence a strand of political economy theory called modernisation theory provides theoretical underpinning for the discourse. modernisation theory is a framework for explaining transitional phases of societal development from traditional society (pre-modern era) to more advanced society ( the theory views development as a continuum of passing phases and stages. for traditional societies to experience development and progress they must pass through certain stages that will eventually take them to modernity (crewe and harrison, 1998; peredo, et al., 2004). modernisation theory in its discourse makes use of structural processes terms like urbanisation, demographic development, improved living standards, industrialization, enhancement of welfare system and other terms that connote progressive advancement (pursiainen, 2012). the proponents of modernisation theory therefore situate ‘modernisation and development’ on the same pedestal and are synonymous terms. andorka (1993:317) provide ason for the link, that within the modernisation theoretical perspective, a society is described as modern or modernized, when five processes are identified. these include: structural changes, improvement in living standards of the people, development of a system; embedment of democracy (democratization) and development of modern values and norms. when the theory is applied to the theme of this paper, the implication is that mncs are products of modernisation and progressive society; hence they have all the requisites of modernity, which gave them competitive edge over ie structurally and functionally. the ies on the other hand are still operating within the framework of traditional institutions, social network, age long traditional culture, old social norms and diverse languages which have been described as hindrance to progress in the modern times (peredo, et al., 2004). to enhance their economic visibility and competitiveness in the nigerian business environment, there is need for ie to transit from traditional practices and standards which underpin their present operations to modern practices and standards which are the core values 1 theorizes the rational for wide gap or competitive edge between mncs ical; while the mncs operate with modern values and standards, the ie operate based on inherited traditional values and norms handed over by previous generations. from figure 1, the competitive edge of mncs manifests in three ways: 87 lutz, 2007). however, ie compared with the mainstream cultural connotation. to understand indigenous entrepreneurship therefore, it is necessary to ask: what is indigenous entrepreneurship? hindle and lansdowne (2005) define ie simply as the process of creating, managing and developing new commercial enterprises or ventures by indigenous people or “creation, management and (p.133). ie therefore describes a peculiar form of epreneurial ventures (commercial or social enterprises) owned and managed by family members of ethnic nationalities or indigenous communities known with certain cultural unlike the general based behaviours (dana, 2006). why has global attention and research focused on indigenous people/entrepreneurs and the need to revive urship are important to the global community because they constitute about 5 percent of the world’s population. pathetically, third of the world’s 900 million people described as extremely oka, 2014). apart from pang of poverty, they also the battle for competitive edge between mncs and a strand of political economy theory called modernisation theory provides theoretical underpinning for the discourse. modernisation theory is a framework for explaining transitional phases of societal to more advanced society (andorka, development as a continuum of passing phases and stages. for traditional societies to experience development and progress they must pass y take them to modernity (crewe and harrison, 1998; peredo, et al., 2004). modernisation theory in its discourse makes use of structural processes terms like urbanisation, demographic development, improved living standards, f welfare system and other terms that connote progressive the proponents of modernisation theory therefore situate ‘modernisation and development’ on the same pedestal and are synonymous terms. andorka (1993:317) provide ason for the link, that within the modernisation theoretical perspective, a society is described as modern or modernized, when five processes are identified. these include: structural changes, improvement in living standards of the people, development of a welfare system; embedment of democracy (democratization) and development of modern values and norms. when the theory is applied to the theme of this paper, the implication is that mncs e all the requisites of modernity, which gave them competitive edge over ie structurally and functionally. the ies on the other hand are still operating within the framework of traditional institutions, social ial norms and diverse languages which have been described as hindrance to progress in the modern times (peredo, et al., 2004). to enhance their economic visibility and competitiveness in the nigerian business rom traditional practices and standards which underpin their present operations to modern practices and standards which are the core values 1 theorizes the rational for wide gap or competitive edge between mncs ical; while the mncs operate with modern values and standards, the ie operate based on inherited traditional values and norms handed over by previous generations. from figure 1, the competitive edge of mncs manifests in three ways: 88 deployment of advanced technology, managerial knowledge and international social networks. figure 1 – theoretical framework source: raimi et al., 2010. 3. methodology the paper adopts the qualitative research method relying on documentary sources and journal articles on the subject. the sourced data were analysed using critical discourse analysis (cda). the cda as a form of discourse analysis examines how phenomenal issues like social power or hegemony, dominance, inequalities and other vital constructs are used and contested within socio-political contexts (van dijk, 2001; mason, 2012; fairclough, mulderrig and wodak, 2011). the cda is appropriate because indigenous entrepreneurship has become a registered language in social discourse and indigenous entrepreneurs have suffered economic abuse and deprivation from mncs. 4. findings and discussions critical review of the literature unveil the following findings as the exploits of indigenous entrepreneurs and the external and internal factors that precipitated loss of competitive edge to mncs. 4.1. exploits of yoruba, igbo and hausa-fulani for the yoruba ingenuous entrepreneurs, historical account by olalere (2013) revealed that 200 years before independence, the yoruba people from oyo, saki, ogbomoso ilorin, igboho and other groups had recorded landmark achievements in entrepreneurship in their local communities. with time, they extended their social networks to gold coast (now ghana) and other parts of africa because they identified economic opportunities beyond the shores of nigeria. the major merchandises they traded were assorted clothes, hard wares, kola nuts, dried pepper, motor cycle or bicycle parts and locally manufactured equipment and household utensils. in ghana, the yorubas as a group were formidable and united; they rented a third of the 700 stalls and built additional 200 to fortify their businesses. yoruba people had the credit before the british to explore ghana for other nigerians. yoruba impacted on social and spiritual wellbeing of ghana, as accomplished entrepreneurs they built schools, houses and religious centres in their communities in ghana. some of their self institutions survived till today in places like suhum, secondi koforidua et cetera. the indigenous igbo entrepr ingenuities and creativities. they are risk takers and adventurists. these qualities took them to greater height before the nigerian civil war, which eroded significantly their accomplishments. the igbo efficiently to their advantage. even contemporary studies acknowledge the important of ethnic businesses as priceless assets which “facilitate the exchange of inputs critical to global capitalism finance, technical 2003:102). in addition, achebe (2012) explained that igbos were outstanding entrepreneurs and had competitive edge in entrepreneurship because they had the abilities to grab environmental opportunities that came their way because their culture placed emphasis on change (adaptability), individualism (self democratic values) traits that the ethnic group has a competitive edge and ability to grab environmental opportunities that come their way. the hausa-fulani people had positive records in entrepreneurship at pre and post independence era. their caravan trade carried livestock, salts, leather products and textiles for sale to people from other regio level of regional trade relations, the hausa till date because the southern parts were geographically unsuitable to stock breeding (de haan and van ufford, 1999; folami and akoko, 2010). kerven (1992) explained that the hausa trade in west africa, a role they shared with only the dyula traders. they traded with the ashante in ghana, and their caravan chai kankan in north-east guinea. in the present day nigeria, the hausa cultivators and livestock producers (folami and akoko, 2010). the exploits of hausa people is largely shaped by a number of “cultural, attitudinal, and performative indicators” which are believed to have strengthen what has come to be known as hausa identity (ochonu, 2008). pierce (2005) had alluded to similar viewpoints that hausa identity could be described as a distinct ways of making a living and lifestyle generally. the facts that have emerged from the critical discourse is that the three indigenous ethnic groups were successful entrepreneurs because they had good knowledge about their environment, strong social networks based on family ties and cultural norms, willingness to undertake risk and strategic migration for opportunity seeking. in spite of these strengths they lost completive edge to mncs. why? the next section unveils the factors. 4.2 . external factors affecting indigenous entrepreneurship technology and managerial knowledge: enterprises are technologically advanced, manufacturing higher capacities than indigenous c entrepreneurs still rely on traditional knowledge, local technology and socio for running their enterprises, whereas access to advanced technology and managerial knowledge are critical factors that gave mncs and retuning entrepreneurs leverage in emerging economies (dai and liu, 2009). even economic theory acknowledges the advantage of technology as catalyst of innovation and creativity which stimulate entrepreneurial activity (schumpeter, 1950). managerial knowledge enhances understanding of the complexities of global business operations, the characteristics of foreign markets, the business climate and cultural patterns religious centres in their communities in ghana. some of their self institutions survived till today in places like suhum, secondi-takoradi, tarkwa, kumasi and the indigenous igbo entrepreneurs are also known for their passion for business, ingenuities and creativities. they are risk takers and adventurists. these qualities took them to greater height before the nigerian civil war, which eroded significantly their entrepreneurs used their ethnic networks effectively and efficiently to their advantage. even contemporary studies acknowledge the important of ethnic businesses as priceless assets which “facilitate the exchange of inputs critical to global finance, technical knowledge, and marketing information” (bräutigam, 2003:102). in addition, achebe (2012) explained that igbos were outstanding entrepreneurs and had competitive edge in entrepreneurship because they had the abilities to grab l opportunities that came their way because their culture placed emphasis on change (adaptability), individualism (self-confidence) and competitiveness ( traits that the ethnic group has a competitive edge and ability to grab ironmental opportunities that come their way. fulani people had positive records in entrepreneurship at pre and post independence era. their caravan trade carried livestock, salts, leather products and textiles for sale to people from other regions (norris 1984; de haan and van ufford, 1999). even at the level of regional trade relations, the hausa-fulani had competitive edge on livestock rearing till date because the southern parts were geographically unsuitable to stock breeding (de haan ufford, 1999; folami and akoko, 2010). kerven (1992) explained that the hausa-fulani communities monopolised long distance trade in west africa, a role they shared with only the dyula traders. they traded with the ashante in ghana, and their caravan chain extended to present-day benin republic, togo and east guinea. in the present day nigeria, the hausacultivators and livestock producers (folami and akoko, 2010). the exploits of hausa a number of “cultural, attitudinal, and performative indicators” which are believed to have strengthen what has come to be known as hausa identity (ochonu, 2008). pierce (2005) had alluded to similar viewpoints that hausa identity could be described istinct ways of making a living and lifestyle generally. the facts that have emerged from the critical discourse is that the three indigenous ethnic groups were successful entrepreneurs because they had good knowledge about their l networks based on family ties and cultural norms, willingness to undertake risk and strategic migration for opportunity seeking. in spite of these strengths they lost completive edge to mncs. why? the next section unveils the factors. factors affecting indigenous entrepreneurship technology and managerial knowledge: mncs maintained competitive edge because their enterprises are technologically advanced, manufacturing-oriented, and mining higher capacities than indigenous companies (malgwi et al., 2006). whereas, the indigenous entrepreneurs still rely on traditional knowledge, local technology and socio for running their enterprises, whereas access to advanced technology and managerial factors that gave mncs and retuning entrepreneurs leverage in emerging economies (dai and liu, 2009). even economic theory acknowledges the advantage of technology as catalyst of innovation and creativity which stimulate entrepreneurial activity managerial knowledge enhances understanding of the complexities of global business operations, the characteristics of foreign markets, the business climate and cultural patterns 89 religious centres in their communities in ghana. some of their self-funded religious takoradi, tarkwa, kumasi and eneurs are also known for their passion for business, ingenuities and creativities. they are risk takers and adventurists. these qualities took them to greater height before the nigerian civil war, which eroded significantly their entrepreneurs used their ethnic networks effectively and efficiently to their advantage. even contemporary studies acknowledge the important of ethnic businesses as priceless assets which “facilitate the exchange of inputs critical to global knowledge, and marketing information” (bräutigam, 2003:102). in addition, achebe (2012) explained that igbos were outstanding entrepreneurs and had competitive edge in entrepreneurship because they had the abilities to grab l opportunities that came their way because their culture placed emphasis on confidence) and competitiveness (inherent traits that the ethnic group has a competitive edge and ability to grab fulani people had positive records in entrepreneurship at pre and postindependence era. their caravan trade carried livestock, salts, leather products and textiles for ns (norris 1984; de haan and van ufford, 1999). even at the fulani had competitive edge on livestock rearing till date because the southern parts were geographically unsuitable to stock breeding (de haan fulani communities monopolised long distance trade in west africa, a role they shared with only the dyula traders. they traded with the day benin republic, togo and -fulanis are cereal cultivators and livestock producers (folami and akoko, 2010). the exploits of hausa-fulani a number of “cultural, attitudinal, and performative indicators” which are believed to have strengthen what has come to be known as hausa identity (ochonu, 2008). pierce (2005) had alluded to similar viewpoints that hausa identity could be described the facts that have emerged from the critical discourse is that the three indigenous ethnic groups were successful entrepreneurs because they had good knowledge about their l networks based on family ties and cultural norms, willingness to undertake risk and strategic migration for opportunity seeking. in spite of these strengths they lost completive edge to mncs. why? the next section unveils the factors. mncs maintained competitive edge because their oriented, and mining-inclined with ompanies (malgwi et al., 2006). whereas, the indigenous entrepreneurs still rely on traditional knowledge, local technology and socio-cultural norms for running their enterprises, whereas access to advanced technology and managerial factors that gave mncs and retuning entrepreneurs leverage in emerging economies (dai and liu, 2009). even economic theory acknowledges the advantage of technology as catalyst of innovation and creativity which stimulate entrepreneurial activity managerial knowledge enhances understanding of the complexities of global business operations, the characteristics of foreign markets, the business climate and cultural patterns 90 (downes and thomas, 1999). managerial knowledge is an intangible asset of mncs; its benefits include enhanced information on access to labour force, infrastructural needs, distribution channels, raw materials and other requirements for running successful businesses (dai and liu, 2009; makino and delios 1996). corruption, bribery and money-laundering: mncs in their attempts to have competitive edge in nigeria employed bribery, money-laundering and corruption as potent vehicles for circumventing local norms, economic interests and hegemony (anzaki, 2015; geo-jala & mangum, 2000; otusanya, 2011). geo-jala and mangum, 2000) explained the watergate scandal which involved the american corporations as form of bribery and illegal payments made by mncs to nigerians to gain competitive business advantages in developing countries. it has been proven that mncs do this to degrade the governing system in the developing country. mncs when viewed from a broader perspective of international capitalism, represent the engines of corruption in the nigerian socio-economic and political context; they has succeeded in designing corporate policies and strategies which circumvent extant laws and regulatory framework in the country, an approach which contradicts their claim in annual reports and media that they are socially responsible and accountable (otusanya, 2011). this ugly development put mnc at vantage position over indigenous entrepreneurs. destructive governance and predatory war: mncs encourage destructive governance by fuelling conflict for supremacy among contending political actors with the aim of having exclusive control of the resources while the political contestation continues. some mncs instigate wars among the indigenous communities and while the war rages, the natural resources of the warring countries are exploited and stolen. porter (2003:3) states that developing countries suffer set-back “because of internal economic and political disorder and destructive and predatory alliances among multinational capitalism, western governments, and african dictators”. this strategy facilitates “the predation of resources – its illicit taking by more dominant parties – and consequent territorial dispossession, loss of culture and identity, and the often justified feelings of betrayal and anger” (carleton, 2014:56). tsabora (2014) expatiated that mncs exploit natural resources in most warring african countries. between 2008 and 2010 alone, natural resources worth us$ 63.4 billion was illegally stolen from africa, an amount which exceeds us$ 62.2 billion given to africa as foreign investment and aid. in the niger-delta, where indigenous communities have been rendered useless, unemployed and hopeless, the use of predatory antics for land and oil-fields acquisitions has been well documented. the petroleum information bill (pib) is a bill to strengthen indigenous nigerian companies in the oil & gas sector to compete with mncs (neiti, 2015). similarly, reno (2000) identifies illegal exploitation of diamonds as the underpinnings of endemic war in angola between two militia groups. the mncs are the buyers of the blood diamonds and facilitated supply of ammunitions to both parties. indigenous communities and entrepreneurship suffered on account of these wars, as a result of endemic looting and political instability. foreign direct investment (fdi): fdi has been described by economists as strength for the developing countries, whereas, it is inimical to indigenous entrepreneurs development in several ways. the mncs from europe, america and china have utilized fdi for their national interests, although some economic benefits accrue to recipient nations (motano and qing, 2014). the state-owned multinational oil corporation cnooc has acquired prospective licenses for oil exploration in nigeria, morocco and gabon. in the ict sector of the developing countries including nigeria, zte corporation, huawei technologies, cl and lenovo have emerged as leading players to the detriment and growth of indigenous company like zinox computer company (alden and davies, 2006). strategic seizures: with regards to seizu politicians, traditional leaders and global financial institutions resorted to tacit seizure of massive land resources in some parts of africa without adequate compensation or restitution (irin, 2009; schoneveld et al., 2010). this approach serves two purposes in the oil comminutes. one, the indigenous communities in the oil producing areas are “ a fair share of oil revenues”; and two, the indigenes are made to bear the brunt of oil pollution, unemployment, destruction of arable land for commercial farming, extreme poverty, ravaging youth unemployment, discriminatory practices in trade and employment and other unethical conducts (obi, 2009:106). in the non with governments of africa to seize rich arable land from the indigenous framers for mechanized farming with the intent of producing food and cash crops for export (hornborg, 2009; sachs, 2011). they secure land without regards for the traditional land rights of th indigenous communities (motano and qing, 2014). the economist (2009) reports that in 2006 alone, a total of 15 million to 20 million hectares of farmland had been secured for biofuel and food production by mncs. in terms of ratio, 70% of the pieces of land so far grabbed are from africa, and the investment on such land totaled between us$20bn and us$30bn position in the list of countries where this illegal seizure of land is taking place. policy has forced several indigenous farming communities and rural inhabitants to migrate to cities and urban areas in search non consequences of forceful sale of land in developing countries are abrupt end o farming and termination of rural livelihoods (grain, 2008). 4.3. internal factors affecting indigenous entrepreneurship indigenous entrepreneurs suffered in nigeria because of several factors linked to lack of institutional support services from formal market government agencies (biggs and shah, 2006; raimi, shokunbi and peluola, 2010) environmental challenges stifling indigenous entrepreneurship in nigeria include high taxes, complex tax regulations, inadequate infrastructure, rising rate of inflation, weak labour regulations, and rigid regulations on starting and running a business ( weder, 1999). with specific reference to nigeria, a number of scholars noted that nigerian entrepreneurs suffer harassment, extortion from public officials and deficient infrastructure especially roads, water shortage, erratic supply chu, kara, benzing, 2008). besides, the most critical challenge facing entrepreneurs to credits from financial institutions (ariyo, 2000; raimi et al., 2012). other challenges are lack of infrastructure, cumbersome government regulations and restrictions on equity/ownership structure in the case of mncs (cotton and ramachandran, 2001). furthermore, the world bank (2014) identified constraint of license & permits, electricity, paucity of educated workforce, political instability, multiple taxes and others as major factors affecting entreprene the internal factors discussed have been worsened by unstable socio political climates, which seriously undermine growth of entrepreneurship and small business development in developing nations and consequently low market p shah, 2006). militancy in the niger examples of political instability affecting national development (adebakin and raimi, 2012). lenovo have emerged as leading players to the detriment and growth of indigenous company like zinox computer company (alden and davies, 2006). : with regards to seizures, the mncs in collaboration with corrupt politicians, traditional leaders and global financial institutions resorted to tacit seizure of massive land resources in some parts of africa without adequate compensation or restitution et al., 2010). this approach serves two purposes in the oil comminutes. one, the indigenous communities in the oil producing areas are “ a fair share of oil revenues”; and two, the indigenes are made to bear the brunt of oil ployment, destruction of arable land for commercial farming, extreme poverty, ravaging youth unemployment, discriminatory practices in trade and employment and other unethical conducts (obi, 2009:106). in the non-oil communities, the rnments of africa to seize rich arable land from the indigenous framers for mechanized farming with the intent of producing food and cash crops for export (hornborg, 2009; sachs, 2011). they secure land without regards for the traditional land rights of th indigenous communities (motano and qing, 2014). the economist (2009) reports that in 2006 alone, a total of 15 million to 20 million hectares of farmland had been secured for biofuel and food production by mncs. in terms of and so far grabbed are from africa, and the investment on such land totaled between us$20bn and us$30bn (adusei, 2010). nigeria occupies number 10th position in the list of countries where this illegal seizure of land is taking place. has forced several indigenous farming communities and rural inhabitants to migrate to cities and urban areas in search non-existing jobs (davis, 2006). the long consequences of forceful sale of land in developing countries are abrupt end o farming and termination of rural livelihoods (grain, 2008). internal factors affecting indigenous entrepreneurship indigenous entrepreneurs suffered in nigeria because of several factors linked to lack of institutional support services from formal market-supporting institutions like banks and government agencies (biggs and shah, 2006; raimi, shokunbi and peluola, 2010) environmental challenges stifling indigenous entrepreneurship in nigeria include high taxes, complex tax regulations, inadequate infrastructure, rising rate of inflation, weak labour regulations, and rigid regulations on starting and running a business (kisunko, brunetti and with specific reference to nigeria, a number of scholars noted that nigerian entrepreneurs suffer harassment, extortion from public officials and deficient infrastructure especially roads, water shortage, erratic supply of electricity and poor telecommunication (mambula, 2002; besides, the most critical challenge facing entrepreneurs to credits from financial institutions (ariyo, 2000; raimi et al., 2012). other challenges are frastructure, cumbersome government regulations and restrictions on equity/ownership structure in the case of mncs (cotton and ramachandran, 2001). furthermore, the world bank (2014) identified access to finance, access to land, corruption, constraint of license & permits, electricity, paucity of educated workforce, political instability, multiple taxes and others as major factors affecting entrepreneurship in nigeria. the internal factors discussed have been worsened by unstable socio political climates, which seriously undermine growth of entrepreneurship and small business development in developing nations and consequently low market participation (biggs and shah, 2006). militancy in the niger-delta and boko haram in northern nigeria are classic examples of political instability affecting national development (adebakin and raimi, 2012). 91 lenovo have emerged as leading players to the detriment and growth of indigenous company res, the mncs in collaboration with corrupt politicians, traditional leaders and global financial institutions resorted to tacit seizure of massive land resources in some parts of africa without adequate compensation or restitution et al., 2010). this approach serves two purposes in the oil comminutes. one, the indigenous communities in the oil producing areas are “‘cheated’ out of a fair share of oil revenues”; and two, the indigenes are made to bear the brunt of oil ployment, destruction of arable land for commercial farming, extreme poverty, ravaging youth unemployment, discriminatory practices in trade and employment oil communities, the mncs collude rnments of africa to seize rich arable land from the indigenous framers for mechanized farming with the intent of producing food and cash crops for export (hornborg, 2009; sachs, 2011). they secure land without regards for the traditional land rights of the the economist (2009) reports that in 2006 alone, a total of 15 million to 20 million hectares of farmland had been secured for biofuel and food production by mncs. in terms of and so far grabbed are from africa, and the investment on such (adusei, 2010). nigeria occupies number 10th position in the list of countries where this illegal seizure of land is taking place. in ghana, the has forced several indigenous farming communities and rural inhabitants to migrate to existing jobs (davis, 2006). the long-term devastating consequences of forceful sale of land in developing countries are abrupt end of small-scale indigenous entrepreneurs suffered in nigeria because of several factors linked to lack of supporting institutions like banks and government agencies (biggs and shah, 2006; raimi, shokunbi and peluola, 2010). environmental challenges stifling indigenous entrepreneurship in nigeria include high taxes, complex tax regulations, inadequate infrastructure, rising rate of inflation, weak labour kisunko, brunetti and with specific reference to nigeria, a number of scholars noted that nigerian entrepreneurs suffer harassment, extortion from public officials and deficient infrastructure especially roads, of electricity and poor telecommunication (mambula, 2002; besides, the most critical challenge facing entrepreneurs is access to credits from financial institutions (ariyo, 2000; raimi et al., 2012). other challenges are frastructure, cumbersome government regulations and restrictions on equity/ownership structure in the case of mncs (cotton and ramachandran, 2001). , access to land, corruption, constraint of license & permits, electricity, paucity of educated workforce, political urship in nigeria. the internal factors discussed have been worsened by unstable socio-economic and political climates, which seriously undermine growth of entrepreneurship and small business articipation (biggs and delta and boko haram in northern nigeria are classic examples of political instability affecting national development (adebakin and raimi, 2012). 92 apart from the issues of environmental constraints and security challenges discussed above, african countries in general are prone to economic shocks arising from unfriendly climatic conditions, distress in agriculture, sudden conflicts, terms-of-trade shocks, frequent policy changes and poor management policy measures, institutional corruption, infrastructure deficits et cetera (biggs and shah, 2006). 5. conclusion and implications this paper sets out to examine the plight of indigenous entrepreneurs and their battle for competitive edge with the mncs in nigeria. on the strength of the modernisation theory, the finding indicates that ie lost its competitive edge to mncs which are technologically advanced and possess higher capacities than indigenous companies operating in africa (malgwi et al., 2006). also, the indigenous entrepreneurs are affected by a number of external and internal factors. from the foregoing critical discourse, the mncs would continue to enjoy competitive advantage until ies has an enabling environment supported by friendly government policies to thrive. to enhance the visibility and competitiveness of ies, the traditional knowledge, social norms, ethnic and family social networks which are the strengths of indigenous entrepreneurs need to be fortified with advanced technology and managerial knowledge. this paper has taken a theoretical approach to analyse the mncs competitive edge over ies, in nigeria, in particular. there is need for an empirical study or cross-sectional study to validate the findings in this paper. after all, ies and mncs abound in other west african countries; 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(2001) critical discourse analysis. the handbook of discourse analysis, 352-371. 69. world bank (2014) enterprise surveys (http://www.enterprisesurveys.org), the world bank, 2014 microsoft word 5 (17-38) palmeira.docx       63  prejudice and discrimination in seaside retailing. comparative analyses between brazil and italy mirian palmeira federal university of parana, brazil received: november 14, 2016 accepted: may 15, 2017 online published: october 2, 2017 abstract this paper focuses on the phenomena of prejudice and discrimination among the interactions of frontline employees and customers in retailing spatial environments. the aim is to identify if there is perception of prejudice and discrimination related to ageism, sexism, lookism (asl) and sexual orientation bias (so) against customers in brazil and italy seaside retailing. through quantitative research and descriptive study, data from curitiba-parana-brazil and urbino-marche-italy are collected, using sampling by convenience. likert scales have been used to evaluate asl+so. findings: one statement (4.2 “the frontline male employees are nicer to younger female customers”), out of 15 shows that the interviewees from both countries had presented a highly agreement perception, which is the reinforcement that they had perceived that gender, age and appearance have influence on frontline employees’ behaviour. however, considering the results of the majority of the statements, an overall conclusion can highlight that the respondents do not perceive ageism, sexism, lookism or sexual orientation bias against customers when the seaside retail companies provide face-to-face services. a theoretical contribution of this paper can be drawn for the development of protocols that can be useful to identify and to evaluate asl+so phenomena in retailing. its format and its methodology can be used to research different kinds of organisations, especially in the retail and services industries. the managerial implications are in the importance of developing t&d to reduce asl+so practices against customers and to include these issues as subjects in the organisation’s strategic statements. also it would be suitable designing more efficient procedures of queueing management. these practices could avoid that dissatisfied customers reduce purchasing and consequent falling sales and profits. keywords: prejudice, discrimination, seaside retailing, ageism, sexism, lookism, sexual orientation bias. 1. introduction in today’s marketplace prejudice and discrimination are becoming hot topics and – as such – are receiving a great deal of attention by researchers. previous literature has analysed different international journal of economic behavior, vol. 7, n. 1, pp. 63-79, 2017 64  forms of prejudice and discrimination in many contexts including workplace, communities, and consumption, but not specifically in the interactions among frontline employees and customers in retailing spatial environments. sociology and psychology are the fields that usually study prejudice and discrimination phenomena. the marketing discipline is becoming very interested in the understanding of customer behaviour through the lenses of those two traditional grounds. the subject is very complex to be researched due to people’s negative reaction to what is different. despite the so-called open-mind behaviour in the first decade of the 21st century, it is possible to observe prejudiced and detrimental evaluations among people. some research on prejudice and discrimination in retailing has been previously published (palmeira, palmeira & santos, 2012; palmeira, santos & palmeira, 2012, and palmeira, 2014). in the first study (palmeira, palmeira & santos, 2012), there was an analysis of how customers perceived prejudice and discrimination from frontline employees during the face-to-face retail service process in different retail business, such as fashion shops, shoe shops, restaurants, fast food restaurants, it stores, and so on. in the second and third researches (palmeira, santos & palmeira, 2012, and palmeira, 2014), the frontline employees of the types of retail companies with the highest scores have been interviewed about their self-perception of ageism, sexism and lookism against customers, and they had admit that this type of bias does indeed exist in both the fashion and food retailing sectors. in this study the focus is on retailing within tourist seaside areas. the tourism industry is one of the most important services sectors nowadays. “the total economic impact of travel and tourism on the global economy was 7.58 trillion u.s. dollars and the direct economic contribution was 2.36 trillion u.s. dollars in 2014” (statista, 2015). and the revenue of the global hotel industry was 457 billion u.s. dollars in 2011. people are more willing to travel due to less expensive costs of fares and hotels. besides, many countries have been trying to improve their hospitality capacity, as well as putting their best efforts to improve their rankings in governments’ advisory web sites, such as, uk foreign advice office (2016). this study was conducted with a survey in two phases: a first stage in the brazilian southern seaside areas, and the second stage in the italian coast locations along the adriatic, mediterranean, ionian and tyrrhenian seas. comparative analyses related to prejudice and discrimination of these two different realities, brazil and italy seaside retailing, has been produced, through the use of sample by convenience. italy and brazil have been chosen to be the focus of this research due to their potential for improving revenue and competitiveness in tourism industry and to the easy access for research. besides there are three reasons to focus on their tourist sector: (1) italy and brazil are not in the top ten’s safest countries to travel (global peace index, 2015). italy is in the 36th position with 1.669 points of score (22sd position in local rank), higher than the region average, which is 1.566. brazil is in the 103rd overall position with 2.122 points, also higher than the average of south america region, which is 2.053 points and in the 9th level of the regional rank. both countries need to improve their scores. more tourists, higher the tourism revenue. (2) italy is in the 8th rank (with 4.98 points) in the travel & tourism competitiveness index ranking (2015) and brazil is in the 28th position (with 4.37 points). and, (3) according to national geographic ranks (2015), only rio de janeiro is the only brazilian beach city in the rank of top 10, occupying the 6th position. none of the italian beach cities are mentioned in the different top 10 classifications. which are the motives that countries with so many vast areas of seaside do not appear in those rankings? tourist activities are characterized by providing services, which level of quality depends especially on frontline employees’ motivation, expertise and commitment, because they are the ones who deliver the services to the customers. if the levels of motivation, expertise and commitment are not in balance and with high standards, the perception of good service would       65  be jeopardized through the eyes of the vacationers. if the staff have some kind of attitude or even behaviour that make the customers believe that there is prejudice or discrimination against them, this perception would affect how the travellers are going to evaluate the services in tourist retailing. since those ideas have been crystallized in the travellers’ minds and hearts, it would be very hard and expensive to try changing this perception related to the business, its employees and its services. this issue becomes more critical when customers arrive in a retailing spatial environment when there is not a clear queuing system. which one should be the first to get the service? which are the criteria that frontline employees are going to choose to which customer they are going to provide the service before? is there prejudiced behaviour from frontline employees against customers related to people’s age, gender, appearance and/or sexual orientation? would the customers perceive the bias? considering this context, the central objective of this study is to identify if there is perception of prejudice and discrimination related to ageism, sexism, lookism (asl) and sexual orientation (so) against customers in brazilian and italian seaside retailing. the operational objectives are three: (a) to describe the travellers’ (customers) profile: social segment that includes data on income, professional occupation, education level, and size of home residence; gender and age); (b) to identify the seaside locations and the types of faceto-face seaside retailing the tourists usually attend during their summer vacations; and (c) to evaluate the perception of prejudice and discrimination against customers related to asl and so in retailing if the is not a clear queue system. 2. literature review the subjects of this research are presented in three groups: prejudice and discrimination; types of prejudice and discrimination (asl and so bias); seaside retailing and frontline employees. they are of great importance when it comes to helping companies to realize that the customers’ perception related to how they evaluate frontline employees’ behaviour when providing services in seaside retailing imprints a good or an unfavourable image of the business and how hard and expensive is to keep a good evaluation or to change a negative one. the importance of how frontline employees behave without showing prejudice or discrimination against consumers is one of the key factors to impress the customers, to improve the business and to guarantee the company’s surviving in a very competitive field of tourist industry. 2.1. prejudice and discrimination prejudiced behaviour can be part of the human’s nature. for survival, people depend on their inner commands-in-action, to run or to fight since primeval times, or to relate among pals, to beat or avoid competitors, and to climb in the corporate ladder nowadays. prejudice is related to attitudes and values, not to behaviours and actions. prejudice is a set of inner comparison procedures in people’s mind in order to evaluate, positively or negatively, an object or person that they had confronted, helping them decide if they are in favour or against this object or individual. prejudice is related to thoughts and feelings. this final decision can lead people to show discrimination, which is the concrete result of prejudice. discrimination is related to spoken words, behaviour and any recognizable element from the other people’s point-of-view, that can be produced (or not) in front of the object or individual that had been assess, under the prejudiced set of values of the beholder. although prejudice is related to attitude, it does not necessarily drive to discriminative behaviour. sociology and psychology are the fields that usually study prejudice and discrimination phenomena. the marketing discipline is becoming very interested in the understanding of 66  customer behaviour through the lenses of those two traditional grounds (solomon and rabott, 2009; eisend, 2010),), considering age, sex roles (johnson, 2008), body image, race and ethnicity, for instance. the most common target groups of negative bias are different race and ethnicity, women and the elderly, especially the one that socially are not considered with suitable appearance and/or adequate behaviour. gays, lesbians and gay-friendly’s groups are also the ones that can suffer from not favoured evaluations under prejudice and discrimination. 2.2. types of prejudice and discrimination commonly, the types of prejudice and discrimination do not come alone. usually they are combined, but for clear understanding purposes, they are presented separately. ageism is a set of prejudice and discriminated values against people’s age in a way to undermine age groups that are not considered suitable or productive from the society’s pointof-view, typically the elderly, and especially in western cultures (abrams, 2005; abrams et al, 2011; haralambos & holborn, 2008; solomon & rabott, 2009). it is “discrimination or the holding of irrational and prejudicial views about individuals or groups, based on their age” (scott & marshall, 2009, pp. 11). the definition of ageism used in this study is “prejudice or discrimination against individuals or groups, based on their age” (palmeira, 2014). sexism is a distinct bias against people’s gender, frequently negative against women (scott & marshall, 2009:686). sexism reproduces “social inequalities based on race, gender and class” (williams, 2006). sexism is the “prejudice or discrimination against individuals or groups, based on their gender” (palmeira, 2014). lookism is related to the appearance and all sets of elements that aesthetically identify and differentiates an object or individual. it refers to the “right look” for a specific group or society and whether the person presents the suitable visual and behavioural characteristics chosen by those groups, to praise or to blame them. commonly, lookism is related to the prejudice and discrimination against a person or individuals, based on their phenotype (palmeira, 2014). there are previous works related to ageism (hsiang-fei & sheng-hshiung, 2011; brennan et all, 2007), as well as sexism (dirks, 2004; prasad, prasad & mir, 2011) and lookism (waring, 2011), but the main focus is on the workplace and how the issue impacts behavior among peers. there is another group of research that focuses on the advertisement stereotypes, related to sex roles (solomon and rabott, 2009). sex orientation bias is related to people's choice of intimacy partnership, especially homosexual. although it is linked to gender’s issues, it is connected to the prejudice and discrimination against recognizable behaviour of close relationship between persons of the same sex and even against gay-friendly people. sexual orientation has influence from heterosexism, which is “a diverse set of social practices – …from the linguistic to the physical, in the public sphere and the private sphere, covert and overt – in an array of social arenas (including work, school, church) on which the binary distinction of homosexual (attracted to members of the same sex) versus heterosexual (attracted to member of the opposite sex) is at work in such a way that heterosexuality is privileged (scott and marshall, 2009:307). sexual orientation is connected to sex role identity which “is a state of mind as well as body. a person’s biological gender (i.e. male or female) does not totally determine whether they will exhibit sex-type traits, or characteristics that are stereotypically associated with one sex or the other” (solomon et al, 2010:154). to this study, sexual orientation, detected through an “observed” behaviour, characterises the people’s choice related to which gender they would like to share intimacy, focusing on homosexual partnership. if frontline employees in seaside retailing show any kind of prejudice and discrimination, they are disrespecting the customers       67  and damaging the business. even in tourism references, ageism is there “masquerade” as theory when the description of elderly has been developed in a prejudiced way (santos and sala, 2013). 2.3. seaside retailing and frontline employees retailing in leisure areas is part of the tourism industry, especially in seaside which is almost synonymous of relaxation and fun time. seaside retailing is the group of activities in seaside areas that involves the process of selling products and services directly to the customer as a way of fulfilling one’s personal needs. tourism industry is the set of companies that provides hospitality goods and services to customers in their leisure and discretionary time. hospitality can be understood as the “act, practice or quality of offering a generous welcome to guests or strangers” (rabone et al, 2009:163). leisure market can be segmented according to the geographic environment (ignarra, 2011) from the offer point-of-view. the tourist’s places are based on (1) seaside (with beaches and harbours) and other summer locations, (2) mountains and other winter sites, (3) water-related places (as sea and river cruising), and (4) urban or countryside areas. to this study, frontline employees are any kind of people that interact face-to-face with customers in a spatial retail environment, which is a retailer area that includes a physical space (palmeira, 2014), that can be hotels, restaurants, pubs and bars, and any kind of retail stores: clothes stores, bakery, ice cream kiosks, drugstores, markets, open markets, art crafts shops and malls (musso & druica, 2014). in these physical spaces, customers come into contact with frontline employees. one of the important elements of spatial retailer area is the queue management used to organise the process of providing the services to customers. it should be simple and understandable to staff and consumers. queueing system or waiting line is not only for check out procedures (allen, 1990). its concepts can increase productivity in different types of retailing (little, 2015), for instance (1) to help restaurants and pubs organise the sequence of services when customers arrive in the premises without booking and the sequence of food orders; (2) to improve the services in groceries, bakeries and kiosks through the use of passwords or numbers; and (3) to help the welcoming process and check out in hotels. the frontline staff should provide hospitality in the tourism industry. if the frontline employees have not been trained to have suitable competences they may develop some bias when supplying a service to customers of a different age, gender, appearance and sex orientation because they are unable to respond with proper emotions, even if these sentiments are not true (delcourt, van riel, & van birgelen, 2009; lovelock & wright, 2007; palmeira, palmeira & santos, 2012). if the customers perceive prejudiced behaviour against them, probably they would be dissatisfied with the retail business and reduce purchases, causing sales and profits falling. in synthesis, the main concepts of this research can be seen in table 1: table 1 – main concepts ageism prejudice or discrimination against individuals or groups, based on their age. discrimination a clear unfavourable action towards a person or groups considering one’s age (ageism), and/or gender (sexism), appearance (lookism) and/or sex orientation. frontline employees any kind of people that interact face-to-face with customers. hospitality act, practice or quality of offering a generous welcome to guests or strangers. lookism prejudice or discrimination against individuals or groups, based on their appearance (phenotype). prejudice learned beliefs and values that lead an individual or group of individuals to be biased for or against members of particular group. 68  seaside retailing group of activities in seaside areas that involves the process of selling products and services directly to the customer as a way of fulfilling one’s personal needs. sexism prejudice or discrimination against individuals or groups, based on their gender. sexual orientation it characterises the people’s choice related to which gender they would like to share intimacy, focusing in homosexual partnership. spatial retail environment retailer area that includes a physical space where customers come into contact with frontline employees. tourism industry it is the set of companies that provides hospitality goods and services to customers in their leisure and discretionary time. source: adapted from palmeira (2014) and rabone et al, (2009). 3. research methodology the methodology includes the nature of the research, and the population and sampling (gil, 2002; malhotra, 2012; mattar, 2007; siegel and castellan, 2006; spiegel, 1971; wonnacott and wonnacott, 1981). considering that the study is a non-random work, it presents research questions (not hypotheses) related to the operational objectives of the study: (1) which are the elements of the travellers’ profile? and do demographics (age, gender, and social class) influence the results of customers’ perception of prejudice and discrimination in seaside retailing? (2) which are the seaside locations and the types of face-to-face seaside retailing the tourists usually go during their summer vacations? and (3) are customers’ responses similar in both brazilian and italian samples related to the perception of prejudice and discrimination against customers concerning to age, gender, appearance and sexual orientation in seaside retailing if the is not a clear queue system? 3.1. nature of the research this investigation is a quantitative study (gil, 2002), based on a survey for data collection. through the use of comparative analyses between both brazilian and italian groups (creswell, 1998) the results were assessed. rattam (1998) protocol was used to create social classification, based on the level of education, income, spatial residential area, size of residence and professional occupation. the rattam social classification model (rattam, 1998) is based on the idea that education level, size of residence, and occupation are more important than income in order to format customer behaviour and to classify the social segments in five levels: a, b, c, d and e. details on the criteria of classification are provided in appendix 1. the protocol was used to identify in which segment the respondents were classified. interaction with the respondents was face-to-face. the interviewer supplied the questionnaires, the respondents answered the questions and they returned the document as soon as they filled in the forms. simple statistical analyses were used to describe the travellers’ profile and some cross tabs analyses to produce their responses. cross tabs analyses examine the associations between variables, but is does not study their causes (malhotra, 2012:373). the perception of asl and so bias in the chosen face-to-face seaside retailing services were measured on 4-point likert-type scales (+2 = strongly agree, for positive responses, and -2 = strongly disagree, for negative replies) (mattar, 2007, pp. 111; ferguson, 1941). a four-point scale (from 1 to 4) has been used to avoid hallo effect when the respondents answer the questionnaires, although the position “zero” appeared in the analyses. the format of likert scales is adapted from the fishbein multiattribute model scales (engel, blackwell & miniard, 1990). a list of 15 statements (table 5) has been used to assess the sampling perception showing the level of agreement or disagreement of the different groups, brazilian and italian ones. findings have been compared between the two groups. for this study, scores upper than +0.8 (> +0.8) are viewed as high agreement level thus high perception of prejudice and discrimination. scores       69  lower than -0.8 (< -0.8) present higher disagreement therefore low perception of prejudice and discrimination. neither the spss nor the mann-whitney tests were used to analyse the data, but they could be applied when working with larger samples (wonnacott and wonnacott, 1981). the data collected are organized to meet the objective of this article. 3.2. population and sampling the population of the research is made up of all the brazilian vacationers of seaside face-toface retailing services as well as the italian ones. the samples have been selected by convenience in curitiba, parana, brazil and in urbino, marche, italy, both inland cities. respondents have been selected within university students’ classes from different programmes: in brazil, they were from the business school of federal university of parana and in italy, the sample units were from the foreign languages programme of the university of urbino. considering the focus of the study is on travellers, the process of collecting data from people in inland cities increases the numbers of respondents that have been in seaside areas as tourists during their summer vacations, not as residents. the number of respondents that had spent their summer vacation in a seaside location was 190 in brazil, but only 89 in the chosen seaside of brazilian southern region, and the sample in italy was 156, although only 112 in italian seaside. the focus of the study was on the chosen seaside sampling. table 2 shows the samples' structure. the survey was conducted after summer vacations in 2014 (march in brazil and october in italy). table 2 –sample structure sampling brazilian phase italian phase people... frequency % frequency % ... travelling to seaside 101 53.16 44 28.21 ... travelling to chosen seaside* 89 46.84 112 71.79 total 190 100.00 156 100.00 * brazilian southern seaside and italian seaside source: survey, 2014. although a random sample is technically more superior to produce precise results that explain the population, some reasons addressed the selection of a sample by convenience (mattar, 2007): (1) a database to list the population’s members and to produce a random sample was not available; (2) the asl and so bias are taboos, and potential respondents avoid answering the key-questions of the questionnaire; therefore a face to face interview was necessary in order to support interviewees in answering; and (3) financial and human resources were limited for adopting a random sampling process. 4. results the findings of the surveys are presented in three sections: (1) the travellers’ profile of chosen face-to-face seaside retailing (social segment, gender and age); (2) types of face-to-face seaside retailing the tourists usually attend during their summer vacations; and (3) likert scale’s evaluation on perception of prejudice and discrimination of retailers' employees related to age, gender, appearance and sexual orientation of tourists, particularly in cases where there is not a clear queuing system. 70  4.1. travellers’ profile from the brazilian sample of 89 respondents that had spent their summer vacations in southern seaside, 86.52% (77/89) are from “b” social segment (medium-high) which is going to be scrutinized from now on. italian seaside 111 sample units are from segment “b” (39/111) and “c” (medium social segment) (72/111), both groups included in the following analyses, considering that rattam (1998) model would be appropriate for brazilian reality, but it would not be completely reliable for italy. in table 3, information on the social segments of both chosen seaside groups of vacationers is reported. the social segments have been considered in this research since their social context may influence the way in which prejudice and discrimination in seaside retailing are perceived. table 3 – social segments from chosen seaside (rattam, 1998) social segments from chosen seaside brazilian seaside italian seaside* frequency % frequency % a 4 4.49 b 77 86.52 39 35.14 c 8 8.99 72 64.86 d 0 0.00 0 0.00 e 0 0.00 0 0.00 total 89 100.00 111 100.00 source: survey, 2014. *1 person has left more than 2 categories without indication. according to table 4, in brazilian units, there is some balance between both genders (51.95% of masculine gender and 48.05% of feminine sampling), one of the characteristics not only from the sample, but also from the population. on the other hand, italy presents a predominantly number of feminine units in both social segments, “b” (82.05%) and “c” (77.78%). the perceptions of feminine and masculine clusters concerning to prejudice and discrimination are evaluated separately. as regard age, basically the respondents are young, under 30 years old, in both groups: 94.81% in brazilian sample and 100.00% in both italian social segments. table 4 – gender and age of social segments from chosen seaside gender and age of social segments brazilian seaside italian seaside "b" "b” "c" gender frequency % frequency % frequency % masculine 40 51.95 7 17.95 16 22.22 feminine 37 48.05 32 82.05 56 77.78 total 77 100.00 39 100.00 72 100.00 age up to 30 years old 73 94.81 39 100.00 72 100.00 older than 30 years old 4 5.19 0 0.00 0 0.00 total 77 100.00 39 100.00 72 100.00 source: survey, 2014.       71  4.2. types of face-to-face seaside retailing respondents indicated a large range of types of retail businesses that provide face-to-face services, which they have been to in their last summer vacations. the results can be seen in table 5. in the brazilian sample, being in seaside retailing was mainly for shopping (39.48%) and eating (30.04%). the italian groups showed preference for eating (31.53% for “b” class and 30.41% for “c” class) and fun (drinking 27.93% for “b” segment and 26.80 for “c”, and partying 8.11% for “b” and 10.82%). the retailers where customers go more frequently are high-profile products and/or services providers. clothes are related to self-image, as well as shoes and accessories (grose, 2012). restaurants normally are places to see and to be seen, not only for gastronomy issues. so, these retailers are very important to reinforce the social status and it is possible to mention that customers are more willing to judge the frontline employees’ behaviour when they deliver the service. table 5 –types of face-to-face seaside retailing attended by social segments types of face-to-face seaside retailing brazilian seaside italian seaside "b" "b" "c" multiple choice frequency % frequency % frequency % shops clothes, bakery, ice cream, drugstore, market, open market, art crafts, malls. 92 39.48 19 17.12 31 15.98 restaurants restaurants, pizzeria, diners, food kiosks. 70 30.04 35 31.53 59 30.41 pubs and bars 37 15.88 31 27.93 52 26.80 hotels hotels, hostels. 24 10.30 17 15.32 31 15.98 others "parties", night clubs, shows. 10 4.29 9 8.11 21 10.82 total 233 100.00 111 100.00 194 100.00 source: survey, 2014. 4.3. likert scale’s evaluation on perception of prejudice and discrimination as explained in the methodology section, scores upper than +0.8 (> +0.8) have been considered as high agreement level thus high perception of prejudice and discrimination. scores lower than -0.8 (< -0.8) present higher disagreement therefore low perception of prejudice and discrimination. through the analyses of data reported in table 6, although the majority of respondents had disagreed with the statement 4.1 (“well-dressed younger women receive faceto-face retail services prior to everybody else if there is not a clear queuing process in the retail spatial environment area”), they presented a highly agreement perception on statement 4.2 (“frontline male employees are nicer to younger female customers”), which is the reinforcement that they had perceived that asl have influence on frontline employees’ behaviour. this second statement is the only one with positive scores showing an agreement perception from all respondents, higher in brazil than italy. in statement 4.2, it is also possible to observe that the levels of agreement in italian sample between feminine and masculine groups of each social segment are similar (78.12% feminine and 85.71% masculine in social class “b” and 59.00% feminine and 43.75% for class “c”). some statements get the lowest levels of disagreement from all groups, such as, 4.3, 4.5, 4.7, 4.9 and 4.10. the other subjects of the likert’s scale do not show results that help to come to conclusions; they just present medium values. there are not too many differences between brazilian and italian groups’ 72  responses of the statements 4.4, 4.6, 4.8 and 4.11, only the latter with the italian masculine of social segment “c”, which presents a high score of disagreement (-1.000), although it is necessary to be cautious to interpret this number, because of the low quantity of respondents. table 6 – perception of prejudice and discrimination (percent of agreement or disagreement responses and avg score of total responses) statements brazil italy fem b masc b fem b masc b fem c masc c 4.1 “well-dressed younger women receive face-to-face retail services prior to everybody else if there is not a clear queuing process in the retail spatial environment area”. 48.65% -0.0541 50.00% 0.0250 93.75% -0.7317 71.43% -0.3636 62.50% -0.4217 50.00% -0.1000 4.2 “frontline male employees are nicer to younger female customers”. 93.55% 0.8378 70.00% 0.7500 78.12% 0.6098 85.71% 0.4545 59.00% 0.4578 43.75% 0.2000 4.3 “frontline female employees are nicer to younger male customers”. -0.3784 -0.1750 -0.5366 0.0000 -0.2530 -0.3500 4.4 “frontline female employees are nicer to younger female customers”. -0.5946 -0.4000 -0.2683 -0.6364 -0.3253 -0.4000 4.5 “frontline female employees are nicer to mature female customers”. -0.1622 -0.4000 -0.3415 -0.2727 -0.2289 -0.2500 4.6 “frontline female employees are nicer to middle-aged female customers”. -0,5676 -0.3000 -0.1220 -0.3636 0.0000 -0.2500 4.7 “frontline female employees are nicer to mature male customers”. -0,2973 -0.1500 -0.1463 -0.1818 -0.0120 -0.1000 4.8 “frontline female employees are nicer to middle-aged male customers”. -0,5946 -0.0750 -0.5610 -0.4545 -0.0843 -0.1500 4.9 “frontline male employees treat the mature female customers better than the others”. -0,2703 0.0250 -0.2195 0.3636 -0.4940 -0.6500 4.10 “frontline male employees treat the middle-aged female customers better than the others”. -0,4595 0.0500 -0.2683 -0.0909 -0.3976 -0.3000 4.11 “frontline male employees treat the mature male customers better than the others”. -0,7297 -0.5750 -0.6829 -0.4545 -0.6386 87.50% -1.0000 4.12 “middle-aged female customers are going to be the last to receive faceto-face retail services if there is not a clear queuing system”. 75.68% -0,9189 87.50% -1.500 100.00% -1.2683 100.00% -1.0909 91.07% -0.9518 87.50% -0.9500 4.13. “male staff provide a better treatment to young male customers”. 89.19% -1,0811 -0.6750 90.62% -0.9512 -0.3636 85.71% -0.8313 100.00% -1.1500 4.14 “male staff provide a better treatment to middle-aged male customers”. 81.08% -1,0000 -0.6500 81.25% -0.8780 -0.6364 92.86% -0.9157 -0.6500 4.15 “gays, lesbians and gay-friendly persons, of any age, gender or appearance, are the last to have the faceto-face service, if there is not a clear queuing system”. 72.97% -0.8378 90.00% -1.4000 93.75% -1.1707 57.14% -0.2727 83.93% -0.8554 75.00% -0.8000 source: survey, 2014.       73  even with all the dissimilarities from the samples, being from different countries and realities, brazilian and italian responses related to the statement 4.12 (“middle-aged female customers are going to be the last to receive face-to-face retail services if there is not a clear queuing system”) and 4.15 (“gays, lesbians and gay-friendly persons, of any age, gender or appearance, are the last to have the face-to-face retailing service, if there is not a clear queuing system”) show the same trend of highly disagreement level. considering the likert scale, the scores are lower than -0.8, the feminine as well as masculine groups show high level of disagreement and low perception of prejudice and discrimination in these matters. the only exception is the italian masculine group from social segment “b” with a low score, but still a disagreement response, because the result is negative (-0.2727 in the statement 4.15). the analyses show that in the statements 4.13 (“the male staff provide a better treatment to young male customers”) and 4.14 (“the male staff provide a better treatment to middle-aged male customers”), brazilian and italian feminine groups present the same trend of higher disagreement therefore a low perception of prejudice and discrimination, considering the negative scores. the masculine groups present negative medium values, with the exception of the italian masculine respondents from social segment “c”, which follows the feminine responses in the statement 4.13, although, again, like statement 4.11, it is necessary to be careful due to the low number of respondents in this group. the likert scales’ results can be visualised in appendix 2. 5. conclusions, limitations and future research directions the results of this study provide information about the perception of prejudice and discrimination in brazilian and italian seaside retail businesses due to age, gender, appearance and sexual orientation. the types of face-to-face retailing that the interviewees have attended in their summer vacations were shops, restaurants, pubs, hotels/hostels, parties, shows and night clubs. likert scales were used to evaluate the perception of ageism, sexism, lookism (asl) and sexual orientation bias (so) in brazilian southern and italian seaside retailing. male and female segments, as well as medium and medium-high social segments showed the same trend the way they perceived prejudice and discrimination. based on the highest negative scores, it seems that they did not believe that either “middle-aged female customers” or “gays, lesbians and gay-friendly persons of any age, gender or appearance” are the ones to be the last to receive face-to-face retailing services if there is not a clear queuing system. for both genders, the statement “the frontline male employees are nicer to younger female customers” presents positive scores, which is the only one with positive scores showing a common perception from all respondents, higher in brazil than italy. an overall conclusion can highlight that respondents did not perceive prejudice and discrimination against customers concerning their age, gender, appearance or sexual orientation when the seaside retail businesses provide face-to-face services. the managerial implications are in the importance of developing training activities for faceto-face employees in order to reduce asl and so-related prejudice and discrimination practices against customers and to include these issues in the organization's strategic statements. moreover, a theoretical contribution of this paper can be drawn for the development of protocols that can be useful to identify and evaluate asl and so phenomena in retailing. its format and its methodology can be used to research different kinds of organisations, especially in the retail and services industries. 74  this study has some limitations. first, considering that discrimination is a kind of taboo, respondents are reluctant to express their opinion concerning this subject. therefore direct interviews could be not totally suitable for this subject and other methodologies, such as experiments or observations, could be adopted. second, the sample was by convenience and was not representative of the population. considering that perceptions of prejudice and discrimination could be affected by age, culture and social condition of customers, a more representative sample was necessary. finally, the rattam model adopted for social segments, which was used in both samples, has been developed for brazilian society, and it could be not completely suitable for italian society. future research on the field analysed could be addressed to: (1) produce comparative analyses of prejudice and discrimination based on asl and so in seaside retailing in different countries; (2) deepen the research on the influence of different social segments, income, professional occupation, level of education on the perception of prejudice and discrimination related to the subjects; (3) compare seaside residents’ perception to tourists’ perceptions; (4) use local (national) models for social segments classification to avoid possible bias in the results; (5) to analyse how perceived asl+so can affect the customer level of purchase intention and loyalty; and (6) to use more quantitative statistical methods for justifying the validity and reliability of the asl and so scales.       75  appendix 1 rattam protocol (rattam, 1998): criteria for social segments classification to produce social segments, it is necessary to consolidate the amount of the four categories. the average score of each category has been used in case the respondent did not fill out the proper data for up two categories. cases with more than two categories without indication, the questionnaire has been withdrawn from the sample. level of education avg score: 28 n. of bedrooms in home residence avg score: 21 1. unschooled, incomplete school level 0 1 0 2. complete school level, incomplete high school level 13 2 6 3. complete high school level, incomplete undergraduate 27 3 15 4. complete undergraduate level, incomplete graduate 40 4 21 5. complete graduate level 56 5 30 6 or more 42 average monthly income avg score: 7 1. up to 500 € 0 2. over 500 € up to 1000 € 4 3. over 1000 € up to 1500 € 6 4. over 1500 € up to 2000 € 8 5. over 2000 € up to 2500 € 10 6. over 2500 € up to 3000 € 11 7. over 3000 € up to 3500 € 12 8. over 3500 € up to 4000 € 13 9. over 4000 € 14 job occupation (if retired, job ranking when still working) avg score: 14 1. housewives, students, unemployed for more than 6 months, unhealthy or disable people and the ones that depend on social services. 0 2. workers in non-formal activities without a job ranking. 3 3. blue collars workers/employees with no expertise. 6 4. blue collars workers/employees with some job expertise. 10 5. white collars workers/employees and micro-business (less than 10 employees) owners. 15 6. middle level managers. 18 7. small business owners (companies with 10 up to 100 employees). 21 8. owners of middle-sized business (companies with more than 100 up to 500 employees), executives of middle-sized companies, lawyers, accountants, and any other liberal or independent professionals, with moderate level of success, and university professors. 24 9. large companies’ owners, ceos of large companies, high level government staff, lawyers, accountants, and, any other liberal or independent professionals highly succeeded. 28 total scores for classification social segments scores a. high segment 118 or higher b. medium-high segment 67 to 118 c. medium segment 33 to 66 d. medium-low segment 16 to 32 e. low segment 0 to 15 76  appendix 2 likert scales seaside retailing (i will fix the title in the figure)       77  references 1. abrams, d. 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(1981). estatistica aplicada a economia e a administracao [applied statistics for economy and business]. rio de janeiro, brazil: ltc publishers (in portuguese). microsoft word 6 (17-44) alves.docx       81  a multicultural study on the impact of culture on the quality of the relationship between exporters and local distributors gisela alves university of minho, portugal received: april 15, 2017 accepted: july 28, 2017 online published: september 23, 2017 abstract this research is aimed at understanding the role of culture in the quality of the relationship between portuguese exporting companies and their distributors in angola. this study is particularly important because it is based on an analysis of exporting distributor pairs (matched pairs) i.e. portuguese export companies and their distributors in angola. this study aims to understand how culture has an impact on the quality of trade relationships established between companies in the internationalization of the business context. also, note that in international contexts, the impact of the similarities/cultural differences on the relationship structures have not been particularly studied. in terms of methodology, we have chosen a qualitative analysis: five case studies of portuguese exporting companies and five case studies of angolan distributors were examined. interviews with directors/ceo of portuguese exporting companies and boards responsible for export activities were carried out and the corresponding angolan distributors in order to answer the research questions. the selection of the portuguese companies was based on a list of the fifty largest exporters to angola, provided by the agency for investment and foreign trade of portugal, epe (aicep) in august 2011. in general, the results show that culture has an impact on the quality of the business relationships between the portuguese exporting companies and the angolan distributors. keywords: international marketing, culture, cross-cultural marketing, exporters, distributors. 1. introduction increasing globalization, intensified competition, and an advance in transportation, communication, and information technologies have been responsible for the phenomenal growth of international business (keegan, 2009). this research is of great relevance since the literature review indicates that in terms of studies conducted so far there is a gap when it comes to analyzing both sides of a commercial relationship; furthermore, research on emerging/developing markets is scarce, and to date, to international journal of economic behavior, vol. 7, n. 1, pp. 81-97, 2017 82  the best of our knowledge, none analyzes the specificities of the angolan market. it should be noted that the "process of initiating buyer-seller relations, negotiation and results are different from country to country" (wiley et al., 2006), cited by saleh, ali & andaleeb (2014, p. 46) which greatly hinders the generalization of results from empirical studies and makes the analysis of each country idiosyncratic. on the other hand, the impact of similarities and cultural differences on relationship structures has not yet been adequately researched, as has the approach of relationships of trust and commitment in international contexts. increasingly, portuguese companies are not only confined to the national market, but seek new markets to ensure their survival. thus, it is pertinent to analyze the quality of relationships and culture in relationships between portuguese exporting companies and their respective distributors in the angolan market. the choice of the angolan market is due to the fact that it is a developing/emerging country, a market in expansion, one of the most promising countries of the african continent. in terms of methodology we chose a qualitative analysis: five case studies of portuguese exporting companies and five case studies of angolan distributors were analyzed. interviews with the managers/ceo of the portuguese exporting companies and the employees in charge of exporting activities were performed, as well as their corresponding angolan distributors, to obtain the answers to the research questions. the selection of the portuguese companies was based on the list of the fifty largest portuguese companies exporting to angola provided by the agency for investment and external commerce of portugal, epe (aicep) in august 2011. 2. literature review 2.1 culture culture guides people's behavior and, as such, has an impact on all aspects of management (tsoukatos, 2007). it can be said that the more the managers know about culture, the better they will perform in the exercise of their functions, especially when culture has several idiosyncrasies as is the case of angola. usunier (2000, p.573) states that "in some cultures" my word is my blind commitment "and trust is a personal matter, which contrasts with the" put in writing "mentality in that trust is more impersonal ". particularly interesting for the present investigation is the same author's statement (p. 574) that in african cultures "written documents are presented either as irrelevant to day-to-day social practices or as an anti-social practice" usunier (2000, p. 572) states that "... many cultures are more relationship-oriented than business-oriented." the cultural dimension universalism versus particularism (turner & trompenaars, 1993) precisely asks: "what is more important: universal rules or relationships?" marshall (2003), anderson & weitz (1990), anderson & narus (1990), schurr & ozane (1985) define trust as a belief, while mohr & nevin (1990) & nielson (1998) also define commitment as a conviction. sojka & tansuhaj (1995, p. 7) define culture as "a dynamic set of socially acquired patterns of behavior and meanings common to members of a particular society or human group, including the key elements of language, artifacts, beliefs, and values.       83  "it thus seems natural that, if culture includes the convictions of a society, and resulting trust and commitment of convictions, these constructs depend on national cultures. the notion of sharing common convictions is central to the latin concept of trust (usunier, 2000). this author (p.554) argues that "when people do not share the same codes there may be problems in assessing the credibility/trustworthiness of their partners" it should also be noted that kroeber & kluckhohn (1951) (cited by hofstede, 1984) include, in their definition of culture, "relationship models" which reinforce the idea that culture affects relationships and, inherently, trust and commitment. the evidence that national culture affects trust is embodied in the existence of high trust and low trust societies (parkhe, 1998). other authors, such as child (2001), argue that cultural differences can undermine the development of trust. usunier (2000, p. 547) states that "trust in an international sale or business venture is heavily dependent on culturally coded signals, and can ultimately be removed precisely because these cultural codes have been ignored. these difficulties in interacting ... are deeply rooted in the human cultural and social background of business people. people with different cultural backgrounds often do not share the same basic assumptions. this can destroy the process of building and maintaining trust between culturally unequal partners. "the same author (p. 548) states that "there are great obstacles to establishing trust in an intercultural perspective: 1) people do not always share the same style of communication; 2) they may not share the same convictions. the "reference to context" (hall, 1973, 1977 & 1990) can be invoked on the style of communication and admit that the establishment of trust differs as we are in the presence of a country with a high context or a low context. geyskens et al. (1998), based on a significant number of articles, present the back ground of the construct trust, including culture and cultural similarity. in this regard, ha et al. (2004) refer that the effects of similarities and differences between the cultural backgrounds of exporters and distributors on channel relationships can be explained through cultural distance and behavioral transparency. although there are several definitions of the concept of culture, the study by schmiedel et al. (2013) states that the concept of culture is mainly defined through invisible values. in fact, many academics have identified shared values as the central element of culture (straub et al., 2002), and the sharing of values is precisely one of the five forerunners of relational commitment proposed by morgan & hunt (1994). the cultural dimension "exclusionism versus universalism" (minkov, 2011) shows a contrast between cultures where friends and next of kin exchange favors and privileges, but exclude strangers from this circle and, on the other hand, cultures where people are not normally treated based on the group to which they belong. usunier (2000, p.557) states that "cultures place a stronger or weaker emphasis on belonging to the group as a prerequisite to being considered a trusted partner." conway & swift (2000) refer to trust "for what they are." for usunier (2000), in different cultures the status is evidenced in different ways and influential people are different. it is therefore plausible to admit that the cultural dimension "exclusionism" has an impact on the way trust is attributed. the "orientation for the future" cultural dimension, one of the dimensions of the globe study (house et al., 2004), can be defined as the extent to which members of a society or an 84  organization believe that their current actions will have impact on their future, believe in planning for the future, and look at the distant future to assess the effects of their current actions. if we consider that the definition of commitment of gundlach et al. (1995) explicitly states that commitment is designed to understand a time dimension and that it only means something in the long run, and morgan & hunt's (1994) definition of commitment that it is worth working on a relationship to ensure that it lasts indefinitely, it becomes easy to admit that culture, especially the conception of time, has an impact on the commitment of the relationship. the same reasoning applies if we consider the cultural dimension "temporary orientation" (hofstede, 1991). usunier (2000, p.550) states that "the parties exchange implicit or explicit (written or oral) signals of their willingness to continue the exchange relationship." furthermore, skarmeas et al. (2002) conclude that an exporter's cultural sensitivity has an impact on the distributor's commitment to the relationship. compiling several authors, it can be said that "culture refers to attitudes, values, roles, assumptions and convictions, meanings, behavior patterns, rules, norms, patterns of perception and relationship, problem solving, standard forms of thinking, feeling and reacting, artifacts, language, art, morals, customs and habits acquired, traditional ideas, knowledge, social stimuli, common associations that are rooted, apprehended, acquired, shared and transmitted (social heritage) by a social group, which in this way is distinct from another that shares a different culture. briefly, it can be said that culture is the collective programming of the mind, the part of the environment made by man that he must know and believe in order to act in a manner which is acceptable to the group "(alves, 2014, 53-54). exports provide the traditional means of access to foreign markets (navarro-garcia, arenas-gaitán & rondán, 2014). "when people started to exchange goods and services they also started to interact in relationships" (gummesson, 2017, p.4). 2.2 quality of the relationship some authors have considered trust and commitment as indicators of the quality of the relationship (eg, garbarino & johnson 1999; ulaga & eggert 2006). gilliland & bello (2002) argue that firms may be linked by economic factors and social factors. when the priority is a long-term partnership between two companies, the second type of relationship is revealed through the development and maintenance of social bonds, social factors, and in this type of relationship, trust and commitment are vital. “trust has been studied for 30 years in several disciplines and continues to attract the interest of researchers in businessto-business (b2b) marketing” (akrout, h., diallo, m. f., akrout, w., & chandon, j.-l., 2016, p.269). if, on the one hand, according to obadia (2008), in an international context, where legal differences between countries hinder the execution of contracts (zhang et al., 2003), the existence of trust is even more important, on the other hand, commitment has been referred to as an important component of close relationships in business to business marketing (chang, et al., 2012) (quoted by schmiedel et al., 2013). the theory of morgan & hunt (1994) is taken as prominent in explaining the relationship between exporters and distributors, based on the concepts of trust and commitment. for these authors, relationship marketing implies a positive relationship between commitment and trust.       85  trust, by reducing perceived risk and vulnerability in a relationship, leads to a greater commitment to the relationship (ganesan, 1994). relationships between firms are guided by relational factors such as commitment standards, which are based on trust (achrol, 1991; cambra-fierro & polo-redondo, 2011; riel et al., 2011). just like morgan & hunt (1994), also buttle (1996), siguaw et al. (1998), conway & swift (2000) & narayandas & rangan (2004) consider that trust precedes commitment. "trust is the basic mechanism used to build and maintain a relationship and to promote long-term orientation in marketing relationships" (li et al., 2007, p.33). trust is used as a basis for strengthening the commitment relationship in organizational sciences (cambra-fierro & polo-redondo, 2011). however, on the contrary, other authors consider that commitment is a determinant of trust (e.g. gundlach et al., 1995, cited by hewett et al., 2002). gundlanch et al. (1995), consider that the behavioral aspect of affective commitment is fundamental in terms of trust building. 3. research methodology 3.1. population of the study the sample of exporting companies is constituted of five portuguese companies, namely: (petróleos de portugal-petrogal. sa (galp energia, sgps, sa |ge|) e unicer bebidasunião cervejeira, sa |unicer|, efacec energia, sa ((grupo efacec) |efacec pt|), martifer construções metalomecânicas, sa |martifer pt| e acail indústria e comércio de ferro e aços, sa |acail pt|. the sample of angolan distributors is constituted of five companies, distributors of portuguese companies: mota & tavares, lda |m & t| and importangola sa |importangola|, efacec angola, lda |efacec ag|, martifer construções metalomecânicas angola, sa |martifer ag| and acail angola sa |acail ag|. the criteria for the selection of the case studies were in the case of exporting companies, the portuguese companies which were successful in exporting to the angolan market and exporting to the angolan market through an angolan distributor. in the case of angolan companies, in the other five case studies, they are distributors of portuguese companies in angola. the geographical context of this study includes portugal and angola. given the nature of this (intercultural) study, the specific nature of these markets is taken into account. 3.2 study design regarding the "design of the study", this research uses a qualitative methodology, namely through interviews. one of the advantages of in-depth interviews is that they allow interviewees to speak freely and the interviewer to explore themes without interruption (robson, 2002). interviews to the managers/ceo of the portuguese exporting companies and to the employees in charge of exporting activities were performed, as well as to their corresponding angolan distributors, to obtain answers to the research questions. a total of 15 valid interviews 86  were carried out. the interviews conducted for this research lasted from about forty-five minutes to one hundred and fifty minutes, when they were allowed to be recorded and were fully transcribed, making up approximately 200 pages of tape scripts. the data collected were treated according to qualitative content analysis (bardin, 2011). since trust is one of the categories, and the subcategories are honesty (anderson & narus (1990); dwyer & oh (1987) citado por geyskens et al. (1998); doney & cannon (1997)), benevolence (geyskens et al. (1998); boersma et al. (2003)); doney e cannon (1997)), competence (helfert et al. (2001); walter et al. (2003): boersma et al. (2003)), perceived credibility (doney & cannon (1997); boersma et al. (2003)), and the trust of calculation: reputation (doney & cannon, 1997). another of the categories is commitment in which the subcategories are commitment of attitude (commitment of calculation and commitment of loyalty) (gilliland & bello (2002); brown et al. (1995) citado por gilliland & bello (2002); morgan & hunt (1994)), commitment of continuity (kim & frazier (1996); skarmeas et al. (2002)), behavioral commitment (skarmeas et al. (2002)), commitment of collaboration (selnes & sallis (2003)), commitment of credibility (gundlach et al. (1995); gilliland & bello (2002)) and affective commitment (sanzo et al., (2003)). finally the last category is culture and its subcategories are language (ghemawat, 2001), habits (jain, 1993), the use of time (hall (1973,1977, 1990); (hofstede (1980 e 1991); trompenaars & turner (1997); house et al. (2004); minkov (2011)), the distribution of power and authority (house et al. (2004); trompenaars & turner (1993); hall (1973,1977, 1990); hofstede (1980 e 1991)), the emphasis on groups or individuals (minkov (2011); house et al. (2004); trompenaars & turner (1993); hofstede (1980 e 1991)) and personal and social control (minkov (2011); house et al. (2004); trompenaars & turner (1997); hofstede (1980 e 1991)). in short, the data collected are treated according to qualitative content analysis. this research used qualitative methodology, an inductive method, the paradigm is constructivist and there is a triangulation of sources. 4. results and discussion common language, habits, customs and social practices, the notion of time, social hierarchies, national pride and its expression, the existence of cultural empathy, the values of the people, the expression of masculinity and business ethics, have a major impact on trade relations between portuguese exporting companies and their angolan distributors. in other words, the analysis of the data collected in the case studies of portuguese exporting companies in the research question, i.e. how cultural differences and similarities affect the quality of the commercial relationship between the portuguese exporting company and its local distributors, it can be pointed out that cultural similarities in language and customs, from the colonization period, contribute positively to international trade, giving portugal a competitive advantage when competing with other countries, as indicated in literature by ghemawat (2001). in addition to the cultural similarities described above, it is important to refer to the habits (jain, 1993), low individualism (hosftede, 1980 & 1991) and the high context (hall, 1973, 1977 & 1990) of both countries. even when there are cultural differences to a greater or lesser extent between portugal and angola, the high level of aversion to uncertainty in portugal and, in the case of angola, only a       87  high one, the low masculinity of portugal and the average masculinity of angola, the low temporal orientation of portugal (hofstede 1980 and 1991) and the hypometropia of angola (minkov, 2011) and exclusionism (minkov, 2011), the high territoriality (hall, 1973, 1977 and 1990) and particularism (turner & trompenaars, 1993) of angola, contribute to generate trust, as reported by the interviewees' testimonies, thus revealing the cultural impact on the quality of the relationship. according to several researchers, such as garbarino & johnson (1999) and ulaga & eggert (2006), commitment and trust are elements of the quality of the relationship. according to boersma et al. (2003), trust has three bases promises, competence and benevolence which are mentioned in the testimonies of the cases of portuguese exporting companies, and according to gundlach et al. (1995) (cited by hewett et al., 2002) commitment is a determinant of trust. gundlanch et al. (1995) consider that the behavioral aspect of affective commitment is fundamental in terms of developing trust. the following are some testimonies of the data collection on the research question with regard to portuguese exporting companies and angolan distributors. "(interviewer: what are the essential characteristics of the relationship of your business with angolan companies, in your point of view?) the first one that is essential is that we perceive and understand the angolan culture. the efacec alliance has experiences in many countries, our marketing says that more than 65 countries and each country is a different country ... "|efacec pt| "... angola has its own things, its own cultures, and therefore, the efacec people in angola, the first concern is to adapt to this culture that is a culture which is different to the portuguese culture. the angolan companies are different in different aspects of things that the portuguese get. therefore, this cultural issue is first and i think it is essential. "|efacec pt | "(interviewer: in your opinion, do you think it is important for an angolan distributor ... the fact that the exporter is portuguese?) i think that language ... culture is an important factor. the fact that efacec is a portuguese company i think gives us some privileges, and therefore, this is very positive compared to other countries, and therefore, the fact that it is portuguese, in this case in angola, i think it has a competitive advantage compared to other foreign countries. "efacec pt | "the portuguese-speaking component of galp energia operates as another facilitator of the relationship of cultural affinity between the parties ..." |ge| "all decisions are taken together and are transparent." |martifer pt| "... there are 2 or 3 criteria that seem fundamental to me. one is the seriousness with which we go there (angola), we must have consistency, patience, seriousness ... "|martifer pt| "in angola, we have a great facility that is the language ... we are part of the management of this country as a colonizing country. all the good things of this proximity of countries is essential and it is an advantage that we as a portuguese company ... "|martifer pt| " the creation of myths about the brand has also been crucial to the success of the product." super bock has become known in the angolan market as the gti, beer with power for the shock troops. that is, through "rappers" and expressions of contemporary angolan popular music, a myth has been created that responds to the masculinity desires in society and corresponds to the diffusion of the belief that super bock is a strong beer, only for those who have power, those who are virile, hence super bock for the shock troops ... virility displays are 88  a way of building trust or getting closer to partners. this is an example of how knowledge of cultural realities at the consumer level can be used in strategy of communication of a product/brand, but this requires knowledge of the idiosyncrasies of local consumers and the culture that shapes their behavior."|unicer| "most of the relationships in angola are defined outside the legal context in force." there is a prevalence of personal relationships and networks. they have created creative ways to make money that sustain a whole subsistence economy. without knowledge of the rules in force in the informal sector, where a substantial part of the distribution networks of consumer products are based, one cannot succeed in business in angola. "| "(interviewer: what are the essential characteristics of the relationship to do business with angolan companies? i think it is good service, quality, speed and seriousness. "exactly. it is to fulfill what one agrees on, not to let the client down when he makes a contract with us. fulfill that contract exactly, even if it could bring us more costs, for some momentary need that has arisen. " "(interviewer: in your opinion, do you think it is important, for the angolan distributor, that the exporter is portuguese?) i think so, they believe in the quality of portuguese products very much, they believe in the portuguese word, the same is not the case with the chinese, they no longer believe in quality, and they think they are there, they only give jobs to the chinese themselves, they do not employ angolans, we give jobs to angolans, they do not like chinese or cubans, but they like portuguese. there is a relationship history, there are always those who are more racist. that foreigners should not be there. they are a minority, so it is not significant. " |acail pt| the following is a summary of the data collection on the research question to the angolan distributor (s) "... we are a serious company" |acail ag| "... businessmen, it's more like work, more like a greeting. the portuguese are compliant. "| acail ag | "it is a problem ... (angolans) create difficulties to sell facilities." (note: "gasosa") "... there is no way to print now, there are no ink cartridges, this in public entities. if you do not have paper, you cannot print "| acail ag | "angola was at war until 2004. and so, there are many values that this society had before, even in the time of the portuguese, which it does not have today. because during the war everything counted ..., so this issue of respect, honor, is something that for them is little or nothing at this time. "efacec ag | "... the importance of the language, the importance of the products, the importance of portuguese quality was so great ..." |efacec ag | "... in principle, i would buy a portuguese product precisely for the purposes of communication, after-sales, dialogue, philosophy .... same cultural affinity helps a lot and most of all it has weight. "|efacec ag| "two obvious cultural influences between the exporter and the distributor: the language and the legal landscape, whose own identities have many similarities or common points." |martifer ag|       89  "i think a little bit of everything. because when we do business we talk about the same things, i mean we speak the same language, we are used to working together, often the same people in other places. "|martifer ag| "no matter how much we speak of a global economy, which is indifferent to buying from a chinese or japanese or brazilian supplier, in everyday life i think that the language barrier, feeling the language, the other side wants to feel trust more and more feel. ... because we already have a relationship of many years .... in one way or another we feel more trust. "|martifer ag| "... the culture is the same, because the portuguese have a culture of many years of qualities and customs with angola, the food, the dress codes are the same. now what happens is that sometimes both sides are not properly prepared to make things easier, and then things go wrong. but the culture is the same, there are no differences. angolan and portuguese habits, customs are the same and you cannot change them. |m & t| "one of the main bases is honesty ..." ... "... because of this, angola prefers to work with the portuguese than with anybody else, this is known ...." most moral values are the honesty of both parties. knowing that i will deliver a product and the customer will be satisfied with the product, he will not be poorly served: this is the main basis, do not sell customer “gato por lebre”/cat by hare. this is the main basis in moral values. "| m & t | "... with unicer it was, therefore, almost an empathic question." |importangola| "trust and loyalty above all, and transparency." |importangola| "no, i think it's different (negotiating with a portuguese company and with a french company) the french, the spanish, the americans, even the brazilians are undervalued, lower competitive advantage because portuguese companies have the capacity to adapt. "|importangola|. various definitions of culture consider language as one of its constituent elements. given that language is one of the key elements of culture, it was the object of analysis of this research. of the five case studies of portuguese exporting companies, there are testimonies from |ge|, |martifer pt|, and |efacec pt| of how the same language is central to the realization of commercial relations between portugal and angola, given that it facilitates cultural affinity as stated by the |ge|, even creating a competitive advantage for portuguese companies, as emphasized by |efacec pt |. regarding angolan distributors, in all case studies, (|efacec ag|, |martifer ag|, |m & t|, |importangola| and |acail angola|) consider the same language an important factor, coming to |importangola | to explicitly express that "it is an advantage, we speak the same language" and also that "it is also the ideas that are expressed by the phrases whose translation is not language. there is a whole advantage in negotiating with the portuguese ... ". thus, in the light of the case studies analyzed in this research, the fact that portugal and angola share the same language is considered an advantage for portuguese companies when they intend to establish trade relationships with angola. according to the testimony of |martifer ag| it is clear that "feeling the language on the other side (portugal) ... increasingly feeling more trust"; according to several authors, the presence of trust and commitment are elements of the quality of the relationship (garbarino & johnson, 1999 and ulaga & eggert, 2006). according to ghemawat (2001), mentioned above, the attribute that has the most impact on international trade is the colony-colonizer relationship. according to the data collected for 90  the portuguese exporting companies in this area, |martifer pt|, |acail pt|, |unicer| consider the colony-colonizer attribute to be relevant, and the |martifer pt| states that "it is an advantage for us as a portuguese company". however, |unicer| informs of the danger of being perceived as neocolonial and |efacec ag| goes so far as saying that sometimes the imputation of colonizers is used to treat and cover the current situation in angola. despite this, on the side of the angolan distributors, |martifer ag|, |acail ag|, |m & t| and |efacec ag| explicitly consider that the relationship of colony and colonizer is important in the commercial relations between these two countries. a |martifer ag| even indicates that "we already have a relationship of many years ... in one way or another we feel more trust"; we can thus deduce that the colony-colonizer relationship contributes to generate more trust, which is, according to several authors, together with commitment, an element of the quality of the relationship. we can deduce that common habits and customs (jain, 1993) result from the period of colonization. according |m & t| there were 500 years, "created a family of 500 years, which is almost impossible to separate"; this has the direct consequence, in economic terms, of consumption of portuguese products, as evidenced by the testimonies of the various interviewees, and, in emotional terms, the creation and/or maintenance of greater empathy between portuguese and angolans for sharing something in over the years. as we can see from the testimony of |efacec pt| "portuguese products, i do not know if still out of admiration, are products that have an acknowledged brand in angola ... for example super bock is the beer that is most drunk in angola." it should also be noted that according to |importangola| the "brand imported from portugal has a lot of power", therefore much more economic value. it can therefore be concluded from the analysis of the case study data of the portuguese exporting companies, |efacec pt|, |unicer|, |acail pt|, |martifer pt|, that there is a preference for portuguese products and that these are associated with quality. on the side of the angolan distributors, |importangola|, |efacec ag|, | acail ag|, |m & t|, they share the same opinion, as we can see from their testimonies. it should be noted that, in addition to the reason given above, |efacec pt| indicates that "portuguese brands, the result of the work that some have done for many years, have a certain ease because there is a whole image of quality associated with the portuguese in angola." thus, we can conclude that, and citing an |efacec pt| statement, “any angolan distributor is more likely to promote a portuguese brand than a french brand or a chinese brand." a |martifer pt| refers that the portuguese's capacity for adaptation is greater due to the past reality (colonization period). portuguese exporting companies that claim to understand the angolan culture are the |unicer|, a |efacec pt|, a |martifer pt| and a |acail pt|. in the light of what labahn & harich (1997, p. 31) state, national cultural business sensitivity is defined as understanding a business and adapting to the partner's national business practices as perceived by the partner. as we can see from the testimonies of the angolan distributors, the adaptability of the portuguese, or, in other words, their sensitivity to the angolan culture, is the reason for the realization of business given the cultural empathy defined by philips et al. (1994) (cited by swift, 1999), such as the ability of one seller to position himself as a buyer, from another culture. this is evidenced by the testimony of |importangola|, "with unicer, so it was almost an empathic question."       91  there is an extremely relevant feature in angolan culture that should be taken into account when conducting business, since its lack of consideration may mean, in the light of the testimonies obtained from portuguese exporting companies (|unicer| e | acail pt |) and of the angolan distributors (|efacec ag| and |acail ag|) the non-realization of business. in other words, according to |efacec ag| "nothing is done in angola without gas (bribery)." the existence of corruption is one of the characteristic features of societies in which exclusionism prevails (minkov, 2011). trust is compost by honesty (anderson & narus, 1990; doney & cannon, 1997; dwyer & oh, 1987cited by geyskens et al., 1998), benevolence (geyskens et al., 1998; boersma et al., 2003; doney & cannon, 1997) competence (helfert et al., 2001; walter et al., 2003; boersma et al., 2003) and perceived credibility (doney & cannon, 1997; boersma et al., 2003). honesty means keeping one’s word, being reliable and sincere. benevolence presupposes that one is genuinely committed to one's interests. competence refers to competence in benefit of the relationship and perceived credibility means one’s word, i.e. the partner's perceived statement that they are reliable. as we can see from the statements of all the portuguese exporting companies present in this research (|acail pt|, |martifer pt|, |unicer|, |ge| and |efacec pt|) these are key characteristics to making business with angola. for the angolan distributors (|importangola|, |m & t|, |acail ag| and |martifer ag|, the fact that the portuguese have a behavior, based on the above mentioned characteristics, is decisive when buying from the portuguese. in other words, in short and citing |m & t|, "one of the main (things) is honesty ... because of this, angola prefers to work with the portuguese than with anyone else, this is known" and, citing | acail ag|, "they have more trust in portuguese companies." commitment integrates the commitment of attitude (brown et al., 1995, morgan et al., 1994), commitment of continuity (kim & frazier, 1996; skarmeas et al., 2002), behavioral commitment (skarmeas et al., 2002), commitment of collaboration (selnes & sallis, 2003), commitment of credibility (gundlach et al., 1995, gilliland & bello, 2002). the statements of portuguese exporting companies, |acail pt|, |unicer|, |ge|, and |efacec pt| and the angolan distributors (|m & t|, |importangola|, |martifer ag| and |efacec ag|) reveal that it is essential for the portuguese and the angolans to have commitment to doing business. in other words, quoting |m & t|, "the main basis, there must be trust and commitment" ... "the most important for both parties, not just one. if both parties have this behavior, the business goes far ... " summarizing, in the light of the literature review and the testimonies revealed in the case studies analyzed in this investigation, culture has an impact on the quality of the commercial relationship between the portuguese exporting companies and the angolan distributors and, as previously mentioned, it was also possible see how this happens. 5. conclusions and implications the study shows that a common historical past, specifically the secular existence of a colonizer colonized relationship, left indelible traces in the angolan culture that has a significant impact on the commercial relationships between the two nations. despite a long colonial war, the agreed outcome that led to the independence of angola, allows the portuguese a peaceful and friendly coexistence with the angolans. the notoriety and reputation of many portuguese 92  brands still dates back to colonial times, thus allowing for a competitive advantage. the colonial heritage of angolans is also reflected in the sharing of habits and customs, which of course represents a marketing advantage for portuguese companies. however, the historical past may, occasionally, have negative repercussions in relationships if attitudes and behaviors are likely to be perceived as neocolonial. the cultural aspect that perhaps has the greatest impact on relations is the fact that the official language of both countries is common. the language, lusophony, facilitates the communication of ideas, contacts and apprehension of reality and consequent adaptation ("angolanization"). the same language significantly reduces the psychical distance perceived by individuals, which, according to nordstrom & vahlne (1994), prevents or disturbs the learning and understanding of the company about a foreign environment, or, in the expression of one of the interviewees, "the same language, another facility". for another interviewee, "feeling the language" generates more trust, confirming the one mentioned by rodriguez & wilson (2002), for whom trust depends, among other things, on cultural similarity. sharing interests in games is also a cultural phenomenon that brings the two nations together. note the references to interest in portuguese football, particularly to benfica, probably a result of the golden age of this club in the colonial era. socialization and the sharing of interests, outside the business sphere, brings people together and strengthens relationships. however, other cultural factors differ considerably between the two cultures. the notion of time is an example. angolans have a short-term orientation, with repercussions, namely in the evaluation of investments and the definition of strategies. this is of particular interest if we take into account the importance of partnerships with local companies. the explanation may lie in the decades of wars colonial and civil that have created a sense of day-to-day living. the habit of improvisation and tolerance for delays are other manifestations of the conception of time. another important cultural aspect for the establishment and maintenance of relationships is the understanding of social interactions, which "establish the roles that people play in society and their patterns of authority/responsibility" (jain, 1993, p.238); in the present case, it is relevant to know the importance attributed to age "old wisdom" in the expression of a respondent to the position in the family and the recognition by the group, which is so characteristic of, for example, eastern societies. "all cultures nurture a certain pride and prejudice among their inhabitants" (jain 1993, p. 243). understanding national pride and prejudice factors of angolans and their implications in business is important. angolans have "an extreme feeling of belonging to angolan nationality and patriotism" (interviewed) and, as already mentioned, a prejudice as to what can be understood as offensive to "angolanity". this pride of being angolan associated with a recent national independence which was conquered with effort, translates into a behavior of the owning, an exacerbated manifestation of the possession of the country, according to which the angolans assume that they are entitled to the income of the businesses operated by foreigners, without having contributed to them. regarding values, respect for values such as seriousness, honesty, loyalty, credibility and transparency "not selling a pig in a poke" (angolan interviewee) is valued by angolans and maintains commercial relationships because they "believe in the word of the portuguese       93  "(interviewee). on the other hand, there is a need on the part of the portuguese to understand the manifestation of some recent values, such as the "culture of money" (interviewed) and the imaginative ways of achieving them, even if they are ethically unacceptable by cultures of western europe and they are the fruit of a rapidly developing society, where there are very large social disparities. another value of great expression in angola is masculinity, whose manifestation can be a source of trust in relationships and be used as the axis of communication of brands ("super bock for the shock troops"). "communication is the human activity that creates and maintains relationships between the different parties involved. although communication is often based on information of various kinds, it is not synonymous with sending or receiving information by itself. for communication to occur, people should not only exchange information but also be able to decipher each other's codes. " (lages et al., 2005, p. 1041). the cultural practice of rumor perhaps the oldest social networking project in the world is a form of communication in angola whose consideration by companies is not negligence, since it can be used in their favor or, if not, require action in order minimize the effects thereof. the material culture that jain (1993, p.237) refers "the tools, knowledge, techniques, methods and processes that a culture uses to produce goods and services, as well as their distribution and consumption" has an impact on relationships in angola. technological deficiencies, such as an intermittent supply of energy or internet access or malfunctioning of ports and customs, conditions business practice and performance, reflecting relationships. as a cultural dimension, formal education (hill, 2001, p.95) has repercussions on business practice in angola, manifesting itself in the lack of qualified staff and, often, the inevitability of using expatriate staff. as a consequence of the cultural proximity between the two nations and the resulting trust, portuguese companies and brands enjoy a preference for angolans, which, if properly exploited, constitutes a sustainable competitive advantage. the results of the empirical study show a strong impact of culture, according to several dimensions, on the quality of relationships between portuguese exporting companies and angolan distributors. one of the limitations that may be pointed out in this research study is that it is based on a qualitative analysis, that is, on the interpretation of a person; as such, generalizations have to be taken care of. another limitation that can be pointed out is the fact that this study is multisector, since it applies more to the general relationship of companies, without focusing on any particular sector, removing homogeneity. the limited time to complete this research can be considered a barrier that conditions the researcher’s options, such as the impossibility of performing more interviews. data collection through in-depth interviews is subject to the scarce availability of respondents, which has lengthened this process over time. however, if we use several international publications as reference, it can be seen that they are based on a smaller number of case studies than those included in this research. for a more complete understanding of the object of study of this research, the same study using a design/data in longitudinal terms should also be performed. 94  with regard to recommendations for future investigations, the suggestion is to to replicate this same study with regard to portuguese exporting companies, but with other markets, such as brazil or mozambique. as these countries, also portuguese ex-colonies, also have portuguese as their official language, the confirmation or infirmation of the contributions of this study and the underlying causes may be evaluated another suggestion may be to carry out this research based on portuguese exporting companies that have failed in the angolan market, instead of successful portuguese exporting companies, allowing subsequent comparative analysis, thus detecting similarities and/or differences. the possibility of investigating the effect of other relational variables is also suggested. one way forward for future research may be to include construct cooperation. it may also be interesting to study the feedback effect of cooperation on trust. references 1. achrol, r. s. 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(2003). manufacturer governance of foreign distributor relationships: do relational norms enhance the competitiveness in the export market? journal of international business studies 34: 550-566. microsoft word 8 (17-37) sentuti.docx       117  female entrepreneurs and intergenerational transfer: new insights into the succession process annalisa sentuti carlo bo university of urbino, italy received: august 10, 2017 accepted: september 26, 2017 online published: october 2, 2017 abstract this study focuses on the intergenerational transfer from female entrepreneurs to offspring, analysing two italian cases of succession from mother to son or daughter. the aim is to understand how the succession unfolds when the incumbent is a woman, and whether specific characteristics of women’s style of leadership and management may facilitate the planning and management of the intergenerational transfer. findings show that the female approach to the succession process is characterised by attention to relationships, cooperation, involvement, communication and sharing in the decision-making process. moreover, the female approach appears to be more orientated towards a positive perspective of succession. women entrepreneurs seem to live through the intergenerational transfer much less traumatically, adopting an idea of the physiological continuity of the business and natural turnover between the generations. these characteristics take on particular relevance to its successful outcome and may facilitate the succession process. keywords: women entrepreneurs, female entrepreneurship, women-owned family business, intergenerational transfer, succession process, matriarchal succession. 1. introduction an intergenerational transfer–or succession–can be defined as the series of actions, events and developments that affect the transferral of managerial control from one family member to another (sharma et al., 2001). in succession, “both the incumbent who relinquishes managerial control and the successor who takes it over are family members” (de massis et al., 2008). in research on female entrepreneurship, the intergenerational transfer has been widely ignored. attention has mainly been paid to female businesses in early stages (start-up period) and on their development strategies (growth period) (cadieux et al., 2002). the reason is that female entrepreneurship is a relatively recent phenomenon. thus, female businesses are generally young and in the entrepreneurial phase (before entering into the family phase which is characterised by the official involvement of at least one family member) (cadieux et al., 2002). international journal of economic behavior, vol. 7, n. 1, pp. 117-130, 2017 118  on the contrary, succession is one of the main research topics in family business studies (sharma, 2004). however, most of the research has focused on traditional succession fatherson (hadler, 1994; harveston et al., 1997). few scholars have investigated how the process unfolds when the incumbent is a woman. kaslow (1998), cadieux et al. (2002), vera & dean (2005) and cesaroni et al. (2017) have introduced significant contributions on this topic but have remained sporadic; therefore, empirical evidence on female entrepreneurs and intergenerational transfer is still limited. nevertheless, even if the traditional figure of the male entrepreneur still prevails, the percentage of businesses founded, run and owned by women has steadily continued to grow over recent decades. according to the 2012 united states census bureau, us women own 36% of all businesses, a jump of 30% since 2007. in europe, the percentage of women entrepreneurs was at 31% in 2012 (european commission, 2014). in italy, women entrepreneurs were estimated between 8-17% of the total in 1996, while according to more recent data from european commission (2014) their percentage has risen to 29%. consequently, the binomial “female entrepreneurs and intergenerational transfer” is becoming extremely important. therefore, it is necessary to emphasise new and emerging perspectives on analysis with reference to the proposals traditionally offered by literature. this paper focuses on this binomial. based on two paradigmatic cases of succession from mother to children, it aims is to understand how the intergenerational transfer unfolds when the incumbent who passes “the baton” of the business is a woman. the rest of paper is organised as follows. in the next two sections, the main literature on intergenerational transfer and women entrepreneurs and succession is presented. in the following section, the methodology used in the empirical research and the two case studies is described. finally, key results of the study are discussed, and main conclusions are drawn. 2. the intergenerational transfer the intergenerational transfer is widely considered as a process that lasts many years and should be very carefully planned and managed (handler, 1990, 1992; harveston et al., 1997; morris et al., 1997; sharma et al., 2001; dyck et al., 2002; sharma et al., 2003; le breton-miller et al., 2004; sund et al., 2015) in order to take into due consideration all of the succession issues (ip & jacobs, 2006; cesaroni & sentuti, 2017a). several authors have produced models that articulate the succession process in different phases. from a cross-reading of the various contributions, the main stages/activities identified are: ▪ propaedeutic activities, such as the acquisition of awareness–by the incumbent–of the need to plan the process and manage all the issues raised by the intergenerational transfer (kets de vries, 1993; corbetta, 1995; ciambotti, 2011; cesaroni & sentuti, 2017a). ▪ selection of the successor, aimed at choosing the person who will guide the family business. the selection must be based on an objective assessment of the candidate’s competencies (knowledge, skills and attitudes) and motivations and contemplate the real business needs. in this phase, all solutions must be considered so as not to leave the firm without a successor and without a possible alternative in cases where there are no heirs, or they are incapable or uninterested in running the business (corbetta, 1995; morris et al., 1997; cabrera-suarez et al., 2001; sharma et al., 2003; ward, 2004). ▪ training of the successor, both outside (family education, socialisation of the entrepreneurial role, schooling, work experience in other firms and/or abroad) and inside the family business (job rotation periods and working side by side with an expert manager and/or the incumbent, with the purpose of developing an understanding of the complexity of the firm and achieving       119  full awareness of the role) so that the potential successor will acquire the necessary preparation to fulfil their future role (corbetta, 1995; morris et al., 1997; cabrera-suarez et al., 2001; sharma et al., 2003; ward, 2004). ▪ co-existence of incumbent and successor, aimed at transferring tacit knowledge from incumbent to successor and combining the incumbent’s experience with the successor’s innovative skills. generational co-existence will also lead to a mutual adjustment of roles. in order to gradually increase the role assumed by the successor, that of the incumbent should be reduced at the same time (handler, 1990; corbetta, 1995; cabrera-suarez et al., 2001; boyd et al., 2015; daspit et al., 2016). ▪ conclusion of the succession process: this phase involves the final passage of the successor to the head of the firm and the simultaneous withdrawal of the incumbent from leadership. it implies overcoming the incumbent’s reluctance to retire (kets de vries, 1993; levinson, 1974; mcgirven, 1978) and any resistance that the organisation may have towards the change (corbetta, 1995; bauer, 1993; schein, 2003; cadieux, 2005; ip & jacobs, 2006) the success of the intergenerational transfer does not guarantee–on its own–the survival and future success of the firm. the transfer must be accompanied by a process of change that answers the real needs of the business and is integrated into its development strategy. many authors have emphasised that succession may give rise to processes of change that could strengthen both the business formula and the sources of competitive advantage. in other words, the intergenerational transfer should be seen as an opportunity to improve and innovate the firm, introducing changes in the entrepreneurial formula that enable the business to create and nurture a competitive advantage (dyck et al., 2002; cesaroni & sentuti, 2010; cesaroni, 2011; de massis et al., 2016). 3. intergenerational transfer and female entrepreneurs intergenerational transfer is one of the main research topics in family business research (sharma, 2004). however, most of the studies concerning the succession process generally refer to a traditional male model based on the transfer from father to son. female entrepreneurs were a minority tacitly assimilated into the male model. in the last three decades, some scholars have analysed the intergenerational transfer from father to daughter (dumas, 1989, 1990; salganicoff, 1990; vera, dean, 2005; wang, 2010; cesaroni & sentuti, 2017b). however, limited attention has been devoted to the succession from mother to children (cesaroni et al., 2017), which remains an under-researched area. nevertheless, with the growth of female entrepreneurs, a small but significant thread of research has emerged. major attention has been devoted to understanding if and how the female characteristics of the incumbent may influence the succession process and its outcome. it is widely recognised that the behaviour of female entrepreneurs differs from that of males. some scholars have analysed entrepreneurs’ style of leadership and have distinguished between a “transformational” and “transactional” style (eagly & johannensen-schmidt, 2001). the latter style is based on the relationship of exchange with your team. this style is goal oriented, rewarded for reaching specific targets (which are carefully planned) or punished if you don’t (beverly, 1995; eagly & johannesen-schmidt, 2001). while the first is generally associated with the female style, the second is deemed to be closest to the male style. the transformational style aims to encourage the empowerment of co-workers or team, with the purpose to increase and develop capabilities and personal potential. this style bases itself on communication, in the division of labour and cooperation, and involves listening to each other and creating a dialogue. 120  it includes the active participation of staff whilst understanding their individual needs, all of which help to increase feedback (beverly, 1995; eagly & johannesen-schmidt, 2001). many authors (rosenblatt et al., 1985; brush, 1992; cole, 1997; dumas, 1998; francis, 1999) believe that businesses can benefit from the characteristics that are typically employed within female businesses, such as: encouraging participation, being client-oriented, qualityoriented, the capability to organise competently, a natural predisposition to interpersonal relationships, the ability to multitask, intuition, sensitivity, attention to social issues, sharing of responsibility, the desire and ability to reach an agreement, etc. hardly any authors have investigated if and how these characteristics could influence the planning and management of succession, although inconsistent results have emerged. harveston et al. (1997) analysed the impact of owner gender in planning the intergenerational transfer. findings showed that men and women follow different predictive processes and are influenced by different factors when making succession plans. in particular, men and women are affected differently by several factors, which are associated with three levels: individual (incumbent’s age and level of education), organisational characteristics (size of the firm and degree of formalisation) and resources (incumbent’s possibility to gain access to internal or external capital). they found that “the owner’s age plays a greater role among male-led organisations than among female-led organisations, where the age of the owner does not appear to be significant”. when the business grows, women, more than men, tend to plan the succession formally. even so, it is more difficult for women to obtain external financing than men and, consequently, women have less financial resources available for planning the succession. as a result, authors suggest adopting “gender-specific models of organisational succession” to identify and evaluate the characteristics of the process to guarantee the best possibility of success. on the contrary, cadieux et al. (2002) carried out a qualitative study of four firms owned and run by women to examine how the succession process develops. however, the study showed that there is not a gender-specific intergenerational transfer. pyromalis et al. (2006) also didn’t find significant differences between men and women regarding the effectiveness of succession. however, the distinctive psychological and sociological characteristics of the female management approach–a natural propensity to interpersonal relationships, greater flexibility, sensitivity, attention to “social” aspects, predisposition to the sharing of choices and responsibilities, the desire and ability to mediate and find an agreement, a disposition toward team work, predilection of communication, etc. (brush, 1992; cole, 1997; dumas, 1998; francis, 1999)–should contribute positively to the management of succession process. dubini & songini (2002) identified different models of corporate governance and management within italian smalland medium-sized female-run businesses, which goes into more depth about the aspects relative to the relationship between women and succession. results showed that intergenerational transfers in women-led business are managed more conscientiously, with collegial and participatory decision-making processes, and are more organised. gnan and montemerlo (2008), analysing succession in smalland medium-italian-family firms, pointed out that female-owned family businesses plan succession in the same way as male-owned family businesses, though women adopt an approach that is more participative than males and are more attentive to relationships between family and family business. some authors have considered the so-called “cross-gender succession” (father-daughter, mother-son) (dumas, 1989, 1990; kaslow, 1998; vera & dean, 2005; haberman & danes, 2007). kaslow (1998), for instance, examined mother-son succession and showed the kinds of interactions and dynamics that may unfold between mother, son and daughter-in-law. the       121  author highlighted that: “the often rivalrous relationship between mother-in-law and daughterin-law, a factor that must be taken into account in such cases, is often much more intense than that between father-in-law and son-in-law”. vera and dean (2005) conducted a qualitative study that compared father–daughter and mother–daughter successions, analysing daughters’ experience. they found that women who succeed their mothers face more difficulties compared to when they succeed their fathers. the daughters said they have a great professional and personal relationship with their father, based on good communication and an absence of a conflict of roles. the relationship between mother and daughter was often much more intense: “some daughters in the current study recognised that working for their mother in the business was very difficult; moreover, mothers tended to require perfection and were afraid of losing control” (vera & dean, 2005). daughters always feel like they are living in their “mother’s shadow” and their leadership style is continually being compared to that of their incumbent. daughters tend to have more flexibility in choosing their leadership style when they succeed their father. recently, cesaroni et al. (2017) pointed out that–in family business studies–women have often been described as third actors (e.g., mediators between family members, patient wives, responsible mothers), playing the main role of emotional leaders (jimenez, 2009). they wondered what happens when a woman-mother is the main actor of the succession process and analysed two cases of succession (mother-son and mother-daughter). results show that even if the two mothers were the founders, owners and leaders of the business, they never strayed from their role as an emotional leader. the authors also underlined that these behaviours have proven to be very beneficial for the succession process and business survival. in summary, results remain inconsistent and little empirical information on female incumbents and succession is available (jimenez, 2009). further research is needed to understand better how the intergenerational transfer mother-son or daughter unfolds. 4. methodology this paper aims to investigate how succession from mother to son or daughter unfolds and if specific characteristics of women’s style of leadership and management may facilitate the intergenerational transfer. a qualitative method, based on case studies, was adopted and two emblematic cases are presented: the first one shows a succession mother-son and the second one a succession motherdaughter. the qualitative method may be central to the in-depth study of a complex phenomenon that evolves over time (eisenhardt, 1989; yin, 2003; flyvbjerg, 2006), such as entrepreneurship and succession. in addition, a wide consensus exists in family business literature on case studies’ usefulness and effectiveness (de massis & kotlar, 2014). qualitative methods are also particularly recommended for studying women in family business (jimenez, 2009). the empirical research was conducted in italy, and the data was collected with in-depth interviews carried out using a checklist (patton, 2002) and enhanced by specific questions. the survey involved two women founders and their successors (respectively, a son and a daughter). the two cases were identified through a purposeful case selection (patton, 2002), based on the author’s personal knowledge. female-owned and run businesses that had recently undergone, or were currently undergoing, an intergenerational transfer were selected. interviews were carried out in each firm and focused on the women’s experience and style of leadership, the characteristics of the firm, the composition of the family, the evolution of the succession process. successors were asked to tell their own stories, experience, motivations and objectives. the interviews lasted between 2 and 4 hours, were recorded and then transcribed 122  word for word. when possible, the information collected was combined with data provided by the companies or found on company websites or through the press. as suggested by miles et al. (2014), available data was iteratively analysed in order to allow a progressive elaboration of a general interpretative framework. 5. case studies1 5.1. from mother-founder to son clothing s.p.a. was established in the mid-1960s by sophia. it produces work clothes for several sectors (hotels, health care, beauty treatment and industry) and supplies to both the local and international markets. sophia is a pioneer female entrepreneur and has faced many challenges in realising her independence. the start-up was not in the least simple: sophia was very young, without capital or experience and above all, she was a woman and also the mother of jim, who at that time was only two years old. no one apart from her father believed in her. he saw her passion and aptitude for business and decided to help her by loaning her the necessary capital to start the business. in the beginning, clothing s.p.a. developed two sides to the business; one side produced work clothing and the other women’s dresses. in 1968, john (second child) was born, and sophia began to really feel the pressures of family life and realised that she had to make a choice. “working in fashion was taking me a long way away from home, and with two children i realised that i couldn’t continue in this way. i concentrated on producing work clothing and gave up the fashion side so that i could be with my family. i was really enjoying my work life but i also wanted to spend more time with my children, and i have no regrets about this decision”. by the early 1970s, the company had become well known country wide, employing 65 people and producing about 1,200 articles of clothing a day. sophia couldn’t, by this time, manage the whole business on her own so she decided to involve her employees. with them, she established a working relationship based on the division of responsibility and good communication. “i chose a leader for each area: they felt rewarded and it produced an effective working system. we communicated with each other, having frequent meetings and i made sure that everyone on the team was kept informed in all areas, such as the acquisition of new clients, what turnover was like and generally how everything was going in the company.” halfway through the 1970s came a period of economic crisis. sales collapsed and sophia was forced to drastically downsize the business and cut staff whilst generally reconsidering the business as a whole. the company went from producing work wear for the manufacturing industry to producing uniforms for high-end hotels. meanwhile, the children were growing up. sophia had involved them in the business from an early age: “every week i spent half an hour telling them about the business. i don’t know how much they actually understood at the beginning, but i kept doing it. i talked to them about the business, and i kept them up to date about what was happening. we even did the accounts together so that they would get used to understanding exactly how much we spent”. as soon as high school finished, jim went straight to working in the business but immediately realised that this wasn’t what he wanted to do and left. john also got his diploma and after a year and a half in england, learning the language, advice from sophia, he began working in the business. in the first two years, he worked in each area of the company from the warehouse to sales and marketing, to information systems, to finance. sophia recounted: “my 1 to preserve the anonymity requested by some of the interviewees, one case is presented anonymously.       123  grandmother always said to me, ‘to understand how to be a leader you have to know how to do everything!’. my son has unloaded the fabrics, printed labels and uniforms, cut and sewn the garments. these were all areas of the business that he had to know and understand them. otherwise, how could he assess the work of employees and understand if they were making mistakes?” at the end of his job training period, john decided to stay with the company, and this was when the real phase of co-existence between incumbent and successor participants in the firm began. on one side, the incumbent tried to impart her experience to the son and encourage him to take courses in management, and on the other, her son began to confront his first responsibilities within the company, seeking to find a balance between his mother’s advice and his own ideas. as the years passed, sophia understood that the time had come to make her son’s position official. the ownership of the company was divided equally between the two heirs, but jim preferred not to be involved and refused his share. sophia explained: “i would have preferred that both of my sons worked in the company, but they have very different characters. the older did not want to be involved, so we did it this way”. this passing on of the baton has been a crucial moment for the founder who above all, understood that the main reason for this change was to ensure the survival of the company that she created. “i am completely in love with my company, and for me, clothing s.p.a. is like another son, and it hasn’t been an easy process to detach myself from it. about all the rest, i have always said that i wouldn’t have held onto it if this meant discontinuing the business or causing it to fail. i would have rather sold the business, even for a small amount, than have closed it”. since the ownership transfer, sophia has continued working alongside her son in the business, and this working relationship continues to be productive for both of them and the business: clothing s.p.a. overcame the entrepreneurial phase of becoming a family business. john has decided to internationalise the business with progressive development into foreign markets: the company exports its garments all over europe (primarily greece, spain, france and germany) and also russia and dubai. in 2010 the company had 15 employees and several occasional workers. more than 600,000 garments are manufactured each year, with a turnover of 5 million euros. sophia, even though she no longer owns the company, still maintains an important role within the business, supporting her son in all of the main management activities, looking after the products in person and staying as a point of reference for all of the personnel. the co-existence between john and his mother was directed towards the development of the business, the professional growth of the son, the transfer of tacit knowledge from mother to son and the mutual role adjustment between entrepreneur and successor. talking about the co-existence between the two generations, sophia stated: “it has taken a lot of patience. i have tried to make it clear to him that he isn’t obligated to work in the business and that it is ok to make mistakes because everyone does so, only to a certain degree, obviously”. because after all “a woman is also a mother and so generally less of a bully, and she understands that she can’t impose herself on her child or let her child keep making mistakes beyond a certain point. a mother is a bit over protective. that maternal instinct always remains. i am always trying to help him learn and help him understand things. men don’t always have this patience. at times they want to be better than their son and compete against him. i have never competed against my son.” according to sophia, it is women’s propensity to being more sensitive and less inclined to confrontation that makes a mother-son succession more likely to be successful than the traditional father-son intergenerational transfer. 124  in 2016, sophia turned 75 years old. she retired from the business in 2011 due to health reasons. john said, “i would have continued to collaborate with my mother; i didn’t change anything, and i never wanted to change it sincerely”. john continues to inform his mother of his main decisions related to the business, and he’s still carrying on several practices that he learned from his mother. 5.2. from mother-founder to daughter serigraphy&co. was founded at the end of the 1980s by mary, a woman who started working early in life. she was forced to finish school at the age of 16 and begin earning a living. she was taken on as an admin assistant for a company that produces machines for serigraphy. mary worked her way up to running the office. however, she always dreamed of creating something of her own and reaching a goal that she hadn’t reached with her schooling. driven by the desire to be more fulfilled in her work life, mary left her secure job to embark upon an entrepreneurial activity, a journey that was as stimulating as it was risky. being extremely motivated and determined, mary even managed to persuade her husband to give up his job and accompany her in this new adventure because she explained: “i was completely on my own, and i needed someone who i could trust and share the responsibility”. she represents the entrepreneurial figure while her husband remains in the background. at the beginning the business, she focused on printing sporting goods. mary handled the planning of the product, the commercial side and the administrative aspects of the business, while her husband looked after production and all of the technical aspects. the results were immediately positive and very encouraging with the business winning important contracts from well-known brands (i.e., fila, diadora, arena) and for 10 years sales continued to increase. in 2000, serigraphy&co. had an annual turnover of over 635,000 euros and 16 employees, but, mary explained: “i don’t like calling them employees because we are a team and they are people who work with me, not for me”. in any case, mary is convinced that she made the right choice. “this project was a gamble, but at the end, i won! in the beginning, i couldn’t count on the help of anyone financially. my family, my father in particular, gave me huge amounts of moral support and encouragement but they weren’t able to help at all financially. now i can probably say that it was better this way. i did everything myself, and i’m very proud of myself.” the arrival of the new millennium also saw the arrival of the first difficulties for the business. fierce competition from both china and india meant that this female entrepreneur was forced to downscale the amount of staff she employed as she saw her turnover start to drop. she decided to diversify, progressively adding other methods of printing, which enabled the company to compete in various other spheres: from furniture to religious objects, from invitations to decorating silver picture frames, from marketing materials to articles of clothing, from flooring tiles to wallpaper, etc. the target market changed radically, no longer focusing on the acquisition of just a few large clients from one sector but many smaller clients from many different sectors, both in italy and abroad. this strategy meant that the business, once again, saw good results and turnover returned to around 600,000 euros. the entrepreneur is extremely pleased with how everything has turned out and the results that have been achieved. for several years she has been turning her attention to a new challenge: succession. mary isn’t even 50 years old yet but has already started thinking about the future of the business and, for several years, has been planning the issue of the succession process. her daughter sarah will follow in her footsteps, even though, “in reality, i would have never imagined that my daughter would work with me one day. i think the most important thing was to give her the opportunity to study because, for me, this opportunity was taken away. i hadn’t really thought of what would happen after that”.       125  as it often happens for many daughters, sarah’s first experience in the business was as a result of an emergency. the head of graphics planning asked for a period of leave for family reasons, and so as not to bring business to a stop, sarah proposed to take on this position herself. she was 22 years old and was still studying but found a way to also work in the family business and help her mother. she very quickly learned the secrets of the trade. when the head of graphics planning returned to work, sarah returned to her studies and within a short period of time completed her degree in communications science. once again the head of graphics planning had to leave work, and mary realised that she couldn’t rely on that person any longer. she needed someone she could trust who wouldn’t just abandon their job at the drop of a hat. sarah was the most suitable person for taking on this role and had already gained a solid foundation in the sector. fundamentally, she is also a member of the family and wouldn’t just walk away from the business. today, sarah is 30 years old and handles the planning of graphics for all the products, client relations and the development of individual projects. thanks to her competence in foreign languages, the business has embarked on a profitable internationalisation course, branching into the spanish market. sarah is extremely happy with how she has done, and she isn’t alone: “i am really happy that my daughter has carved out a position in the business for herself. i have great respect for her capabilities and intend to involve her in all of the other areas of the business and my own responsibilities much more. i want to do it in such a way that when the time comes for me to retire, she will take over the reins and the business will continue seamlessly. my daughter is the future of this business”. mary also has a son who is young and still in high school. “he doesn’t yet talk about any involvement in the business. he thinks he is still too young and anyway there is sarah”. on the other hand, sarah is fully aware of her mother’s expectations and continues to develop her expertise. within the business, she is constantly looking to work towards her future role as the entrepreneur, and she takes courses that refresh and increase both her technical knowledge and her managerial expertise. the relationship between mother and daughter within the business is very much geared towards imparting the values of the company and the “know how”. sarah only complains about the fact that they are never able to fully cut off from work. “often at dinner we find ourselves discussing clients or orders or equipment, and this does get a bit much. however, i do consider myself to be very lucky. i have a good job with a lot of responsibility that i really love, and i have a lot of autonomy and flexibility. overall though, this situation makes the sacrifices less for my family and me”. 6. discussion in line with the aim of the research, data was analysed in order to understand how the succession from mother to son or daughter unfolds and if specific characteristics of women’s style of leadership and management may facilitate an intergenerational transfer. concerning the different phases articulating the succession process, in both cases, it is possible to highlight important propaedeutic activities. the awareness of the necessity to plan and manage the intergenerational transfer in advance appears to be accentuated in the female entrepreneurs analysed. both of the women interviewed had begun to plan the process (even if informally) when they were still fairly young. maybe women are more inclined to think of their children as the natural successors to the business and not as potential rivals to the head of the business. regarding the selection of the successor in both of the cases, the future leader was chosen, taking into account his/her attitudes, aspirations and competence, all of which were displayed 126  once they had started to work within the business. meanwhile, gender wasn’t taken into consideration. in the first case, it was only the son who showed interest that was involved. in the second case, even though a male child was present, the mother thought it was right to involve her daughter because she had shown the capability to take over her position eventually. looking at the successor’s training, the growth of the new generation seemed naturally embedded into the double role of women such as mother and entrepreneur. female incumbents take on the job of educating their children in many ways: imparting the values of the family and the business, socialising the entrepreneurial role, believing in the value of studying. they shared in the choices relative to their children’s formative education. the co-existence of the incumbent and successor phase was characterised by a deep harmony between mother and child. experience, tacit knowledge and responsibilities were progressively transferred from incumbent to successor in order to generate a mutual adjustment of roles. concerning the idea of finally leaving the business and handing it over, the two female incumbents appeared to be less reluctant to give up their role and pass it on to their children. the psychological barriers that may often hinder the first intergenerational transfer seem to be more contained and therefore more controlled, even if–as in the case of clothing s.p.a.–leaving the business remains quite difficult. to find the right compromise and balance between maintaining an interesting role in the business and not undermining the new leader is also a challenge for female entrepreneurs. regarding the style of leadership employed by the two female entrepreneurs, it is possible to recognise a “progressive” and “transformational” approach. both of the female entrepreneurs are characterised by an inclination towards adaptability, following one’s instinct and a predilection towards small business and interpersonal relationships. they are willing to engage in communication and the division of responsibility and encourage the involvement and participation of their co-workers. this approach was also adopted in the management of the intergenerational transfer. the process has begun very early and proceeded in a slow yet progressive way. it was based on the sharing of choices and the progressive involvement of the new generation. the female incumbent aided and “hoped for” involvement of the successor. however, they didn’t press their own aspirations, attitudes and choices onto their children. this approach represented an important advantage in managing the intergenerational transfer because it favoured a positive interaction between incumbent and successor and also ensured a much smoother transition. 7. conclusions despite the growing number of female entrepreneurs within the larger part of world economies, the intergenerational transfer from a female incumbent to her children has been widely overlooked both in the female entrepreneurship and in family business studies. this paper focuses on the intergenerational transfer from mother to children in order to understand how the process unfolds when the incumbent is a woman and if and how her female characteristics may influence the succession and its outcome. this study contributes to the literature by shedding light on this topic, with regard to three aspects. first, findings show that the female approach to intergenerational transfer is characterised by attention to the education of children, relationships, cooperation, involvement, communication and sharing of the decision-making process. these results are consistent with previous research by dubini & songini (2002) and gnan & montemerlo (2008). all of these features take on particular relevance to the successful outcome of succession. this doesn’t mean in any way that female succession is easier or more simple than male succession. the process is equally complex but the care and attention taken over certain aspects can help to manage       127  these complexities with a better chance of success. second, based on these results, the female approach appears to be more orientated towards a positive vision of the succession. in fact, the idea of succession is thought of by many male entrepreneurs, above all founders, as synonymous with old age and the end. instead, the analysed female entrepreneurs seem to live through the intergenerational transfer in a much less traumatic way. the idea of physiological continuity of the business and natural turnover between the generations appears to prevail. third, according to findings, the intergenerational transfer from mother to daughter is not necessarily more difficult as affirmed by vera & dean (2005). mary didn’t take on a hostile position towards her daughter’s involvement within the business and mother-daughter succession wasn’t any more problematic than mother-son. this research presents a number of limitations. the main one is its generalisation, as this research is based on only two cases. secondly, it is mainly descriptive and not exhaustive. further research is needed in order to clarify the relationship between female entrepreneurs and 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(2003). case study research: design and methods, (3rd ed.), london: sage publications. microsoft word 7 (17-05) gbadeyan.docx       99  effect of supply chain management on performance in selected private hospitals in ilorin, nigeria rotimi a. gbadeyan university of ilorin, nigeria francis o. boachie-mensah university of cape coast, ghan. olubunmi f. osemene university of ilorin, nigeria received: may 21, 2016 accepted: april 28, 2017 online published: october 2, 2017 abstract there has been increasing patients’ dissatisfaction about health care service delivery in most private hospitals in nigeria due to the quality of health care services provided to patients. the objective of this paper is to examine the effect of supply chain management on hospital performance in ilorin, nigeria. the quantitative research approach and the descriptive study design were adopted for the study. the simple random sampling method was used to select respondents from ten, out of fifty-eight, private hospitals in ilorin. the study employed the partial least squares method in the estimation of the structural equation model’s effect in supply chain management (scm) on hospital performance. results indicate that scm has no strong and direct impact on hospital performance, but has indirect impact on performance through competitive advantage. the paper concludes that an efficient scm will result in more patient satisfaction and better competitive advantage. it is recommended that private hospitals should not depend on single suppliers. they should engage more reliable suppliers that would be closer to them for better medical procurement and supplies to be achieved. keywords: supply chain; drugs; private hospitals; patient care; procurement, structural equation model; hospital performance. 1. introduction supply chain management (scm) is one of the important functions that need to be performed efficiently in every business. organizations have now realized that their success depends on their capacity to design and manage their scm system effectively, in order to reap maximum international journal of economic behavior, vol. 7, n. 1, pp. 99-116, 2017 100  benefits and sustain their competitive advantage (lenin, 2014). this situation is also the same in the health care industry where there is high competition and sharp rise in price in almost all products and services. the healthcare industry has become one of the fastest growing industries in the service sector, with most hospitals, except few highly specialised ones, providing similar types of services (turkyilmaz, bulak & zaim, 2015). these hospitals strive to achieve service excellence and retain every customer that they can profitably serve. in other words, they try to achieve zero defects through a continuous effort to improve the quality of their service delivery system. thus, hospitals need to pay attention to critical approach, which is a health care supply management, to be more competitive and successful (lillrank, groop & venesmaa, 2011; turkyilmaz, bulak & zaim, 2015). the challenges facing the healthcare sector include increasing costs of medication and equipment, increasing demand of quality health care, sophisticated equipment and the changing patterns of diseases, which result in higher health care cost. the health care organizations, therefore, need to adopt a system that will enable them to deal with these challenges and gain customers’ satisfaction. this also requires the private hospital administrators employing supply chain management to promote the advancement of healthcare (toba, tomasini & yang, 2008; ali, alolayyan & idris, 2012; hong, kim & dobrzykowski, 2012; pheng, hamdani & zailani, 2014). the supply chain, being a significant driver of cost in the health industry, has become an important issue which attracts attention from the industry’s stakeholders. scm is now regarded as having an important impact on reducing costs and improving performance in health care organizations (mathew, john & kumar; 2010; christos, vicky & constantinos, 2014). according to lenin (2014), due to the rapid advancement in medical technology and life sciences market, the healthcare supply chain is under severe pressure. the health sector comprises various sectors such as pharmaceutical, medical equipment and supplies, and health care services.the industry’s size and velocity make the management of its supply chain complex (christos, vicky & constantinos, 2014). in this study, the focus is basically on selected private hospitals in nigeria. there have been declines in the quality of services provided by public owned hospitals, which has led to more demand for health services in private hospitals. there is a general belief that private hospitals are having high-level performance in terms of supply chain than the publicowned ones. in other words, services offered by private hospitals are superior to those of the public hospitals (polsa et. al., 2011). for example, private hospitals that are recognised for their world class standard health care services in malaysia have attracted an increasing number of patients each year (pheng, hamdani & zaliani, 2014). patients attach more importance to the quality of healthcare services received and they are ready to abandon free health care services in public hospitals for expensive better health care in private hospitals ((ramsaran-fowdar, 2005; butt & de run, 2010; kanyoma & khomba, 2013). in nigeria, there is persistently low quality and inadequate health services provided in public facilities, which have made the private sector an unavoidable choice for consumers of health care (ogunbekun, ogunbekun & orobaton, 1999). also, in a similar study done by polsa, spens, soneye and antai (2011), it was revealed that the patients perceived private hospitals to be more dependable than public hospitals. however, the study done by basu, andrews, kishore, panjabi and stuckler (2012) revealed that, when the private sector included unlicensed physicians, it provided the majority of coverage for low-income groups, but when only licensed providers were included, the public sector was the main source of healthcare provision in low and middle-income countries. this gave a different result from the earlier ones considered, but, to a certain extent, the various studies examined have shown that the private hospitals are significant alternatives to the public hospitals. scm is defined as a way to envision all steps needed to deliver products or services to the customers (meijboom, schimidt-bakx & westert,       101  2011). the procurement and supply chain management functions play an important role in health care delivery and its failure can result in sabotage in the organizations (kumar, ozdama & zhang, 2008; kayoma & khomba, 2013). in the healthcare industry, procurement operations associated with pharmaceutical products can affect the standard of care for patients. it also affects the inventory level and it is, therefore, prudent that some minimum stock of medical supplies be kept in hospital. this is because controlling logistics in the health sector will improve patient safety (pan & pokharel, 2007; kumar et al., 2008; mustaffa & potter, 2009). inefficient processes and delayed delivery or stock out of medical supplies may affect both the efficiency and effectiveness in hospitals (kumar, de groot & choe, 2008; mustaffa & potter, 2009). procurement, therefore, plays a key role in the value chain for health care delivery in hospitals (aronnsson, abrahamsson & spells, 2011; kanyoma & khomba, 2013). the objectives of scm in organizations are: to improve the quality of the goods and services, to increase customer service, to reduce waste and non-value added activities, including excess inventory, to improve supply chain communication, reduce cycle time and satisfy the customer (kauffman, 2002; lenin, 2014). however, the main challenge in the healthcare supply chain management is the achievement of improved performance and service (lenin, 2014). the increasing importance of private hospital as an alternative source of healthcare delivery not only in developed, but also in developing countries, motivates this study. the focus of research on scm in the last two decades has been in the manufacturing industry, but there is now a change of focus to healthcare supply chain management; thus, making healthcare supply chain to be in its early stage of development (shou, 2013). the majority of the works done in this area used the qualitative and case study approach, while few scholars used questionnaire surveys and quantitative approaches (kim, 2005; kumar, ozdama & zhang, 2008; mustaffa & potter, 2009; shou, 2013). this study differs from the other studies because it examines the effect of scm on patent health care delivery in selected private hospitals in nigeria. a greater number of studies have been on healthcare qualities, workers’ attitude, facility location, government spending on healthcare, service provision and disease prevalence (mills et. al., 2002; tuan et. al., 2005; polsa et.al., 2011). the study also used the partial least squares method in the estimation of the structural equation model’s effect of scm on patent health care delivery. 2. literature review 2.1. conceptual definition there are various definitions of scm. in this study, two of these definitions will be discussed. the council of logistics management (2000) defines scm as the systematic, strategic coordination of the traditional business functions within a particular organisation and across businesses within the supply chain for the purposes of improving the long-term performance of the individual organizations and the supply chain as a whole. the definition considers scm as a business function which takes place, both within and outside a particular organisation, for the purpose of bringing about its improved performance and supply chain decisions. according to shou (2013), scm in hospitals involves both the internal and external chain. the internal chain includes patient care unit, hospital storage and patient etc, while the external chain includes the vendors, manufacturers, distributors, etc. the scm processes in healthcare are physical product, information, and financial flow. the physical product flow helps in managing customised products and services for the treatment of 102  patients. the information and financial flows are for effective product flow and improved organizational performance (lee, lee & schniederjans, 2011). chopra and meindl (2007) define scm as the management processes of flows of goods, information and funds among supply chain partners in order to satisfy consumer need in an efficient way. this definition examines scm from three key functions performed by the supply chain partners, which are the flow of physical product, the information, and financial flow. the supply chain partners are expected to perform these functions in order to satisfy customers and achieve improved organizational performance. scm has been regarded as the key to building sustainable competitive edge by organizations for their products and services in an increasingly crowded market place (jones, 1998; li,ragu-nathan & rao, 2006). the key players in healthcare supply chain are the producers, purchasers, providers and patients (burns, de graaf, danzon, kimberly, kissick & pauly, 2002). the producers are those who manufacture products, such as pharmaceuticals, medical devices, and implants, medical and surgical supplies. purchasers are group purchasing organizations (gpo) and distributors who arrange the payment and shipment of goods from the producers to the providers. the providers include the hospitals, clinics, pharmacies and physician offices. patients are the households who seek medical care from the hospitals (smith, nachtman & pohl, 2012; turkyilmaz, bulak & zaim, 2015). the following are given as dimensions of health care scm: relationships with suppliers, compatibility, specifications and standards, delivery and aftersales service (al-saa'da et.al., 2013). patient care delivery system involves organising the activities of the health staff into a workable pattern to meet patient needs (ezzat, 2007). in other words, patient care is the various measures taken by the health staff that is aimed at alleviating patient illness and creating optimum conditions for treatment (dehktiar, 1974). it has been shown that the main concern about healthcare scm is on its performance, and a key measure for healthcare supply chain is patient satisfaction. a study conducted in south korea further showed that customer satisfaction in the health care industry is positively related to supply chain performance (kim, 2004; shou, 2013). this means that, when there is an efficient health care, supply chain management will bring about better hospital performance and patient satisfaction. brown, franco, rafeh and hatzell (1998) describe nine quality dimensions of health service delivery that lead to patient satisfaction. these dimensions are: effectiveness, efficiency, technical competence, interpersonal relations, and access to service, safety, continuity, and physical aspect of health care. hospitals are making efforts to ensure that quality care is delivered to the patient in order to influence outcomes with respect to hospital performance and patient satisfaction. it is only when patients enjoy quality health care that they can become satisfied and this will also lead to better hospital performance (jiang, friedman &begun, 2006; toba, tomasini & yang, 2008). according to li et al. (2006), scm practices impact not only overall organizational performance, but also competitive advantage of an organization. organizational performance has been described as how well an organization is able to achieve its market-oriented goals as well as its financial goals (yamin, gunasekruan & mavondo, 1999). the short-term objectives of scm are increased productivity and reduced inventory and cycle time, while long-term objectives are in a form of increased market share and profits for all members of the supply chain (tan, kannan & handfield, 1998). traditionally, business performance was based on financial metrics such as profit, market share, and revenue growth, but a study has shown that financial indicators are measures of past performance only and may not be a good measure of future performance. the inclusion of non-financial indicators, such as: service quality as perceived by customers, reputation, capacity, market orientation, market development, etc., helps a firm overcome this shortcoming (kaplan & norton, 1998; bulak & turkyilmaz, 2014).       103  competitive advantage is described as the extent to which an organisation is able to create a defensible position over its competitors (porter, 1985; mcginnis & vallopra, 1999). this makes an organization have capabilities to differentiate it from other competitors through its critical management decisions (tracey, vonderembse & lim, 1999; li et al., 2006). there are empirical studies which have identified price/cost, quality, delivery, and flexibility as important competitive capabilities for organizations (skinner, 1985; roth &miller, 1990; tracey, vonderembse, lim, 1999). also, time-based competition has been included as an important competitive priority (stalk, 1988; vesey, 1991; handfield & pannesi, 1995; kessler & chakrabarti, 1996; zhang, 2001). the extant literature has shown that scm has an influence on both performance and competitive advantage of an organization. therefore, in relation to this study, scm could be said to have influence on both the hospital performance and its competitive advantage. the previous studies on scm include: the factors between weaknesses in the supply chain and operational performance of american companies (hendricks & singhal, 2005). the result revealed that the return on sales and assets have the most important impact on operational performance. shah, goldstein, unger and henry (2008) examine the field approach to the study of how healthcare supply chain increases performance by decreasing service time and increasing service quality in a decentralised network of health care providers. the result of their study shows that the use of lean principles can guide process improvement efforts. al-saa’da, taleb, abdallat, al-mahasneh, nimer and al-weshah’s (2013) study considers the effect of the scm on health care service quality in jordanian private hospitals. they found that there was a significant effect of scm dimensions on the quality of health services. there is also a study on assessment of total quality management (tqm) practices as a part of scm in health care institutions by turkyilmaz et al. (2015). the study revealed that tqm practices do not have direct influence on financial performance, but have indirect influence on non-financial performance. out of all these studies considered in this paper, only that of turkyilmaz et al. (2015) made use of partial least square methods to estimate the relationship between factors used for the selected health care institutions in turkey. this trend further confirms that few scholars used quantitative approach, such as structural equation model, for the study of scm and healthcare industry (kim, 2004; lee, lee & schniederjans, 2011). in terms of procurement practices, it has been shown that there are significant differences between the public and private sector. the public sector almost relies on transactional-based approaches and the restrictions placed on its procurement practices result in sub-optimal outcomes (lian & laing, 2005). the hospitals need to maintain an efficient inventory of drugs and medical supplies in order to meet emergency demands, but this may result in increased costs. there is also increasing supply chain problems as a result of drug shortage, which lead to additional costs for hospitals and drug counterfeiting, which poses serious threat to patient safety (chen, 2013; christos, vicky & constantinos, 2014). the nigerian health services are built on three levels, which are primary, secondary and tertiary care. the local governments are responsible for primary health care services, which provide health education, safe water and sanitation, reproductive health, immunization against major infectious diseases, provision of essential drugs, mental and dental care. the state governments manage the health care services at the secondary level. the secondary level provides health care services at a higher level than that of the primary health care facilities. they provide specialized services, such as laboratories, diagnostics, general, medical and surgical, to referred patients from the primary health care facilities. the tertiary health care services represent the highest level of health care services in the country and it is administered by the nigerian federal government. they provide highly specialised health care services in orthopedic, psychiatric, maternity and pediatric specialties (polsa et. al., 2011; nbs, 2012). 104  there were 34,020 hospital facilities in nigerian as at 2011 (nbs, 2012). the health care facilities comprised of 23,450 public hospital facilities and 10,570 private hospitals, as shown in table 1. table 1 – health care facilities in nigeria as at 2011 types public private total primary 21,808 8,290 30,098 secondary 1,569 2,270 3,839 tertiary 73 10 83 total 23,450 10,570 34,020 source: national bureau of statistics, 2012. this has reflected the upward number of the health care facilities established in nigeria in recent time (coker & sridlar, 2010). the health care facilities are mostly located in urban areas, which resulted to restrict access to health care delivery in rural areas. this situation had led to the predominance of traditional healers and private health care facilities in the rural areas (polsa et.al., 2011). this study, therefore, in addition to the objectives earlier stated, examines the relevance of private health care facilities in meeting the health needs of these rural dwellers. they usually come from the village to visit the private health facilities for their medical treatments. this literature on scm has shown, to a great extent, how significant it is to the health care industry and other stakeholders. 2.2. theoretical framework to the study according to halldorsson, kotzab, mikkola and skjøtt–larsen (2007), there are four theories of managing supply chains and these include: the principal agent theory, transaction cost analysis, the network theory and the resource based view (rbv). the principal agent theory is all about mitigating agency problems that may arise in organizations. transaction cost analysis is about transferring rights of disposal in inter-organizational arrangements. the network theory is concerned with reciprocated interactions between institutions, while the resource based view is concerned with the coordination of relational assets in the organization. halldorsson et. al. (2007) stated that there is no such thing as a unified theory of scm. they further said that, depending on the situation, one can choose one theory as the dominant explanatory theory and then complement it with one or several of the other theoretical perspectives. in this study, the rbv is adopted, because it is one of the grand theories of economics and pays attention to the achievement of a competitive advantage through internal resources (bohnenekamp, 2013). the rbv examines the link between a firm’s internal characteristics and performance. there is a need for a firm’s resources to be valuable, rare, inimitable and non-substitutable for it to create a competitive advantage (dierickx & cool, 1989; barney, 1991; petraf, 1993). the rbv also assumes that activities leading to competitive advantage should be maintained in house and less important items sourced externally (bohnenekamp, 2013). in other words, outsourcing decisions or supply management decisions are based on the idea of focusing on core competencies and outsourcing complementary competencies to external partners (halldorsson et. al., 2007). the rbv theory, thus, serves as appropriate and relevant to this study. the following hypotheses are, therefore, raised in this study:       105  h1: supply chain management has a weak impact on patient satisfaction. h2: supply chain management has a strong direct impact on hospital competitive advantage. h3: supply chain management has a strong and direct impact on hospital performance. h4: patient satisfaction has a strong direct impact on hospital performance. h5: competitive advantage has a strong direct impact on hospital performance. 3. methodology this is a descriptive and quantitative study which examines the impact of scm on patient care delivery. the study has been different from other studies, because it used the structural equation model-partial least square method (sem-pls) to measure the impact of scm on patient health care delivery in ilorin, nigeria. the sem-pls approach enables the simultaneous examination of a series of interrelated dependence relationships between a set of constructs, represented by several variables while accounting for measurement error. this attribute has contributed to its widespread application in business research (sarstedt, ringle, smith, reams & hair, 2014). ten private hospitals were selected, out of the total 58 that were functioning in ilorin, nigeria (akande & monehin, 2004; gbadeyan, raheem & abdullahi, 2014) as sample for the study. the hospitals were randomly selected based on their geographic spread, years of existence, size and quality of services offered to patients. the selected hospitals include: abanishe-lolu hospital, olalomi hospital, omolola hospital, ola olu hospital, kiddies medical centre, olanrewaju hospital, olotu hospital, eyitayo clinic, ella hospital and surulere medical centre. the study was conducted from march 7th to march 21st, 2016. this study was carried out to evaluate the impact of scm in these hospitals on patient satisfaction, competitive advantage and performance, using the partial least square structural equation model approach. the instrument which measures scm was developed from the study done by al-saa’da et.al. (2013). competitive advantage and organizational performance measures were adopted from zhang (2001). the patient satisfaction measures were developed from brown et.al (1998). there were minor modifications made to the original version of these instruments to arrive at the final form used for the study. the questionnaire consisted of two sections: sections a and b. the first section (i.e. section a) has 13 questions, while section b has 25 items, making a total of 38 items. section a provides information on the characteristics of the sampled private hospitals, while section b contains measurement instrument for the patient care delivery and scm. the questionnaire is shown in the appendix.twenty questionnaires were administered by simple random method to each private hospital to collect data from the medical directors, staff in charge of procurement, suppliers and patients. the medical directors in these private hospitals helped in providing information about their hospitals and suppliers. the questionnaires were distributed to the patients during hospitalisation. a total of 173 questionnaires, out of the 200 administered, were filled in and returned, which represents 86.5% rate of return. each item for the section b instrument was rated on a 10 scale point with 1 = minimum and 10 = maximum. the questionnaires were pretested several times to ensure the appropriateness of the wordings used. the judgemental measures were used to collect information about the financial performance, because most hospitals are not willing to disclose their financial position. this is 106  done because the judgemental method had been used in similar past study (turkyilmaz et al., 2015). 4. results and discussion the breakdown of the sampled population revealed that 5.8% of the respondents were the medical directors of the private hospitals, 11% of the health staff were in charge of the procurement and supply for the hospitals, 12.7% of the respondents were suppliers and 70% of the respondents were the patients who participated in the survey for the study. the respondents’ distribution is shown in table 2. table 2 – respondents’ distribution frequency percentage medical directors 10 05.8 procurement staff 19 11.0 suppliers 22 12.7 patients 122 70.5 total 173 100.00 source: authors’ field survey, 2016. in 70% of the hospitals selected for the study, it was found that all the medical directors and the procurement staff are involved in supply chain decisions, while in 30% of the private hospitals, only the medical directors are involved in scm decisions. the procurement staff members are mostly either nurses or doctors assigned by the medical directors to carry out this responsibility for the hospitals. this revealed that most of those involved in supply chain decisions are not those who are professionally trained or graduates with a supply management degree or diploma certificate. the average number of suppliers for the selected hospitals are two, 40% of the hospitals had three suppliers, while 20% of the selected hospitals rely on a single supplier. this makes most of the hospitals to be able to meet up with the supply for drug orders. the patients form the greatest proportion of the sample; they were 70% of the total respondents considered for the study. the detailed information about the hospitals selected for the study and respondents’ distribution is shown in table 3. it is shown in the table that the number of beds for the hospitals ranges from 30 to 69. the number of doctors is from 2 to 5, while staff nurses are from 7 to 15. the administrative staff are between 3 to 5 and suppliers for the hospitals range from 1 to 3. this information shows that most of the hospitals were small and medium-sized in nature. the respondents were also fairly distributed across the selected hospitals. figure 1 shows the structural model for the study. the partial least squares (pls) approach was utilized to test the hypothesized relationships developed for the study. the internal consistency reliability for the model, as shown in table 4, indicated that the composite reliability for the latent variables used range from 0.6313 to 0.7307, which is considered acceptable for this type of study. the composite reliability is superior to the cronbach’s alpha. this is because the cronbach’s alpha assumes that the measurement item load equally on the construct, which is clearly not the case of the measurement model (hair, ringle & sarstedt, 2011).       107  table 3 – detailed information about selected private hospitals s/n number of doctors number of nurses number of administrative staff number of suppliers no of beds no of respondents sampled % distribution of respondents 1 2 10 3 2 32 18 10.40 2 5 14 4 3 58 20 11.56 3 3 15 3 2 43 18 10.40 4 3 10 4 2 50 17 9.83 5 4 13 5 3 69 19 10.98 6 2 7 3 1 30 17 9.83 7 3 11 3 3 42 17 9.83 8 3 14 4 2 46 15 8.67 9 2 13 3 1 34 15 8.67 10 3 12 4 3 48 17 9.83 total 30 119 36 22 452 173 100 source: authors’ field work, 2016. figure 1 ‒ structural model also, the r2 values in table 4 for hospital performance and competitive advantage were moderate, while patient satisfaction was weak. this, in other words, means that 59.5% of the model variance is explained by hospital performance, 57.4% explained by competitive advantage and 39.6% explained by patient satisfaction. the indicator loadings, as shown in 108  table 5, are higher than the cross loadings, which means that discriminant validity has been achieved. table 4 – overview results of the structural model ave composite reliability r square cronbach’s alpha ca 0.3201 0.6313 0.5741 0.3559 hperf 0.3384 0.7044 0.5947 0.5696 ps 0.2479 0.7007 0.3959 0.5493 scm 0.368 0.7307 0 0.5479 source: authors’ fieldwork, 2016. table 5 – cross loadings for structural equation model ca hperf ps scm ca_1 0.6823 0.4343 0.335 0.6569 ca_2 0.2908 0.3441 0.3534 -0.1091 ca_3 0.712 0.4971 0.4718 0.5526 ca_4 0.4728 0.4404 0.6624 0.2162 hperf_1 0.7053 0.8044 0.5442 0.6739 hperf_3 0.1266 0.353 0.0815 0.103 hperf_4 0.4289 0.6401 0.4941 0.4448 hperf_6 0.3229 0.4865 0.2069 0.0482 hperf_7 0.2523 0.5235 0.3914 0.2808 ps_1 0.1689 0.3486 0.2345 -0.0621 ps_2 0.5687 0.2892 0.4654 0.3629 ps_3 0.3446 0.4361 0.7056 0.2385 ps_4 0.2116 0.2287 0.4352 0.3272 ps_5 0.5429 0.5175 0.6678 0.5675 ps_6 0.3694 0.1716 0.3427 0.1994 ps_7 0.3485 0.4147 0.616 0.332 ps_8 0.2449 0.0937 0.2857 0.2301 scm_1 0.427 0.5143 0.4457 0.5854 scm_2 0.3872 0.4624 0.3706 0.5549 scm_3 0.5616 0.4346 0.3747 0.7855 scm_4 0.1896 0.0962 0.2293 0.3141 scm_5 0.6131 0.3982 0.4444 0.6883 source: authors’ fieldwork, 2016. in using bootstrapping to assess the path coefficients’ significance, three manifest variables were deleted because their coefficients are less than 2 and, hence, these items are considered not load properly. the manifest variables are: ca_5 (the hospital is capable of offering patients new medical services faster than major competitors), hperf_2 (the hospital is having increase in its return on investment) and hperf_5 (there is growth in the hospital’s return on       109  investment). in using pls, discriminant validity can be established if the measurement items load on their corresponding latent variables, a magnitude higher than they load on other latent variables and the square root of average variance explained (ave) is greater than the correlations between latent variables (gefen & straub,2005; gabisch & gwebu,2011). in this study, the square root of the ave for each latent variable was higher than the correlations of the latent variables, and this is shown in table 6. table 6 – latent variable correlation matrix ca hperf ps scm ca 0.6092 hperf 0.4114 0.5522 ps 0.3793 0.551 0.5721 scm 0.3031 0.5085 0.5967 0.6041 source: computation from smart pls, 2016. the minimum number of bootstrap samples of 5000 and 173 original samples was used as suggested by hair, ringle & sarstedt (2011). the results of the test, as shown in path analysis, are presented in table 7: table 7 – result of hypotheses test hypothesized path t-statistics p-value result ca -> hperf 2.2908 0.023188 supported ps -> hperf 3.1258 0.002082 supported scm -> ca 18.1181 9.95e-42 supported scm -> hperf 1.6199 0.107086 not supported scm -> ps 12.0716 1.07e-24 not supported source: computation from smart pls, 2016. the result of the hypothesis 1(h1) revealed that scm has a strong direct impact on patient satisfaction and, hence, the null hypothesis, which states that it has a weak impact on patient satisfaction, is not supported. the p-value equals to 0.0000, which is less than 0.05 significant level. this result is in agreement with that of shou (2013), which established that the key measure of health care scm is patient satisfaction. there may be failure in scm as a result of suppliers’ inability to meet up with the drug orders from the hospital, delays by hospital in making the order, failure to pay for drug supplied and unexpected disease outbreak where there is no drug for its cure, for example, as was the case with ebola disease. other reasons adduced for failure in scm in health care include: poor inventory management, unavailability of the drug in the market and expiry of drug in excess of hospital requirement (kanyoma & khomba, 2013). the lack of efficient scm in hospitals may result in death of patients, deterioration in patients’ medical condition, patients’ prolonged stay in the hospital, overcrowding in hospital and transfer of patients to other health facilities where they can get the necessary medication (kanyoma & khomba, 2013). the second hypothesis (h2), which states that scm has a strong direct impact on hospital competitive advantage, is supported at the 5% level of significance, with p=0.0000. according to li et al. (2006), the implementation of various scm practices may provide the organization a competitive advantage on cost, quality, dependability, flexibility, and time-to-market dimension. therefore, an efficient scm has strong impact on hospitals’ competitive advantage. 110  hypothesis 3 (h3) is not supported at the 5% significance level, the p value equals to 0.1071. the hypothesis states that scm has a strong and direct impact on hospital performance. the result indicated that scm has no strong and direct impact on hospital performance. in other words, the result revealed that an efficient scm does not necessarily translate to better performance. other factors need to be taken into consideration for scm to be able to have direct impact on hospital performance; for example, there may be the need for patient satisfaction and the hospital achieving competitive advantage over its competitors. organization performance is measured in terms of both financial and non-financial metrics, so the hospital should use its competitive advantage to influence its performance. in a similar work done by li et al. (to – check the date), they asserted that scm practices can have a direct, positive influence on organizational performance as well as an indirect one through competitive advantage. the fourth hypothesis (h4) states that patient satisfaction has a strong direct impact on hospital performance. the result of this hypothesis is supported by p = 0.0002 at 5% significant level. this result indicates that patient satisfaction would lead to better performance. a study has confirmed that, in hospitals, quality management initiatives have been raised on how quality care can be delivered in order to influence outcomes with respect to hospital performance and patient satisfaction (jiang, friedman & begun, 2006). the result of hypothesis 5 (h5) is supported at the 5% significant level with p value = 0.0232. the null hypothesis, which states that competitive advantage has a strong direct impact on hospital performance, is, therefore, accepted. li et al.’s (2013) study, which states that higher levels of competitive advantage may lead to improved organizational performance, supports this result. hospitals which have a competitive advantage in terms of service delivery, patient care, good physical environment, better pricing strategy and customer relations will, in no doubt, achieve better performance. this may be in terms of increase in number of patients, increase in profits and gaining good market share in the health care industry. a greater proportion of medical directors of the private hospital considered for the study agreed that efficient scm decisions have brought about improved financial performance to their hospitals. 5. conclusion and recommendations this study has examined how scm influences the quality of patient care delivery in private hospitals in ilorin, nigeria. it employed the structural equation model-partial least square method to test the hypotheses raised, and it has been found that scm has a strong direct influence on patient satisfaction and competitive advantage. also, scm has no strong and direct impact on hospital performance, but has indirect impact on performance through competitive advantage. the study found that patient satisfaction has a strong direct impact on hospital performance. it is no doubt that an efficient scm will result in more patient satisfaction and better competitive advantage for not only private, but other types of hospitals, which will consequently result in better performance. the following recommendations are made to ensure that better hospitals’ performance is achieved: private hospitals should process orders from suppliers who are closer to them. the procurement function could also be outsourced to suppliers that are jointly owned by private hospitals. this would result in improved product pricing and reduced inventory. private hospitals should not depend on a single supplier; they should try to have more dependable suppliers. in a situation where there is the unavailability of drugs in the market, efforts should be made to get close substitutes for the drugs. also, where there is sudden outbreak of diseases and no drugs, such as the case of ebola, proactive measures should be taken to ensure that the spread of such disease is prevented, pending the time that there will be a cure for the disease. professionals and graduates having       111  skills in scm should be employed for good decision making to be achieved in hospitals, in terms of procurement and supply chain practices. the major limitation to the study is that the sample size is not large enough to properly accommodate the heterogeneous population under study. however, it is suggested that larger sample size should be considered for future study. this study has been able to take care of the problem by the use of pls sem model. the model is generally recognised as achieving a high level of statistical power with small samples. appendix questionnaire 1. name of hospital ________________________________ 2. year established _________________________________ 3. number of hospital beds__________________________ 4. number of doctors_______________________________ 5. number of nurses________________________________ 6. number of suppliers/vendors_______________________ 7. do you have procurement of staff [a]yes [b]no 8. who are those involved in the procurement for the hospital? [a] nurses and other admin staff [b] medical directional[c]nurses only [d] administrative staff only section a: information about the hospital 9. how do you rate the suppliers’ effeciency? [a] very effective [b] effective [c] undecided [d] not effective [e] strongly not effective 10. do you think supply claim management has an effect on your hospital performance? [a] yes [b]no 11. if yes, how effective is it? [a] very effective [b] effective [c] undecided [d] not effective [e] strongly not effective 12. is there improvement in your hospital financial performance as a result of the supply chain management decision put in place? [a] yes [b]no 13. how do you rate your hospital financial performance [a] excellent [b] good [c] fair [d] average [e] poor 112  section b: measurement instrument for the patient care delivery and supply chain management. latent variables manifest variables supply chain management (scm) (a) the supplier relationship with the hospital is dependable (b) the suppliers are meeting with the standard specifications set by the hospital (c) the suppliers are able to meet up with their delivery dates. (d) the hospital enjoys follow up maintenance service with the suppliers after sale (e) there is an appropriateness of medical equipment and supplies to the specification agreed upon between the suppliers and the hospital. patient satisfaction (ps) (a) the hospital services are effective and efficient (b) the hospital staff and patients have good interpersonal relations (c) the hospital staff members are technically competent in performing their task and the facilities provided by the hospital are able to meet up with patients’ expectation (d) there is unrestricted access to the hospital’s services (e) the hospital maintains a good level of trust and confidentiality with patient and risk of injury, infections and other harmful side effects are minimal (f) the hospital provides consistent and constant care to the patient which enables them maintain continuous visit for treatment (g) the hospital offers to the patients’ good facility, comfort and clean environment (h) the hospital offers their patients appropriate choice treatment competitive advantage (ca) (a) the hospital offers patients lower medical charges than its competitors (b) the hospital services to the patient are reliable and of good quality (c) the hospital offers timely care to patients (d) the hospital makes its services to meet up with the patients’ needs. 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(2001). technology infusion enabled value chain flexibility: a learning and capability-based perspective. doctoral dissertation, university of toledo, toledo, oh. microsoft word 9 (17-04) mustapha.docx 131 relationship between board structure variables and performance of listed manufacturing firms in nigeria yusuf ismaila mustapha university of ilorin, nigeria abdulrasaq ishola nafiu federal polytechnic offa,nigeria received: april 23, 2016 accepted: april 28, 2017 online published: september 25, 2017 abstract corporate board structure has been at the center of policy debate concerning their relevance to organisation’s performance in recent times. since the value creation of corporate governance can be measured through firm performance, this study investigates the relationship between board size, board composition, ceo-duality and performance of listed manufacturing firms in nigeria. content analysis was used to collect secondary information from the thirty listed firms that met the requirement for selection as sample between 2006 and 2010 from nigerian stock exchange fact books. panel data regression techniques were employed as analytical instrument to test the study hypotheses. findings of the study revealed that board sizes is positively related to roa but negatively related to roe performance variables. the study recommends that firms should appoint more of outside directors (neds) than inside executive directors to enable it to maximize the benefits of board independence as well maintain a two-tier board structure. keywords: board structure, board size, board composition, ceo-duality, listed manufacturing firms, performance. 1. introduction the board of directors is the highest governing authority within the management structure in any publicly traded company. the role of the board in overseeing how management serves the long-term interests of shareholders and other stakeholders is at the core of corporate governance. however, skeptics often question whether or not corporate boards contribute to the effective performance of organisations because their day-to-day effect is difficult to observe, except, when things go wrong in organisations, then corporate boards becomes the center of international journal of economic behavior, vol. 7, n. 1, pp. 131-147, 2017 132 attention. certainly, this was true situation of the scandals in enron in 2001, worldcom in 2002 both in the us, and parmalat of italy in 2003. the directors of enron and worldcom, in particular, were held liable for the fraud that occurred. as a consequence of these scandals and the ongoing concerns about corporate governance, corporate boards have been at the center of the policy debate concerning their relevance to organisation’s performance. in recent years, the discussion has focused on the structure of the board of directors, the most outstanding corporate governance mechanism of the internal control systems (jensen, 1993). a number of studies such as gompers, ishii and metrick (2003) and kyereboah–coleman (2007) have shown that good corporate board structure put in place by the board increases valuation and boost firm’s performance. in nigeria, corporate governance has been gaining roots and several initiatives, structures and institutions designed to address corporate governance issues have been established. these include the companies and allied matters act 1990 (cama, 1990), and the nigeria security and exchange commission, which established the corporate governance codes in 2003 and 2011 that provides the modalities for corporate board structure in nigerian firms among others. most developing countries such as nigeria, are now increasingly embracing the concept of good corporate governance as a means to sustainable growth and development. however, in the context of sub-saharan africa, the issue has received very limited empirical research attention. the provisions of the nigerian security and exchange commission codes (nsec codes, 2003 and 2011) are aimed at promoting accountability and transparency with a deliberate attempt to streamline corporate practices which are thought to increase firm performance and cater for stakeholders’ interests. for instance, the code stipulates a minimum of five directors with appropriate mix of corporate board executive and non-executive directors (neds) and the separation of the position of chief executive officer (ceo) from that of the board chairman (nsec code of corporate governance, 2003, 2011). the expectation is that adherence to these guidelines by boards will improve firm’s performance. however, whether firms following these recommendations regarding board structure will indeed perform better is a question to be examined empirically in the nigerian context. this is the central focus of this study. secondly, studies conducted on the relationship between board structures variables and firm performances are mostly on developed economies and have produced conflicting results. it is against these backgrounds that the present study empirically examines the relationship between board structure variables of board size, board composition, ceo-duality and performance of listed manufacturing firms in nigerian stock exchange (nse). on the basis of this, the study specifically seeks to answer the following questions: is there any relationship between board size, board composition and firm performance? and does separation of the post of ceo and board chairman promote firm’s performance? the main objective of this study is to examine the relationship between board structure variables and firm performance of nigerian listed manufacturing firms. the specific objectives of this study are to: i. determine the relationship between board size, board composition and firm performance; ii. investigate whether or not separation of the post of ceo and board chairman promote firm’s performance. in line with the above objectives, the study postulated that: h01: there is no statistical relationship between board size and firm performance. h02: there is no statistical relationship between the percentages of neds (board composition) and firm performance. h03: there is no statistical relationship between ceo duality and firm performance. 133 the current study on the relationship between corporate board structure variables and performance of listed manufacturing firms in nigeria is significant for several reasons. first, nigeria arguably offers an interesting research context where the corporate board structure variables-performance relationships can be empirically examined in view of the conflicting empirical reports on the relationship between corporate board structure variables and firm performance in the extant literature (sanda et al 2005; olayinka 2010; haniffa & hudaib, 2006). unlike most african countries, nigeria has deep equity culture comparable with those of other emerging economies. for instance, nigeria is one of the largest emerging stock market in africa, with highest market capitalization in west african countries in 2010 (wdi, 2010). similarly, market capitalization of listed companies in nigeria amounted to about $56.3m in 2012 (the world bank, 2013). arguably, these performances offer exciting research context, where the corporate board structure variables-firm performances nexus can be empirically investigated. the second significance of this study is that despite offering exciting research context, there is a dearth of rigorous empirical research on nigerian firms, which attempts to ascertain whether bettergoverned nigerian listed firms tend to be associated with higher financial returns than their poorly-governed counterparts (okeahalam & akinbode 2003, okeahalam 2004). therefore, the paucity of rigorous empirical corporate governance studies on nigeria offers opportunities to make contributions to the extant literature in this area. 2. literature review 2.1. conceptual clarifications the concept of “corporate governance” has attracted various definitions in the literature. cadbury committee (1992) defines corporate governance as the system by which companies are directed and controlled. deakin and hughes (1997) define corporate governance as the relationship between the internal governance mechanisms of corporations and society’s conception of the scope of corporate accountability. this position was buttressed by (sarbah & xiao, 2015) when they opined that corporate governance is the structures and processes for the direction and control of businesses and the relationships among the management, board of directors, controlling shareholders, minority shareholders and other stakeholders (sarbah & xiao, 2015). corporate governance is also seen as the whole set of measures taken within the social entity (i.e., enterprise) to favour the economic agents to take part in the productive process, in order to generate some organization surplus, and to set up a fair distribution between the partners, taking into consideration what they have brought to the organization (sanda et al, 2005). in the light of the foregoing, we may state that corporate governance has no universally accepted definition. it is therefore suggested that the existing numerous definitions can be classified into two groups: narrow and broad. at the narrow level, corporate governance refers to the internal governance structures; such as the executive management, the board of directors and the general assembly of shareholders, by which companies are directed and controlled. at the most expansive form, it can be contended that corporate governance goes beyond immediate internal governance mechanisms to include external structures and stakeholders, such as the legal system, the efficient factor markets, local communities, the regulatory system, as well as the political, cultural and economic institutions within which companies operate (ntim, 2009). in summary, the aim of corporate governance according cadbury (1992) is to facilitate efficient use of resources by reducing fraud and mismanagement with a view to maiximising and aligning the often conflicting interests of all the stakeholders in the organization. 134 2.2. theoretical framework the two theories that were considered relevant to this study are briefly discussed below. these theories are agency theory and stewardship theory. 2.2.1. agency theory agency theory describes a fundamental agency problem in modern firms where there is a separation of ownership and control. in agency theory, the agent may be succumbed to selfinterest and opportunistic behavior falling short of congruence between the aspirations of the principal and the agent’s pursuits (abdullah & valentine, 2009). the theory is generally concerned with how to align the conflicting interests of principals and agents (jensen & meckling, 1976; fama, 1980). specifically, it suggests that the principal can limit divergences from his/her interests by establishing appropriate incentives or control mechanisms (corporate board structure) to monitor managers in order to limit the incidence of opportunistic action by the agent (jensen & meckling, 1976). the control mechanism is to allow for more effective ways of supervising and monitoring of the ceo and it is on the basis of this, that agency theorists believed that it is essential to separate the chairman of the board and the ceo positions (peng et al, 2007). the assumption of the theory is that the separation of the ceo and the chairman keeps managerial opportunism under control because the chairman of the board is independent of the ceo. the chairman of the board can use incentives to align the interests of the ceo with those of the shareholders (donaldson & davis, 1991, chen, 2014;). these theorists also expresses that ceo duality is negatively related to firm performance (peng et al, 2007). 2.2.2. stewardship theory stewardship theory posits that executive managers are intrinsically trustworthy individuals (kiel and nicholson, 2003). as such, managers should be fully empowered to run firms because they are good stewards of the resources entrusted to them (letza, sun & kirkbride, 2004). the stewardship theory suggests that due to their information and knowledge advantages, giving greater managerial power and trust to managers of firms is likely to lead to better performance. stewardship theorists proclaimed that managers’ knowledge lead to better decision, reduced agency costs and improved firm’s performance (donaldson & davis, 1994; fama, 1980; fama & jensen, 1983). as a result, proponents of stewardship theory contend that better firm performance are likely to be associated with internal corporate governance practices that grant managers greater powers, such as combining the positions of company chairman and chief executive officer (i.e. ceo-duality) according to donaldson & davis (1991) and (1994). ceoduality refers to a board leadership structure in which one person undertakes the combined roles of chief executive officer (ceomanagement) and chairman (control) of the board. stewardship theory proposes that role duality can have a positive impact on firm financial performance. firstly, weir and laing (2002) contend that as an insider, the ceo tends to have greater knowledge, understanding and experience of the strategic challenges and opportunities, which the company faces, than a non-executive chairman. secondly, it has been argued that role duality grants a charismatic ceo the opportunity to have a sharper focus on firm objectives (haniffa & hudaib, 2006). this implies that a visionary ceo will have the chance to shape the long-term fortunes of a firm with minimum board interference (haniffa & cooke, 2002). this may lead to improved performance due to the rapid management decision making that arises from the provision of clear and unambiguous corporate leadership (haniffa & hudaib, 2006). thirdly, vafeas and theodorou (1998) suggest that role duality avoids extra compensation to the chairman, which can results in a reduction in managerial remuneration. finally, bozec 135 (2005) argues that unified firm leadership associated with role duality improves managerial accountability as it makes it easier to charge the blame for poor performance. the above two theories were adopted for this study in line with the postulations that agency theory aligns the conflicting interests of the principals with that of the agents, while, stewardship theory believes that managers possess resourceful information and knowledge and are trusty worthy to run corporate organization effectively and this may have relationship with firm performance. in the view of the conflicting propositions in the theories, this study adopted agency theory for board structure and board composition, while stewardship theory was adopted for ceo duality. the adoption of the two theories is due to the fact that they are more germane and appropriate to the variables of interest in this study. 2.3. empirical framework 2.3.1. empirical evidences on board size and firm performance empirically, the evidence regarding the association between board size and firm performance is conflicting (yermack 1996; adams & mehran 2005; guest 2008). yermack (1996) investigated the relationship between board size and firm performances of 452 large us industrial corporations between 1984 and 1991. he reported an inverse relationship between corporate board size and firm performance (tobin’s q). his analysis however, focused purely on large us firms. in contrast, sanda et al. (2003) in a sample of 93 firms, studied the effect of corporate governance mechanism on firm performance of listed firms in nigeria between 1996 and 1999 and found a positive correlation between board size and profitability, proxied by return on equity (roe). their sample however consisted of financial and non-financial firms. analysing financial and non-financial firms together may distort the outcome of the results in view of the fact that financial institutions operate under a special regulatory environment which may mask the efficiency differences across firms, and may potentially render governance mechanism less important (vafeas & theorodou, 1998; singh & davidson, 2003). the work of kajola (2008) also examined the relationship between corporate governance and firm performance in a sample of twenty listed firms in nigeria between 2000 and 2006. he reported that board size have no significant relationship with profit margin. the sec code of corporate governance provides that all public companies must have a minimum of five directors (sec code 2003). the sec provisions did not set maximum board size neither did it specify the exact number of directors that should form a board. however, it sets out general principles that the board should be of sufficient size relative to the scale and complexity of the company’s operation. this suggests that sec code admit that a company’s board size may probably affect its performance. given the mixed evidences and the provision of sec code on board size, the null hypothesis that was tested in this case is that: there is no statistically relationship between board size and firm’s performance. 2.3.2. empirical evidences on the board composition and firm performance prior empirical evidences regarding the relationship between the percentage of neds (board composition) and firm performance is also mixed. a strand of the empirical studies reported that boards dominated by neds deliver higher performance. in a study of governance structure, director independence and corporate performance of a sample of 311 uk listed firms from 1994 to 1996, wier and laing (2002) reported a positive relationship between the percentage of neds and firm performance (tobin’s q). while, researchers such as yermack (1996), agrawal and knoeber (1996), and bozec (2005) reported that the percentage of neds is negatively related to firm performance. for instance, sanda et al. (2008) studied the effect of board independence on firm performance in a sample of 89 firms on the nigerian stock 136 exchange between 1996 and 2004 and reported that firms with a low percentage of outside directors (neds) performed better than those with more neds. again, their analysis suffered from the same defect as those of their earlier work which analyses both financial and nonfinancial firms together. the provisions of the sec codes require every listed company to appoint at least one independent neds (sec code 2003). it provides that such a ned should have no contractual relationship with the company and should be free from company’s business relationship which could materially interfere with his/her capacity to act in an independent manner. this shows that neds should be independent of the management to ensure that minority interests are adequately protected and shareholders’ wealth increased. given the mixed evidence, the null hypothesis that was tested in this case is that: there is no statistically relationship between the percentage of neds (board composition) and firm performance. 2.3.3. empirical evidences on the ceo-duality and firm performance evidences regarding the relationship between ceo-duality and firm performance are mixed (rechner & dalton 1991; brickley, coles & jarrell, 1997; weir & laing, 2002). rechner and dalton (1991) investigated the relationship between ceo-duality and firm performance of 141 large american corporations (fortune 500 firms) from 1978 to 1983. they reported that companies with separate board chairman and ceo positions consistently outperformed those with ceo-duality. their results have been criticized on the grounds that they failed to control for firm specific characteristics such as firm size (donaldson & davis, 1991) and that they focused purely on large american firms. in contrast, sanda et. al (2003) found a negative relationship between ceo-duality and tobin q in nigeria listed firms. also, olayinka (2010) reported a strong negative relationship between ceo-duality and firm performance in nigeria listed firms. however, the results of the study of olayinka (2010) were not reliable because the analysis was single-year based and the technique of estimate was not potent in handing panel data variables. the sec provisions on ceo-duality states explicitly that the positions of the chairman and the ceo should not be held by the same individual (nsec code, 2003 & 2011). this is to avoid over concentration of power in one individual which may rob the board of the required check and balances in the discharge of its duties. this suggests that sec codes recognised ceoduality as an undesirable development, while role separation is seen as good corporate governance practice. however, the prior literature evidences are mixed. given these conflicting evidences therefore, the null hypothesis that was tested in this case is that: there is no statistical relationship between ceo-duality and firm performance. from the review of the literature on the relationship between board structure variables and performance there appears to be visible gaps. first, most of the researches conducted in this area are focused on developed economies and the researches outcomes are conflicting. second, several countries, nigeria inclusive, have issued guidelines and recommendations for best governance practices especially on board structure (cadbury, 1992 nsec code, 2003 and 2011). the expectation is that adherence to these guidelines by boards will improve firm performance. however, whether firms following the best practice recommendations regarding board structure will indeed perform better is a question to be examined empirically especially in the nigerian context. these situations present identified gaps and provide opportunity to conduct a study in this area with a focus on nigerian listed manufacturing firms. 137 3. methodology 3.1. population, sample size and sampling technique the population of this study comprises of 57 listed manufacturing firms operating in different sectors of nigerian stock of exchange. the choice of listed firms in this sector was based on the fact that the records of these classes of firms are expected to be organized, readily available and meets the corporate governance standard (daniel, 2005). more so, listed firms were adopted as the study population because other studies such as sanda, et al (2003) and patrick (2012) used listed firms in their respective studies. the sample firms to be selected must have been listed on the floor of nigerian stock exchange market not later than 2006. the year of listing is a fundamental requirement for firms that were selected as samples in this study. the choice of the selected firms and sector is informed by the availability of data and firms’ annual reports for a period of ten years under review. this is due to the fact that it is only the firms that were listed as at year 2006 that can provide the required data. thirty manufacturing firms that met this requirement were purposively selected as samples out of a population of 57 manufacturing firms listed on the floor of nigerian stock exchange. hence, purposeful sampling technique was adopted in this study. 3.2. data and source this study basically used secondary data collected from the annual reports of 30 listed manufacturing firms on the floor of nigerian stock exchange (nse). data for the study covers eight-year period from 2006 to 2013. the board structure variables and firm performance data were obtained from nse fact book (2011/12 and 2014) and company websites. 3.3. model specification the methodological approach adopted in examining the relationship between the board structure variables and firm performance is panel data multiple regression analysis because of its advantages over the conventional time series approach according to hsiao (2003) and klevmarken (1989). thus, panel data regression technique was used to analyse the data. fixed effects and random effects regression models were run in addition to the pooled ols regression model. panel data regression model was adopted because our data set are both cross-sectional and time series in nature. there are multiple entities, each of which has repeated measurements at different time periods and these may have group effects, time effects, or both, which are analyzed by fixed effect and random effect models (oscar, 2007). consequently, the study employs a modified version of the econometric model of miyajima, omi and saito (2003) which is given as: yit = β0 + β1git +β2 cit + eit....................................................................................(1) where yit represents firm performance variables (dependent variables); return on assets (roa), and return on equity (roe) for firm i in time t. git is a vector of corporate governance variables (independent variables); board size (bds), board composition (bdc) and a dummy variable of 1 (ceo) to capture if the board chairman is the same as the chief executive officer (ceo) and 0 otherwise. cit is a vector of control variables: size of the firm (fz), leverage (lev), representing the debt structure of these firms, firms’ probability is (pro) and firms’ age (age) is a proxy for firm complexity in the sector while eit , is the error term. the essence of the control variables is to give recognition to the fact that the performance of listed firms may be influenced by several factors. the fixed effects and random effects options of panel regression were also run in addition to the pooled regression. 138 from the above discussions, equation 1 is specified as follows: yit = b0 + b1git + b2cit + eit........................................................................................(2) yit = (roa, roe), representing the dependent variables. git = (bds, bdc, ceo) representing the independent variables. cit = (fz, pro, lev, age) representing the control variables. eit = the error term. thus the expanded form of equation 2 and 3 are specified as: roait = bo+b1bdsit+b2bdcit+b3ceoit+b4proit+b5fzit+b6levit+b7ageit+eit..........................(3) roeit = bo+b1bdsit+b2bdcit+b3ceoit+b4proit+b5fzit+b6levit+b7ageit+eit..........................(4) the individual fixed effect equations which capture the individual characteristics that are specific with each firm but do not change over time is given as: roait = bi+b1bdsit+b2bdcit+b3ceoit+b4proit+b5fzit+b6levit+b7ageit+eit...........................(5) roeit = bi+b1bdsit+b2bdcit+b3ceoit+b4proit+b5fzit+b6levit+b7ageit+eit............................(6) where bi is the fixed effect parameter that can be estimated directly. the apriori expectation of the signs of the parameter estimates are: i. for return on asset (roa), b1, b2, b3 <0, b4 – b7> 0. ii. for return on equity (roe), b1, b2, b3 <0, b4 – b7 >0. 3.4. estimation techniques several estimation techniques were used to estimate firm financial performance in the models. these included the pooled ordinary least square (ols), the fixed and random effects. the hausman specification test was performed to decide a preferred option between the fixed and random effect as deemed necessary. thereafter, the breusch-pagan langrange multiplier (lm) test was carried out to decide a preferred estimate between pooled ols and random effect estimates in the case of the roe. the result of the test was insignificant indicating that, the random effect is a preferred estimate for the study. 4. data analysis and discussion various options of the panel regression were run; fixed effects, random effects and the pooled ols regressions. the results of the panel regressions were presented in the subsequent sections starting with the descriptive statistics. 4.1. variable definitions and measurement table 1 contains the definitions of variables and how they are measured in the study. 139 table 1 – variable definitions and measurement variable definition measurement roa return on assets earnings before interest and tax payments divided by total assets. roe return on equity earnings before interest and taxes by share-holders’ funds. bds board size total number of members serving on a board bdc board composition ratio of outside directors to total number of directors (neds). ceo ceo-duality a dummy variable, taking a value of 1 for firms with ceo as chair, and 0 otherwise. fz firm size natural log of total asset. pro profitability ratio of earnings before interest and taxes to total assets lev leverage ratio of total debt to total assets. age firm complexity number of years the firm has been in operation. source: authors’ compilation 4.2. descriptive statistics this section presents the descriptive statistics of the mean, the median, the maximum, minimum and the standard deviation of the variables under investigation. table 2 – descriptive statistics source: stata panel data regression output. the descriptive statistics of dependent, independent and control variables of the relationship between board structure variables and firm performance is presented in table 2. from the table, the mean board size is about eight (8) suggesting that manufacturing firms listed on the nigerian stock exchange (nse) have relatively moderate board sizes. there is a maximum board size of fourteen (14) and standard deviation of 2.52, implying that manufacturing firms in nigeria have relatively similar board sizes. on the board composition, nigerian manufacturing firms are relatively less independent. this is indicated by the relatively high proportion of neds (60.3%) on the corporate boards being appointed from outside the firms. out of all the firms studied, about 79.6% of them adopted the 2-tier board structure implying that only about 20.4% of the firms have their ceos and board chairman positions variable obs mean maximum minimum std. dev. roa 240 0.0105 0.2179 -0.6925 0.1347 roe 240 4.9923 1142.26 -19.0624 73.7410 bds 240 7.6042 14.0 3.0 2.5164 bdc 240 0.6030 1.3333 1.3333 0.1735 ceodua 240 0.2042 1.0 1.0 0.4039 firmage 240 40.725 73.0 73 14.0849 lev 240 1.7753 93.0007 93.0007 9.8486 logfz 240 6.2709 8.9259 8.9259 0.8261 pro 240 1.7735 347.8168 347.8168 22.4966 140 combined in one person. this suggests that avenue for agency problems emanating from conflict of interest and agency costs are minimized to the barest level. this is likely to enhance firm performance. on the average, the descriptive statistics shows that most of the manufacturing firms appear not to be doing well with regards to roa as a performance variable with a mean ratio of 0.01. the implication of this is that most of the manufacturing firms do not break–even on this front indicating that they might not be effectively and efficiently utilizing their assets. the profitability ratio at a mean ratio for the firms is 1.77. this figure might be as a result of the good performance of the firms as indicated by the roe performance measure. the firms generally depended more on debt equity financing as indicated by the highly leverage figure of 177.53. the firms have similar sizes of 7.6 on the average. on the whole, the roe seems to perform better than the roa measure of performance in the descriptive analysis. the roe had a mean of 499.23% compared to roa performance mean of 0.01% over the period of study. on the whole the roe performance measure come out better in the descriptive statistics, while the roa performance measure come out poorly as will be further shown in the regression output of the overall significance of the regression analysis. 4.2. presentation of results this section presents the regression results of the relationship between return on assets (roa) and the board structure variables as well as that of the interaction between return on equity (roe) and the board structure variables. first, we present the discussion on the relationship between the board structure variables and return on asset (roa). table 3 – regression results of roa variables pooled ols fixed effect random effect constant -0.0816 (0.0731)* -0.5632 (0.2078)* -0.1618 (0.1018) bds 0.0102 (0.0044) -0.0060 (0.0069) 0.0057 (0.0048) bdc -0.0807 (0.0589) -0.0270 (0.0616) -0.0249 (0.0570) ceo-dua -0.0020 (0.0220) -0.0162 (0.1251) -0.0040 (0.0343) lev 0.0004 (0.0009) -0.0002 (0.0009) -0.0001 (0.0008) fz 0.0186 (0.0114) 0.0386 (0.0331) 0.0295 (0.0163)*** age -0.0013 (0.0006)** 0.0097 (0.0059)*** -0.0010 (0.0010) pro 0.0001 (0.0004) 0.00005 (0.0004) 0.0000 (0.0004) r2 0.0636 0,0068 0.0555 f 2.25* 19.4 insignificant prob chi2 7.73 insignificant significant at (1%)*, (5%) **, (10%)***, standard error in parenthesis. source: stata panel data regression output. 141 table 3, shows the regression results of the relationship between return on asset (roa) and the board structure variables. the results generally show that the roa perform poorly as indicated by the overall insignificance of the fstatistics for both the fe and re regression results for the variables of interest and roa. consequently, our discussion focused attention on the pooled ols regression result as presented in table 2. the pooled ols regression results indicated that contrary to studies by jensen (1993), lipton and lorsch (1992) and sanda et. al. (2003), the board size is positively related to roa implying that the larger the size of the board, the better the roa. this result confirms the findings of the studies that supported the view that larger boards are better for corporate performance because members have a range of expertise to help make better decisions, and this may make it harder for a powerful ceo to dominate the board. the board composition has a negative relationship with roa implying that when there are less external board members, performance of the firm tends to be worse. this finding is also consistent with the finding of the study by agrawal and knoeber (1996) which suggested that boards expanded for political reasons often result in too many outsiders on the boards, which does not help performance. a group of researchers such as yermack (1996), agrawal and knoeber (1996) and bozec (2005) also reported that the percentage of neds is negatively correlated with performance. in a sample of 25 canadian firms from 1976 to 2005, bozec (2005) found that the relationship between the percentage of neds and performance is negative. the study’s finding also contradicts the results of other empirical studies such as brickley and james (1987) and brickley et al. (1994) on outside director’s value in supporting the beneficial monitoring and advisory functions to firm’s shareholders. with respect to ceo-duality, the results suggest that ceo-duality is negatively related to roa and that when a ceo doubles as the board chairman, roa decreases. this result is consistent with studies which have found out that the one-tier board structure type leads to leadership facing conflict of interest and agency problems, (berg & smith 1978, brickley & coles 1997). in the context of a developing country, the study of sanda et al. (2003) found no relationship between firm performance and separating the functions of the ceo and chairman and thus gave preference to one-tier board structure. in contrast however, the result of this study buttresses the fact that there is need to have a clear separation between the positions of board chairman and ceo as indicated by the negative relationship between ceo and roa performance variables in table 3 above. as expected, the study found that firm size has a positive relationship with roa, though not significant. this means that the size of a firm, measured by its asset base, could lead to better performance if put to efficient use. the implication therefore is that most of the firms are utilizing their size to enhance performance. the positive coefficient in the pooled ols regression for total debt (lev) could be interpreted to mean an increase in debt is associated with increase in performance. this probably implies that firms that have huge proportions of debt perform better. this confirmed the findings by hadlock and james (2002), and petersen and rajan (1994), which posited that profitable firms use more debt to finance their operations. this position is further supported by the positive relationship between profitability and leverage with roa in the pooled ols regression as indicated in table 3. table 4 is the regression results of the relationship between roe and the board structure variables. as could be seen in table 5, the overall regression results for the fe, re and pooled ols are all significant at 1%. consequently, there was the need to perform the hausman specification test and breusch pagan langrange multiplier test to determine a preferred estimate between the three regression estimates. the hausman test indicated that re is a preferred estimate to fe model. therefore, there was the need to perform the breusch pagan 142 test to decide a preferred estimate between the re and pooled ols estimates. the results of the breusch pagan test showed that re is a preferred estimate. the discussion below is therefore based on the re regression estimate. table 4 – regression results of roe variables pooled ols fe re constant -15.9947 (3.0465)* -41.23859 (8.6850) -20.1692 (4.0147)* bds -0.1051 (0.1840) 0.0979 (0.2868)* -0.0828 (0.2018) bdc 0.2134 (2.4556) -4.7638 (2.5743)* -1.5964 (2.4334) ceo-dua 0.9949 (0.9162) 1.6122 (0.5.2286) 1.3235 (1.3152) lev 0.0486 (0.0381) 0.0664 (0.0358)* 0.0560 (0.0364) fz 1.9027* (0.4760) 8.5231 (1.3854) 2.7010 (0.6427)* age 0.0896 (0.0259)* -0.2783 (0.2449)* 0.0897 (0.0381)* pro 3.2624* (0.0160) 3.2695 (0.0149)* 3.2675 (0.0152)* r2 0.9946 0.9847 0.9945 prob chi2 4675* f 6072* 6960.8* hausman test 6.08 insignificant re preffered to fe breusch pagan test 15.33* re preffered to ols significant at (1%)*, (5%) **, (10%)***, standard error in parenthesis. source: stata panel data regression output. based on re regression estimate, the board size is negatively related to roe. this result is consistent with findings of the studies by jensen (1993), and lipton (1992) who argued that larger boards are less effective and are easier for the ceo to control. when a board gets too big, it becomes difficult to co-ordinate. further argument is that smaller boards also reduce the possibility of free riding by individual directors, and increase their effectiveness in decision making processes. some other empirical studies also supported this position. for example, yermack (1996) documents that, for large u.s. industrial corporations, the market places higher values on firms with smaller boards. again, sanda et al. (2003) found that, firm performance is positively related to small, as opposed to large board size. on board composition, roe is negatively related to board composition. this result supports the findings of earlier studies (sanda et al, 2003; john & senbet, 1998) which showed a negative relationship between board composition and roe. the implication of a negative relationship between board composition and roe is that fewer outside directors are on the board and hence the board might be less independent. this is capable of jeopardizing the performance of the firm. the argument is that boards of directors are more independent as the 143 proportion of outside director’s increase and this position is more favoured and cherished by shareholders. regarding ceo-duality, the results point to a positive relationship between the roe performance measure and the two-tier board structure in which case separate persons occupies the position of board chairman and ceo. this result is not consistent with the findings of other empirical studies such as fama and jensen (1983) who argued that the concentration of decision management and decision control in one individual reduces boards’ effectiveness in monitoring top management and tends to increase agency costs because it depicts a clear case of possibility of conflict of interest and hence could lead to agency problems. profitability (pro) and the debt structure (lev) are both positively related to roe. this finding suggest that the studied firms relied on debt and tend to perform better in view of the fact that profitability and leverage variables are both positive and significantly related to roe in the random effect (re) regression estimates. thus, manufacturing firms under this study should lean towards having more debts to finance their operations. firm size is positively related to roe and this shows that the studied manufacturing firms will benefit if they increase their sizes to enjoy economies scale. comparatively, the findings of the current study is consistent with the findings of the works of eisenberg et al. (1998) and bozec, (2005) which were conducted in usa and united kingdom respectively and found a negative relationship between performance-related top-management turnover and board size. however, it contradicts the findings of the works of beiner et al. (2006) and henry (2008) that independently reported similar statistically significant and positive relationship between board size and the q-ratio for swiss and australian listed firms respectively. furthermore, chahine and tohmé (2009) and kiel and nicholson (2003) conducted their studies in usa, middle east and north african countries respectively and discovered that underpricing is significantly higher among firms that have ceo duality and that firms with separate board chairpersons consistently outperformed those with ceo duality. however, the works of kiel and nicholson (2003) found that ceo duality impacts positively on the financial performance of australian listed firms. gupta and fields (2009) conducted their study in usa and found that there is positive relationship between ned and firms’ financial performance, while the studies of bozec (2005) and haniffa and hudaib (2006) which were conducted in canada and malaysia reported a statistically insignificant negative relationship between the percentage of neds and firms’ performance. 5. conclusion and recommendations 5.1.conclusion this study draws the following conclusion from its findings: that the board sizes of the studied quoted manufacturing firms are positively related to roa and negatively related to roe performance variables. also, the board structure composition variables of quoted manufacturing firms are negatively related to both performance measurements of roa and roe and that ceo duality of quoted manufacturing firms is negatively related to roa and positively related to roe. 5.2.recommendations based on the findings of this study, the following recommendations are made for efficient performance of quoted manufacturing firms and other similar organisations: 144 i. maintenance of smaller board sizes that hovers around eight members (8) is critical to the success and survival of corporate firms in nigerian while firms should also increase their size through increase in total assets and put these to efficient use in order to enjoy economies of scale. ii. firms should make appointment of outside directors (neds) to dominate the appointment of inside executive directors so as to enable the firms to maximally reap the benefits of board independence. iii. the position of board chairman and that of the chief executive officer should be separated in order to protect the interests of the shareholders and guard against managerial opportunism 5.3. suggestions for future research there is need to extend the scope of the study to cover listed firms in africa stock exchange market. therefore, further study can examine corporate governance and performance of listed firms from african stock exchange markets. a study of this nature may improve current understanding of the internal board structure variables-financial performance association across different african markets. secondly, studying other sectors of nigeria economy would also advance and expand our knowledge of the subject matter. consequently, we suggest that future studies should pay attention to organizations in other sectors of nigeria economy. thirdly, a way to improve on the current study is for that future studies to increase the sample size (i.e. number of firms) and extend the scope (i.e. number of years). references 1. abdullah, h. & valentine, b. 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life cycle theory. keywords: conspicuous consumption; household saving chinese economy; cultural changes; international openness; urbanization; population mobility. 1. introduction china’s high national saving has captured much attention recently. as one of the leading current account surplus economies, it has been regarded as a source of the global saving imbalances and partly borne the blame for the 2007 subprime mortgage crisis in the u.s. for supplying cheap funds to the international market. as a component of national saving, household saving in china is also well above the world average. calculated from the united nations (un) database, china’s average gross saving rate between 1992 and 2009 reached 33%, while the world average was only 7.1% during the same period. the attention has sparked an academic enthusiasm for explaining household saving patterns in china, but the findings are mixed on what drives the high saving rates and the implications for the future trend. both cristadoro and marconi (2012) and liu and hu (2013) find evidence for the life cycle theory and the precautionary motive, while cristadoro and marconi (2012) also stressed the role of liquidity constraint, as in zhou (2014), who observed siblings, particularly brothers, as international journal of economic behavior, vol. 7, n. 1, pp. 3-24, 2017 4 a resort of informal lending. using the life cycle framework, curtis, lugauer, and mark (2015) conclude that the higher saving rates are largely driven by reduced family sizes due to the population control policy, and future saving rates may decline as the population ages. however, chamon, liu, and prasad (2013) discovered that the middle aged save the least, contrary to the life cycle theory, and they attribute this abnormality to shrinking public education and healthcare, and privatization of the housing sector. their findings in relation to the life cycle theory are echoed in chen (2017b) on the consumption of migrant households, who constitute a large portion of urban households. similarly, horioka and wan (2007) only found weak support for the life cycle and permanent income theories, but contended that the high saving rates will persist provided that income growth remains high. the lack of consensus on the role of the age structure may also be partly due to old people’s desire to leave bequests, as studied by yin (2012). while wang and wen (2012) maintained that increased housing price coupled with borrowing constraint and demographic changes contributed to higher saving rates, li, whalley, and zhao, (2013) rejected such claims, in favor of a negative association between housing price and household saving. on the precautionary saving side, both ang (2009) and feng, he, and sato (2011) found positive effects of the pension reform on household saving, but the result was reversed when the model was applied to data from india in ang (2009). the introduction of a cooperative medical insurance scheme seemed to only affect middle income households, according to cheung and padieu (2015). kraay (2000) acknowledged the role of future income growth in rural household saving, but the model performed poorly in explaining urban household saving. undoubtedly, the aforementioned papers have provided useful explanations of household saving patterns in china. however, the mixed results of applying the conventional theories suggest that current understanding of the determinants of household saving in china is far from adequate, and alternative explanations are worth exploring. in particular, the existing literature fails to capture recent rapid cultural and social changes in china, which are transforming consumer behavior, and may have brought about fundamental and widespread changes in household saving patterns. this paper incorporates cultural and social factors in explaining household saving behavior that will shed light on the future trend of household saving in china as well as in other economies that are undergoing similarly transformations. it explores alternative theories on consumer behavior, veblen’s ([1899] 2007) conspicuous consumption theory in particular, to further explain household saving, since consumption and saving are essentially two sides of the same issue. according to veblen, consumption is a way to display wealth with the purpose of achieving social status, and population mobility and large communities will enhance the importance of such conspicuous consumption. although it has suffered criticism in the past, veblen’s theory is endorsed by recent researchers. for example, bagwell and bernheim (1996) derived theoretical conditions under which conspicuous consumption may arise. dutt (2001) concluded that signaling status through conspicuous consumption is the most convincing motive for relative consumption effects. both trigg (2001) and schor (2007) revisited veblen’s work and bourdieu’s (1984) related theories, and countered popular criticism of the conspicuous consumption theory. the arguments in support of the conspicuous consumption concept are validated by recent empirical studies such as those by heffetz (2011), who found higher income elasticities for wealth-signaling consumption expenditures, and danzer, dietz, gatskova, and schmillen (2014), who discovered elevated self-reported socioeconomic status through visible consumption for recent migrants. guarneros, narváezy, and vilar (2001) also observed that urbanization resulted in excessive pursuit of consumption by youth in mexico. in the existing 5 literature on household saving, the most closely related research to this paper is a study by chen (2017a), which extended veblen’s framework and showed that globalization contributed to the decline in household saving through several channels, including cultural and social interactions, increased population mobility and urbanization, international trade (via facilitating access to status goods) and international financial flows (via alleviating credit constraints). the logical framework of this paper resembles chen (2017a), but is applied to provincial level data in china, rather than worldwide cross-country data. it also expanded the explanatory variables, including internal population mobility (represented by passenger traffic turnover), communication intensity (represented by communication volume and per capita telephone units), and the share of state-owned enterprises, a factor of particular importance to china.1 it finds that income per capita and its growth play important roles in household saving, as in the literature; however, there is little support for the role of the age dependency ratios and thus the life cycle theory. weak evidence of increased precautionary saving is detected, indicated by the negative effects of government social spending (on education, healthcare, etc.) for rural households and the share of state-owned enterprises for urban households. most importantly, there is consistent evidence in line with the extended conspicuous consumption framework. as in chen (2017a), increased international openness (foreign direct investment and international trade volume) are found to depress household saving. likewise, urbanization, population mobility, and communication intensity also have negative effects on saving to various degrees of consistency. the latter conclusion is unique, however, because in chen (2017a), the urbanization ratio is dropped through model selection, population mobility is not modeled specifically, and communication intensity is part of the globalization index rather than a separate variable. the structure of the rest of the paper is as follows. section 2 examines social and cultural changes in china and their possible effects on household saving. sections 3 and 4 present formal econometric analyses of factors determining household saving using provincial data, and examine the implications for the future trend of household saving. section 5 contains final remarks. 2. cultural and social changes and their effects on household saving since the beginning of the economic reform at the end of the 1970s, china has transformed itself from a near-closed status to a remarkably open society, economically, culturally, and socially. figure 1 shows the degree of globalization in china in comparison with the world average, measured by the kof globalization index, constructed using economic (36%), social (38%) and political (26%) indicators (dreher, 2006; dreher, gaston, & martens, 2008). china’s overall globalization index was only about half of the world average in the late 1970s when it embarked its economic reform. by the end of 1990s, its globalization index already surpassed the world average. among the components of the kof globalization index, china’s social globalization index exceeded the world average in the early 2000s; the gap with the world average in the economic dimension has also narrowed greatly. most markedly, globalization in the cultural dimension, measured by the kof cultural proximity index, exceeded the world average in the early 1990s and has been far above the average since the late 1990s. the cultural proximity index is constructed using three indicators: per capita number of mcdonald’s restaurants (45%), per 1 some of the variables considered in chen (2017a) are not included in the model here, either because they are economy wide variables (for example, interest rate and terms of trade) or are unavailable (for example, corporate saving and household assets). 6 capita number of ikea (45%), and trade in books as a percent of gdp (10%). needless to say, the kof measure of cultural proximity has its limitations. nevertheless, in a country with a drastically different traditional culture from the west (including food, drink, and furniture styles), the proliferation of mcdonald’s and ikea undoubtedly reflects chinese consumers’ willingness to accept and adopt different cultures. as additional evidence, starbucks also acquired a sweeping presence in china recently. figure 1 – economic, cultural, and social globalization during the process of globalization, different cultures may influence each other through trading goods and services, exchanging ideas, and consuming each other’s products, particularly cultural products, such as books, movies, and music. as noted by researchers in marketing and management (see, for example, kim, forsythe, gu, & moon, 2002; yuan, song, & kim, 2011), cultural values are important in shaping life styles and consumer behavior. it follows that influences from other cultures can lead to changes in consumption and saving behavior. as reasoned in chen (2017a), since the west, represented by the u.s., has a comparative advantage in cultural products, their exports dominate the world market of cultural products. thus, the influences of western culture may outweigh those of other cultures. to a society with high initial saving rates, interactions with other cultures that discount the value of frugality may induce behavior changes in favor of higher spending and lower saving. in addition, international trade enables consumers to access more varieties of products, especially luxury goods, which are often perceived as status goods, or goods that can signal or elevate one’s social status, such as iphones, ipads, and bmw automobiles. thus, globalization provides additional instruments for conspicuous consumption and hence may exert a negative effect on saving. 20 30 40 50 60 1970 1980 1990 2000 2010year overall index, china overall index, world average 0 20 40 60 80 1970 1980 1990 2000 2010year cultural proximity, china cultural proximity, world average 10 20 30 40 50 1970 1980 1990 2000 2010year social globalization, china social globalization, world average 20 30 40 50 60 1970 1980 1990 2000 2010year economic globalization, china economic globalization, world average 7 anecdotal evidence of growing conspicuous consumption is abundant in china. pursuing luxury brand goods is widespread, especially among urban consumers. evidence of lavish spending abounds from rising demand for british butlers (heatley, 2011), to buying luxury cars at costs two to three times the u.s. levels (goldstein, 2014). declarations like “rather cry in a bmw than laugh on the backseat of a bicycle” in a reality show is not an isolated incident (lim, 2012), but an indication of a social phenomenon. another extreme example is a case where a 17-year-old student willingly sold his kidney to buy an ipad and an iphone (guo, 2012). as noted by many researchers in various fields (for example, dutt, 2001), east asia (including china) values collectivism as opposed to individualism. at first sight, conspicuous consumption may seem contradictory to a culture where collectivism is a defining characteristic. however, if social acceptance is not sacrificed, conspicuous consumption can also be rife in a society of collectivism. as a long-term advertising professional who believes that fundamental cultural differences remain between china and the west, doctoroff (2012) observed that in china, “[l]uxury items are desired more as status investments than for their inherent beauty or craftsmanship.” he noted that luxury brands from abroad are especially desired and consumers are willing to pay high premiums if the products are consumed publicly. display of luxury brands should ideally be “conspicuously discreet” to meet the need of projecting affluence while “fitting in.” in the meantime, popular products that are consumed privately are often cheap domestic brands, in line with the “conventional virtue” of frugality. his observation coincides with bagwell and bernheim’s (1996) theoretical results that “luxury” brands without higher intrinsic value than “budget” brands are priced higher at equilibrium, driven by consumer demand to display wealth. as additional casual evidence, japan and south korea both experienced relatively rapid globalization deepening in the social and cultural dimensions and dramatic decline in household saving in recent years. 2 while the world average of the indicator increased from 33 to 51 between 1970 and 2011, japan’s social globalization index increased from 26 to 67, and south korea’s from 22 to 52. in the meantime, japan’s average gross household saving rate (calculated from the un’s database) dropped from 21.3% before 1990 to 8.7% after 2000. south korea’s average net household saving rate plunged from 15.7% before 1990 to just 4.6% after 2000. 3 table 1 – averages of provincial urbanization and distant communication indicators 1990 1995 2000 2005 2011* share of workers in urban areas (%) 32.0 33.6 29.4 30.8 45.7 passenger to population ratio 6.94 9.42 11.14 13.26 25.11 post and telecommunications volume (1000 yuan/person) 0.02 0.10 0.41 0.97 1.03 number of telephone sets per person 0.02 0.05 0.17 0.68 0.84 source: calculations from china data online and the national bureau of statistics of china. * data for number of telephone sets per person is for 2009. 2 these are the only two east asian economies in the un and oecd databases with household saving data before the 1990s. 3 source: the oecd database. gross household saving rate is unavailable for south korea. the difference between net and gross saving rates is that the calculation of net saving rate involves subtracting depreciation (consumption of fixed capital) from both saving and disposable income. 8 china has also undergone other dramatic social changes. first, the speed of urbanization is unprecedented, largely due to high economic growth and the accompanied structural changes. urban population only accounted for 13.7% of the total population in 1954, and is over 50% in 2011.4 nearly half of the workers are also in urban areas in 2011 (table 1).5 second, population mobility also increased greatly, although restrictions still remain. accompanying the increased mobility is the need to communicate through the mail, phones and other means. table 1 also includes several measures indicating the rapid increase in population mobility and distant communication intensity. these domestic changes may also have negative effects on saving. in the framework of veblen’s theory, conspicuous consumption becomes more important when the population is more mobile. this is because in a society with greater mobility, it is more difficult to observe leisure, an alternative means to project wealth; as a result, individuals are forced to rely more on consumption to acquire social repute. likewise, residing in urban areas boosts the return of conspicuous consumption as one would be more likely to face a large number of transitory observers than in rural and small communities. the rest of this paper will turn to annual provincial data from china data online,6 which covers all 31 provinces, autonomous districts, and metropolises (all of which may be collectively referred to as provinces hereafter) from 1949 to 2011 (some have shorter coverages). since provincial data on consumption of fixed capital is not available, net saving rates cannot be calculated. ideally, both income and consumption should account for nonmonetary transactions and transfers as well as goods and services produced for own consumption, and disposable income should adjust for the changes in net equity of households on pension funds (united nations, 2009). however, due to lack of data, saving rates are calculated as the portion of disposable income that is not used as living expenditure. three observations associated with unusually high saving rates are dropped, including one for urban households and two for rural households, all with more than 80% saving rates. table 2 – disposable income and saving for urban and rural households: provincial means urban rural urban/rural urban rural urban/rural (¥) (¥) ratio (%) (%) ratio mean 5253 1905 2.76 16.9 20.1 0.84 1949-1959 190 75 2.53 10.7 10.5 1.02 1960-1969 232 101 2.30 7.4 10.0 0.74 1970-1979 334 149 2.24 7.6 13.5 0.56 1980-1989 780 403 1.94 8.9 16.8 0.53 1990-1999 3,690 1,538 2.40 17.0 19.9 0.85 2000-2009 10,414 3,603 2.89 24.1 24.6 0.98 2010-1011 19,338 6,903 2.80 33.5 25.4 1.32 per capita disposable income saving rates overall, household saving increased during the last six decades (table 2). both urban and rural saving rates exhibit a positive relationship with disposable income (figure 2), consistent 4 source: the national bureau of statistics of china. 5 the temporary decline in urban worker share at the end of the 1990s may be caused by the slowdown in economic growth after the asian crisis, when migrant workers from the rural areas returned home. 6 provided by the china data center at the university of michigan. 9 with the standard theories on household saving. however, a comparison of urban and rural saving rates reveals a contradiction to the above observation. in spite of an average disposable income two to three times the rural level, urban households saved a smaller portion of their income than did rural households most of the time (table 2 and figure 2). urban households’ more stable income and lower consumption of self-produced goods and services could be factors behind the relatively low urban saving rates, but more prevalent conspicuous consumption in urban areas could be another factor. figure 2 – disposable income and saving a casual cross-province comparison of consumption and saving patterns also seems to support veblen’s theory. coastal provinces exhibit lower saving rates consistently, especially in the south and southeast, which tend to be more open internationally and attract more migrant workers. for example, in 2011, retail sales of consumption goods as percentages of household disposable income were 80% in shanghai, 72% in guangdong, and 67% in fujian, much higher than those in such inland provinces as jiangxi (44%), hunan (55%), and guizhou (31%). while disposable income seems to play a predominant role in rural saving, there are clearly other factors at play in the ranking of urban saving (table 3). the eight provinces with the lowest urban saving rates include three of the four metropolises (chongqing, beijing, and tianjin) and guangdong, a province next to hong kong with the most and earliest national economic special zones and the longest history of openness, in spite of their high rankings in disposable income (except for tianjin). in contrast, most of the eight provinces with the highest urban saving rates are inland provinces and none of them is a metropolis. the next two sections will present a formal model that identifies the individual effects of different determinants of household saving using provincial data. 500 0 200 00 1940 1960 1980 2000 2020year urban households rural households per capita disposable income 0 10 20 30 40 1940 1960 1980 2000 2020year urban households rural households saving rates -20 0 20 40 60 sav ing ra te 0 10000 20000 30000 40000disposable income per capita urban saving rates vs income -20 0 20 40 60 sav ing ra te 0 5000 10000 15000disposable income per capita rural saving rates vs income 10 table 3 – lower and upper quartiles of saving province saving rate disposable income ranking province saving rate disposable income ranking lower quartile lower quartile chongqing 11.4 6 hunan 4.3 12 sichuan 12.1 28 shaanxi 10.3 27 gansu 14.2 31 yunnan 11 29 beijing 14.2 2 sichuan 12.9 28 yunnan 14.5 30 qinghai 13.2 25 tianjin 14.6 29 guizhou 15.7 30 qinghai 14.6 19 gansu 16.4 31 guangdong 15.0 4 guangxi 16.6 20 upper quartile upper quartile hainan 18.9 7 henan 25.4 17 jiangxi 19.4 27 shandong 25.4 6 heilongjiang 19.9 11 beijing 25.7 2 shanxi 20.1 26 heilongjiang 26.8 11 zhejiang 20.1 3 hebei 27.7 14 xinjiang 20.5 20 tibet 30.2 26 shandong 20.5 8 hainan 31.5 9 tibet 21.1 12 tianjin 36.1 13 urban households rural households 3. methodology because of the panel nature of the data, the following model is considered. = + , + + + + in the equation, sit represents saving rate for province i in year t; β0, β1, and the vector β2 are parameters. the lagged saving rate is included as an explanatory variable because of possible inertia in consumption and saving behavior in the short term. x is a vector of explanatory variables. αi accounts for all time-invariant and province specific factors, such as local cultures affecting consumption and saving; the linear time trend t accounts for common time effects, which are time-varying but common to all panels, such as interest rate and other macroeconomic factors that affect the whole economy. εit is the idiosyncratic disturbance term. because the data consists of relatively large numbers of panels, specification of heterogeneous time trends across provinces is not considered. however, heterogeneity in coefficients across urban and rural households is allowed by running separate regressions for the two samples. the following is a list of the variables included in x. the data source is china data online, unless otherwise specified. all flow variables are logarized, including per capita disposable income, government social spending as defined as follows, and those in (5) and (6) in the following list. 11 (1) per capita disposable income and its growth. according to the permanent income theory of saving, they should have positive effects on saving if the increase in income is viewed as temporary income. (2) old (65 years and older) and young (14 years and younger) dependency ratios. data is available from 1990 onwards and is obtained from the website of the national bureau of statistics of china and its various printed editions of china population statistics yearbooks. since the sample sizes of the censuses, and hence the dependency ratio data, are drastically different in years 2000, 2005, and 2010 from those in the rest of the years, data for these 3 years are linearly interpolated. according to the life cycle theory, the middle-aged save the most; thus, the age dependency ratios should have negative effects on saving. however, the effects may be muffled if the middle-aged are keen on saving for their children’s future education and are burdened by hikes in education and housing cost, and the old are frugal due to desires to leave bequest to their children and concerns about increased longevity. (3) share of urban workers in state-owned enterprises and per capita government spending on culture, education, science, and healthcare (government social spending hereafter). jobs in state-owned enterprises are viewed as more stable than in private enterprises, although to a lesser extent after privatization of state-owned enterprises started. note that the share of workers in state-owned enterprises is not considered for rural household saving. government social spending is considered since it may reduce households’ precautionary saving. these two variables should have negative effects on saving. (4) share of workers in urban areas as a proxy for the urbanization ratio. it is expected to have negative effects on both urban and rural saving. a higher urbanization ratio means households are more likely to live in larger communities and population mobility may also be higher. as a result, households are expected to engage in more conspicuous consumption and have lower saving rates. a higher urbanization level also means a higher portion of the rural areas are close to cities, and rural households presumably have more personal connections with urban households. as a result, rural households are also more likely to be exposed to transient observers and influenced by urban cultures. note that this variable does not represent the differences between urban and rural households in such factors as income uncertainty, since the two samples will be estimated separately. (5) passenger traffic to population ratio, per capita business volume of postal communications and telecommunications (communication volume hereafter), and per capita number of telephone units. these variables are not only directly and indirectly associated with the degree of population mobility, they also reflect the intensity of intra and inter-community interactions. higher population mobility exerts a negative effect on saving, according to veblen’s theory. the more intense the interactions are, the more likely a community will undergo cultural changes. the data source used to calculate these ratios is the website and the printed publications of the national bureau of statistics of china. due to a high correlation coefficient (0.97) between per capita communication volume and per capita telephone units, these two variables are included in the regressions separately.7 (6) variables representing international openness, including per capita foreign direct investment inflows and per capita international trade volume (sum of exports and imports). these two variables measure economic openness and personal contact with 7 passenger traffic has relatively low correlation with these two variables, however. 12 cultures from abroad directly and indirectly. to be consistent with other variables, these variables are recalibrated to measures in chinese yuan using annual exchange rates from fred economic data, maintained by the federal reserve bank of st. louis. they should also have negative effects on saving based on previous reasoning. since the correlation coefficient between them is high (0.85), they are also included in the regressions separately. per capita income growth was rising for both urban and rural households from the end of the 1990s to the end of the data period in this study. all other variables exhibited clear upward trends since 1990, except for the young dependency ratio and the share of urban workers in state-owned enterprises, both of which trended downward sharply. all variables are available for all 31 provinces for at least some periods, but the maximum length of over half of the variables is 21-23 years. as a result, the number of panels is considerably greater than the number of periods. also note that since data availability varies for different variables, the sample size differs slightly when different covariates are included. the wooldridge test for serial correlation (drukker, 2003) rejected the null of no autocorrelation in the idiosyncratic errors. the modified wald test also detected the presence of group heteroskedasticity. as a result, robust standard errors will be used in all regressions. cross-sectional dependence is also detected using the pesaran’s test (de hoyos & sarafidis, 2006); thus, the within estimator may be biased, according to driscoll and kraay (1998), and regressions with the driscoll-kraay standard errors will also be run as an alternative. the dynamic specification may introduce bias to the fixed effect estimator due to correlation between the lagged saving rate si,t-1 and the error term εit. this problem is magnified when the number of time periods is short relative to the number of panels, which is the case here. while the number of panels is 31, the panel length is only between 17 and 21, depending on which variables are included in the regressions. thus, in addition to the fixed effect estimator, regressions are also run using the arellano-bond estimator as a better alternative, which corrects for this problem. the sargan test of over-identifying restrictions failed to reject the joint validity of the instruments at the 1% level in two cases and at least at the 5% level in all other cases, even though heteroskedasticity may cause over-rejection of the test. the arellano-bond test results of autocorrelation in first-differenced errors are all satisfactory; that is, there is first order serial correlation in the disturbances, but not the second order. 4. results estimation results are presented in the tables in the appendix. table 1 shows the results for urban households using the within estimator. lagged saving rate, disposable income and its growth are all positive and significant in most cases, as expected. both young and old dependency ratios are insignificant, probably due to the reasons mentioned in the previous section. in addition, the relatively high correlation between the young dependency ratio and income per capita (correlation coefficients are -0.71 and -0.79 for urban and rural households respectively) may also skew the results. the coefficients for government social spending and the share of state owned enterprises are not significant, and the signs are inconsistent or not as expected. however, estimations for the variables representing urbanization and population mobility are almost all negative, and are significant across the regressions, except for passenger traffic. the results for rural households using the within estimator are generally similar (table 2). however, the income elasticity of saving, indicated by the coefficient of disposable income, is much higher for rural households, probably due to their more cautious attitude towards increased income. that is, increased income is more likely to be treated as temporary income 13 by rural households. unlike the regressions for urban households, the parameter for government social spending is negative and significant in one case for rural households. in addition, the coefficient for communication volume is no longer significant; however, those for the variables representing international openness (foreign direct investment and international trade) are both highly significant. since the data exhibits cross-sectional dependence, estimations with the within estimator are also obtained using a procedure written by hoechle (2007) that adopts the driscoll-kraay standard errors. the results are reported in tables 3 and 4. the estimated coefficients are similar in general, but the p-values are different for some variables. the biggest change is that disposable income growth is now insignificant for rural households. however, the variables affecting precautionary saving and conspicuous consumption (the variables in (3) – (6) in the previous section) are still negative in general. as in previous regressions, the urbanization ratio is again significant in most regressions. government social spending, communication volume, per capita telephone units, foreign direct investment, and international trade are also significant in some regressions. the estimation results using the arellano-bond robust estimator are reported in tables 5 and 6 in the appendix, along with the results of the sargan test and the arellano-bond test. the results are largely the same as with the within estimator. for the variables in (3) to (6) in the variable list, the coefficients are generally negative, as expected, but the p-values for the vast majority of them are lower. thus, there are more significant estimations for the urban household sample. the coefficients for urbanization and communication volume are consistently significant, and the share of state-owned enterprises, per capita telephone units, foreign direct investment, and international trade are also significant in about half of the regressions. as a robustness check, regressions are also run with no time trend, a quadratic trend, and time dummies in lieu of a linear trend. both components of the quadratic trend are insignificant in all regressions except for one, but the hypothesis that all time dummies are zeros is strongly rejected. the results are not drastically different from previous regressions (see table 7 for some of the results using the arellano-bond estimator). disposable income and its growth continue to have positive and significant estimates. estimations for the age dependency ratios are still largely insignificant. the parameters for the variables representing urbanization, population mobility, and international openness continue to be negative and significant in many of the regressions. in summary, the estimation results are robust using alternative estimators, explanatory variables, and specifications of the common time effects. of all the explanatory variables, only two variables, disposable income and its growth, are estimated to have positive effects on household saving without ambiguity. these variables trended up in the past several decades, which were major factors for past increase in household saving. however, as economic growth slows down inevitably, the support of higher saving rates from disposable income increase is bound to fade in the future. little evidence is found for the life cycle theory through the results on the age dependency ratios. however, all other variables in the model are estimated to have negative effects on saving to various degrees of consistency. the estimations for government social spending (for rural households mainly) and the share of workers in state-owned enterprises (for urban households) suggest weak evidence of previous increase in precautionary saving. as households are weaned off government provided education and healthcare, precautionary saving may continue to increase, but only to a limited extent given that social welfare measures in rural areas are improving and the provincial mean share of state-owned enterprises already dropped to 14.4% in 2011. 14 meanwhile, the variables that would enhance conspicuous consumption will most likely trend up in the future, including the urbanization ratio, the variables representing population mobility and interactions (passenger traffic, communication volume, telephone units) and international openness (foreign direct investment and international trade volume), further putting downward pressure on saving. urbanization will likely accelerate as the government is considering it a priority to aid future economic transformation. population mobility will continue to increase with the relaxation of restrictions on labor mobility. status goods will become more readily available as international trade expands. cultural influences from the rest of the world will permeate further and individuals’ life styles will continue to transform as international openness deepens. together, these factors can outweigh the positive effect of higher income, and the current high household saving may not persist. 5. final remarks in addition to conventional theories, this paper considers the rapid cultural and social changes that are happening in china and incorporates non-conventional theories on consumption and saving that help explain china’s household saving patterns. among the conventional explanatory variables, the paper finds that per capita disposable income and its growth contribute to higher household saving, consistent with the permanent income theory. the young and old dependency ratios are generally insignificant with few exceptions, and the signs are not consistent. this insignificance may be caused by the custom of bequeathing, increased longevity, altruistic saving for children’s education, increase in education and housing cost, and correlation between the young age dependency ratio and per-capita disposable income. the paper’s unique contribution to the literature is the exploration of the possible presence of conspicuous consumption in china and its effect on household saving. expanding from veblen’s theory, it finds evidence that urbanization, increased population mobility, and a greater degree of international openness all depress household saving, likely through higher conspicuous consumption. the list of explanatory factors is further broadened from the perspective of precautionary saving, and there is evidence that while the decline in state ownership prompted urban households to save more, increased government spending on education and healthcare may have the opposite effect in rural areas. observations of conspicuous consumption as a potential contributing factor to declining household saving are certainly not confined to this research or to the chinese economy, as reviewed in the first section of this paper. as international openness coupled with rapid economic development often leads to cultural shifts, swift urbanization, and increased population mobility, the findings on chinese household saving could also shed light on household saving trends in other developing and emerging countries which are following the footsteps of china, such as india, vietnam, and cambodia. as an important component of national saving, household saving is a critical source for financing investment, especially when the government and businesses engage in excessive borrowing, as china is currently experiencing, and many other emerging economies experienced in the past, such as those in predicament during the east asian financial crisis. if excess status consumption becomes widespread and the competitive nature of conspicuous consumption is unleashed, the resulting decline in household saving can be self-reinforcing. the implications can be particularly grave for developing and emerging economies with their growth relying more on investment, but their ability to borrow from the international market far more limited than developed economies. the policy implications of the findings in association with changing patterns of households saving can be far-reaching, ranging from taxation on luxury goods (see bagwell & bernheim, 1996), to evaluation of financing sources of investment, and long term growth strategies for 15 developing and emerging economies. the choice of policy regime leading to or away from a more egalitarian society also matters to saving and economic growth to the extent that wealth distribution influences the drive for conspicuous consumption, although the overall link between economic inequality and household saving is still much debatable, as corneo and jeanne (2001) and roychowdhury (2017) showed. future avenues of further investigation may include incorporating provincial level data that reflects household assets, life expectancy, corporate saving, housing price indexes (ideally differentiating between the rural and urban housing markets), and other factors that may affect household saving. moreover, it will be worthwhile to confirm the findings and further understand this issue using household level data. as empirical work on conspicuous consumption is still relatively rare and the topic remains inadequately researched, similar studies can be extended to economies that are also undergoing rapid changes economically and culturally. 16 appendix table 1 – urban households: the within estimator with linear time trend (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.43 *** 0.31 *** 0.43 *** 0.31 *** 0.31 *** (0.000) (0.004) (0.000) (0.006) (0.005) disposable income 3.90 ** 6.70 * 2.99 7.50 * 9.59 ** (0.017) (0.071) (0.115) (0.079) (0.034) disposable income growth 0.06 *** 0.05 *** 0.05 *** 0.05 *** 0.05 *** (0.000) (0.008) (0.002) (0.001) (0.007) young depdency ratio 0.01 0.01 0.01 0.01 0.00 (0.798) (0.809) (0.824) (0.827) (0.974) old dependency ratio 0.03 0.18 0.05 0.18 0.17 (0.780) (0.312) (0.663) (0.287) (0.305) government social spending 1.56 0.40 1.41 0.03 -0.38 (0.165) (0.835) (0.221) (0.989) (0.852) share of state-owned ent. 0.01 -0.05 0.03 -0.04 -0.02 (0.709) (0.163) (0.422) (0.279) (0.610) urbanization -0.06 -0.22 ** -0.07 * -0.21 ** -0.21 ** (0.112) (0.031) (0.064) (0.028) (0.026) passenger traffic 0.17 -1.13 0.13 -0.92 -0.88 (0.780) (0.308) (0.831) (0.361) (0.405) communication volume -2.07 ** -1.80 ** -2.83 *** (0.018) (0.023) (0.002) telephone units -1.97 * -1.89 * -0.86 (0.066) (0.097) (0.376) foreign direct investment -0.09 -0.34 -0.19 (0.677) (0.157) (0.441) international trade volume -0.74 -0.31 -0.78 (0.167) (0.700) (0.316) t 0.49 0.04 0.47 * -0.06 0.43 (0.120) (0.906) (0.089) (0.873) (0.252) ***p < 0.01, **p < 0.05, *p < 0.1 17 table 2 – rural households: the within estimator with linear time trend (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.53 *** 0.45 *** 0.52 *** 0.44 *** 0.41 *** (0.000) (0.000) (0.000) (0.000) (0.000) disposable income 16.30 *** 14.28 *** 15.99 *** 15.86 *** 17.49 *** (0.000) (0.000) (0.000) (0.000) (0.000) disposable income growth 0.07 ** 0.07 ** 0.07 ** 0.06 * -0.03 (0.024) (0.045) (0.035) (0.055) (0.489) young depdency ratio 0.03 -0.02 0.04 -0.03 -0.06 (0.583) (0.809) (0.439) (0.689) (0.494) old dependency ratio 0.03 0.06 0.01 0.04 0.05 (0.863) (0.806) (0.967) (0.881) (0.831) government social spending -1.65 0.54 -4.60 ** -5.78 0.18 (0.465) (0.878) (0.040) (0.102) (0.963) urbanization -0.16 * -0.10 -0.24 *** -0.32 *** -0.24 ** (0.072) (0.116) (0.002) (0.003) (0.033) passenger traffic -1.37 -0.70 -0.77 -0.83 -0.86 (0.280) (0.648) (0.451) (0.469) (0.417) communication volume -0.97 1.15 -2.60 (0.429) (0.304) (0.195) telephone units -0.29 0.21 0.74 (0.863) (0.879) (0.618) foreign direct investment -1.17 *** -1.00 ** -0.11 (0.008) (0.042) (0.870) international trade volume -3.67 *** -4.66 *** -4.03 ** (0.007) (0.006) (0.035) t -0.25 -0.28 -0.76 -0.27 -0.22 (0.592) (0.589) (0.104) (0.560) (0.683) ***p < 0.01, **p < 0.05, *p < 0.1 18 table 3 – urban households: the within estimator with driscoll and kraay standard errors (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.43 *** 0.31 *** 0.43 *** 0.31 *** 0.31 *** (0.000) (0.002) (0.000) (0.002) (0.002) disposable income 3.89 * 6.70 ** 2.99 7.50 *** 9.42 *** (0.083) (0.027) (0.128) (0.003) (0.000) disposable income growth 0.06 ** 0.05 * 0.05 * 0.05 * 0.05 (0.028) (0.085) (0.055) (0.076) (0.120) young depdency ratio 0.01 0.01 0.01 0.01 0.00 (0.837) (0.871) (0.865) (0.893) (0.985) old dependency ratio 0.03 0.18 0.05 0.18 0.17 (0.728) (0.192) (0.609) (0.239) (0.268) government social spending 1.56 0.40 1.41 0.03 -0.39 (0.177) (0.865) (0.136) (0.987) (0.854) share of state-owned ent. 0.01 -0.05 0.03 -0.04 -0.02 (0.687) (0.144) (0.324) (0.374) (0.595) urbanization -0.06 -0.22 ** -0.07 -0.21 ** -0.21 *** (0.259) (0.017) (0.231) (0.021) (0.010) passenger traffic 0.17 -1.13 0.13 -0.92 -0.88 (0.903) (0.478) (0.928) (0.595) (0.595) communication volume -2.07 *** -1.80 *** -2.83 *** (0.001) (0.001) (0.000) telephone units -1.97 * -1.89 -0.86 (0.064) (0.138) (0.414) foreign direct investment -0.09 -0.34 -0.19 (0.668) (0.132) (0.395) international trade volume -0.74 -0.31 -0.78 (0.322) (0.733) (0.265) t 0.49 * 0.04 0.47 * 0.06 0.44 (0.057) (0.931) (0.084) (0.920) (0.404) ***p < 0.01, **p < 0.05, *p < 0.1 19 table 4 – rural households: the within estimator with driscoll and kraay standard errors (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.53 *** 0.45 *** 0.52 *** 0.44 *** 0.41 *** (0.000) (0.000) (0.000) (0.000) (0.000) disposable income 16.30 *** 14.28 *** 15.99 *** 15.86 *** 17.49 *** (0.000) (0.001) (0.000) (0.000) (0.000) disposable income growth 0.07 0.07 0.07 0.06 -0.03 (0.346) (0.304) (0.377) (0.463) (0.565) young depdency ratio 0.03 -0.02 0.04 -0.03 -0.06 (0.512) (0.791) (0.487) (0.722) (0.385) old dependency ratio 0.03 0.06 0.01 0.04 0.05 (0.859) (0.820) (0.969) (0.895) (0.844) government social spending -1.65 0.54 -4.60 *** -5.78 *** 0.18 (0.194) (0.770) (0.000) (0.003) (0.930) urbanization -0.16 ** -0.21 -0.24 *** -0.32 ** -0.24 * (0.034) (0.104) (0.005) (0.017) (0.056) passenger traffic -1.37 -0.29 -0.77 -0.83 -0.86 (0.293) (0.168) (0.605) (0.556) (0.499) communication volume -0.97 1.15 -2.60 (0.161) (0.282) (0.199) telephone units -0.29 0.21 0.74 (0.868) (0.896) (0.650) foreign direct investment -1.17 ** -1.00 -0.11 (0.044) (0.149) (0.885) international trade volume -3.67 *** -4.66 *** -4.03 *** (0.001) (0.000) (0.000) t -0.25 -0.28 -0.76 ** -0.27 -0.22 (0.339) (0.603) (0.012) (0.659) (0.787) ***p < 0.01, **p < 0.05, *p < 0.1 20 table 5 – urban households: arellano-bond estimator with time trend (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.41 *** 0.27 *** 0.41 *** 0.27 *** 0.28 *** (0.000) (0.001) (0.000) (0.002) (0.001) disposable income 4.80 ** 7.99 ** 4.02 ** 9.04 ** 11.82 *** (0.003) (0.016) (0.031) (0.030) (0.004) disposable income growth 0.06 *** 0.05 *** 0.06 *** 0.06 *** 0.06 *** (0.000) (0.008) (0.000) (0.001) (0.002) young depdency ratio 0.00 -0.01 0.02 0.02 0.01 (0.930) (0.870) (0.528) (0.595) (0.708) old dependency ratio 0.05 0.19 0.01 0.12 0.12 (0.650) (0.205) (0.915) (0.313) (0.302) government social spending 1.19 -0.19 0.99 -0.70 -1.08 (0.319) (0.923) (0.408) (0.734) (0.617) share of state-owned ent. 0.01 -0.09 *** 0.02 -0.06 * -0.05 (0.876) (0.005) (0.554) (0.070) (0.121) urbanization -0.08 * -0.21 ** -0.08 * -0.20 ** -0.19 *** (0.090) (0.030) (0.095) (0.023) (0.021) passenger traffic 0.35 -0.83 -.00 -1.11 -1.02 (0.586) (0.486) (0.994) (0.381) (0.472) communication volume -2.50 *** -2.09 *** -3.41 *** (0.006) (0.009) (0.001) telephone units -2.29 * -2.46 * -1.21 (0.051) (0.081) (0.283) foreign direct investment -0.15 -0.43 * -0.24 (0.456) (0.051) (0.285) international trade volume -0.89 * -0.75 -1.22 * (0.063) (0.263) (0.055) t 0.55 * -0.06 0.53 * 0.02 0.60 (0.094) (0.875) (0.080) (0.951) (0.153) sargan test 0.112 0.013 0.202 0.052 0.075 arrelano-bond test ar(1) 0.023 0.029 0.020 0.024 0.031 ar(2) 0.269 0.354 0.246 0.358 0.352 ***p < 0.01, **p < 0.05, *p < 0.1 21 table 6. rural households: arellano-bond estimator with time trend (dependent variable: saving rate. p-values in parentheses) variable (1) (2) (3) (4) (5) lagged saving 0.52 *** 0.45 *** 0.48 *** 0.41 *** 0.44 *** (0.000) (0.000) (0.000) (0.000) (0.000) disposable income 16.81 *** 14.30 *** 15.77 *** 15.42 *** 17.38 *** (0.000) (0.000) (0.000) (0.000) (0.000) disposable income growth 0.07 ** 0.07 ** 0.04 0.03 0.06 (0.027) (0.025) (0.399) (0.493) (0.133) young depdency ratio 0.02 -0.03 0.04 -0.02 -0.01 (0.710) (0.697) (0.341) (0.786) (0.852) old dependency ratio 0.02 0.03 -0.08 -0.07 -0.09 (0.893) (0.892) (0.613) (0.731) (0.662) government social spending -1.58 1.03 -3.98 * -4.99 -0.50 (0.508) (0.788) (0.072) (0.203) (0.896) urbanization -0.16 * -0.18 -0.23 *** -0.27 *** -0.18 * (0.066) (0.136) (0.001) (0.002) (0.061) passenger traffic -1.75 -0.26 -1.66 -1.27 -0.42 (0.181) (0.878) (0.250) (0.422) (0.802) communication volume -1.47 1.11 -3.39 (0.274) (0.369) (0.161) telephone units -1.14 -0.22 -0.25 (0.534) (0.874) (0.881) foreign direct investment -1.07 * -0.87 -0.32 (0.081) (0.207) (0.703) international trade volume -4.10 *** -5.17 *** -5.09 *** (0.001) (0.001) (0.002) t -0.08 -0.05 -0.75 -0.15 0.76 (0.877) (0.934) (0.117) (0.763) (0.232) sargan test 0.023 0.016 0.105 0.073 0.054 arrelano-bond test ar(1) 0.000 0.001 0.000 0.001 0.001 ar(2) 0.979 0.982 0.953 0.830 0.829 ***p < 0.01, **p < 0.05, *p < 0.1 22 table 7 – alternative specifications of common time effects with the arellano-bond estimator (dependent variable: saving rate. p-values in parentheses) variable urban rural urban rural urban rural lagged saving 0.41 *** 0.52 *** 0.40 *** 0.52 *** 0.47 *** 0.43 *** (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) disposable income 5.03 *** 16.64 *** 7.23 ** 16.28 *** 7.10 ** 25.54 *** (0.003) (0.000) (0.023) (0.000) (0.046) (0.000) 0.06 *** 0.07 * 0.06 *** 0.07 ** 0.20 *** 0.24 *** (0.000) (0.060) (0.001) (0.014) (0.000) (0.000) 0.02 0.02 0.01 0.02 -0.04 0.12 * (0.610) (0.684) (0.844) (0.734) (0.225) (0.085) 0.05 0.03 0.05 0.01 0.03 -0.30 * (0.628) (0.885) (0.663) (0.969) (0.762) (0.076) 2.46 *** -2.17 -0.40 -1.02 -0.70 -0.86 (0.006) (0.212) (0.854) (0.697) (0.747) (0.731) -0.04 0.00 0.02 (0.231) (0.986) (0.675) urbanization -0.12 ** -0.14 * -0.08 * -0.16 * -.00 -0.15 ** (0.015) (0.075) (0.079) (0.079) (0.999) (0.034) passenger traffic 0.17 -1.82 0.23 -1.69 0.48 -1.65 ** (0.782) (0.154) (0.713) (0.230) (0.318) (0.049) -1.73 *** -1.34 -1.97 *** -1.80 -1.36 ** 1.14 (0.003) (0.167) (0.009) (0.332) (0.044) (0.445) -0.91 ** -4.11 *** -1.00 ** -4.08 *** -0.12 -0.91 (0.046) (0.001) (0.031) (0.004) (0.763) (0.342) t -0.02 0.10 (0.954) (0.912) t 2 0.02 -0.01 (0.231) (0.710) no trend quadratic trend time dummies communication volume international trade volume disposable income growth young depdency ratio old dependency ratio government social spending share of stateowned enterprises ***p < 0.01, **p < 0.05, *p < 0.1 23 references 1. bagwell, l. s., & bernheim, b. d. 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(2014). brothers, household financial markets and savings rate in china. journal of development economics, 111(november), 34–47. 3 _15-03_ kurniasari international journal of economic behavior, 5, n. 1, pp. 3 the relationship between csr and profitability to firm value received: february 13, 2014 this study aims to investigate the relationship between corporat (csr), profitability to firm value. the samples are all manufacturer companies that listed in sri-kehati index by using control kehati index). this study is empirically examined between csr disclosure (enviro energy, health and safety, product, and community se value. for company that listed in sri kehati index, this study found no significant relationship between csr to firm value but there were positive significant r profitability to firm value. keywords : corporate social responsibility (csr), corporate social responsibility index (csri), firm value, profitability, firm size 1. introduction corporate social responsibility (csr) is getting an increasingly import the world, due to a new attention to all the aspects of firms activities and their relationships with stakeholders. carroll (1999) f is driven by greater sensitivity and public expectation of civic duty means going beyond adding value to the bottom line. currently, csr reporting practice development is globally imbalance. in asia, evidence shows that many developing co corporate social reporting. nurlela and islahuddin (2008) analyzed the effect of csr on firm value by using the percentage of management ownership as a moderating variable showed a significant effect on firm value but partially only percentage of management ownership has an effect on firm value. in indonesia, many companies implement the corporate social responsibility programs and concern to the social and environmental problem. companies have to report any expenses international journal of economic behavior, vol 5, n. 1, pp international journal of economic behavior, 5, n. 1, pp. 3-14, 201 the relationship between csr and profitability to firm value in sri-kehati index widuri kurniasari soegijapranata catholic university, indonesia yusni warastuti soegijapranata catholic university, indonesia accepted: september 23, 2014 online published: abstract this study aims to investigate the relationship between corporate social responsibility to firm value. the samples are all manufacturer companies that listed in kehati index by using control samples (manufacturers company kehati index). this study is empirically examined between csr disclosure (enviro th and safety, product, and community services), profitability (roa) and firm value. for company that listed in sri kehati index, this study found no significant relationship between csr to firm value but there were positive significant relationship betwee corporate social responsibility (csr), corporate social responsibility index (csri), firm value, profitability, firm size corporate social responsibility (csr) is getting an increasingly important issue the world, due to a new attention to all the aspects of firms activities and their relationships carroll (1999) found that public interest on the role of businesses in society is driven by greater sensitivity and awareness of environmental and ethical matters. the public expectation of civic duty means going beyond adding value to the bottom line. currently, csr reporting practice development is globally imbalance. in asia, evidence shows that many developing countries are moving in a positive direction with reference to nurlela and islahuddin (2008) analyzed the effect of csr on firm value by using the percentage of management ownership as a moderating variable showed a fect on firm value but partially only percentage of management ownership has an in indonesia, many companies implement the corporate social responsibility programs and concern to the social and environmental problem. companies have to report any expenses international journal of economic behavior, vol 5, n. 1, pp. 31-4 31 14, 201 the relationship between csr and profitability to firm value kehati index widuri kurniasari soegijapranata catholic university, indonesia yusni warastuti catholic university, indonesia online published: march 28, 2015 e social responsibility to firm value. the samples are all manufacturer companies that listed in samples (manufacturers company not listed in srikehati index). this study is empirically examined between csr disclosure (environment, vices), profitability (roa) and firm value. for company that listed in sri kehati index, this study found no significant relationship lationship between corporate social responsibility (csr), corporate social responsibility index ant issue for all over the world, due to a new attention to all the aspects of firms activities and their relationships ound that public interest on the role of businesses in society awareness of environmental and ethical matters. the public expectation of civic duty means going beyond adding value to the bottom line. currently, csr reporting practice development is globally imbalance. in asia, evidence untries are moving in a positive direction with reference to nurlela and islahuddin (2008) analyzed the effect of csr on firm value by using the percentage of management ownership as a moderating variable showed a fect on firm value but partially only percentage of management ownership has an in indonesia, many companies implement the corporate social responsibility programs and concern to the social and environmental problem. companies have to report any expenses 41, 2015 32 occurred related to csr program in financial report. this study will analysis the relationship between csr and profitability to firm value. firms, used as samples, are listed firms in indonesian stock exchange (idx) selected from sri-kehati index. sri-kehati index is stock market index that consists of 25 indonesian firms that have excellent performance in promoting sustainable businesses, as well as having awareness of environmental, social and good corporate governance. 2. literature review 2.1. corporate social responsibility in indonesia, the discourse on csr began to surface since 2001, but prior to this discourse has surfaced many companies csr and very few are expressed in a report. this was probably because we do not have any means of support such as: reporting standards, skilled personnel (both accountant that prepare the report and the auditors). so that csr is not considered important to report in detail because no one requires reporting on csr. csr as an idea, the company no longer faced with the responsibility that rests on a single bottom line, the value of the company (corporate value) are reflected in the financial condition (financial) only. but corporate responsibility should be based on the triple bottom lines. here, other than the financial bottom lines also social and environmental. because financial conditions are not enough to guarantee the value of the company to grow in a sustainable. sustainability will only be guaranteed if the company shows interest to the social and environmental dimensions. it is a fact how the resistance communities, in different places and times come to the surface of the companies that are considered not pay attention to aspects of social, economic and environmental (nurlela and islahuddin, 2008). the information disclosed in the annual report can be grouped into two, namely the mandatory disclosure, which is the minimum disclosures that must be disclosed (required regulations), and voluntary disclosure, where companies are free to choose the type of information disclosed that if only to support decision-making and increase the company's value to stakeholders and shareholders. voluntary disclosure rise because of the awareness of the surrounding environment, successful companies not only on profit but also concern for the environment surrounding communities (yuliani, 2003). research conducted by (maksum and kholis, 2003) states that have corporate social responsibility (csr) is an important thing to do for a company. masnila (2007) stated that csr disclosure in annual reports can be grouped based on the theme that was revealed, the type of disclosure, the level of disclosure, as well as locations where social responsibility is expressed. according to hackston and milne (1996) in nisya (2008), csr is the process of communicating the social and environmental impact of economic activities on the organization of special interest groups and the community as a whole. in its operations, the company often causes problems for the environment and society as a social problem, pollution, natural resource, and waste. according to the prince of wales foundation, there are five important things that can affect the implementation of csr, first, concerning the empowerment of human capital or human. second, the environments are talking about the environment. third is good corporate governance. fourth is social cohesion. that is, in implementing csr not to cause social jealousy. fifth is the economic strength or bamboozle environment towards economic independence. in company law also mentioned the regulations regarding concerns about the environment, which is set in the company law article 74 paragraph (1) which states: limited liability company act states that the company runs its business activities in the field and or international journal of economic behavior, 5, n. 1, pp. 3 relating to any source natural resources required to carry out social and environmental responsibility. this is what is meant by corporate social responsibility 2.2. signaling theory signaling theory offers an intriguing opportunity for reconciling the strategic materialist approaches in the social sciences with approaches centered value, and ritual. signaling theory is one theory that underlies the voluntary disclosure of where the company was driven to provide information to outside parties. signaling theory is useful for describing behavior when two parties (in organizations) have access to different information. typically, one party, the sender, must choose whether and how to communicate (or signal) that information, and the other party, the receiver, must choose how to interpret the signal. accordi prominent position in a variety of management literatures, including strategic management, entrepreneurship, and human resource management. signaling theory in science communication in the disciplines of accounting is used explain and predict the behavior patterns of communication to the public managers. signaling theory in accounting for one of its functions is to assess any issued by the management to shareholders. the manager seeks to c information which tends to contain good news is to increase shareholder wealth 2004). according to signal theory, companies with high earnings quality will result in persistent earnings, and are entitled to a high valuation produce low-quality earnings are not persistent, and deserves a low valuation of investors indicated a low stock market prices (bandi, 2009). the theory of signals related to the capital market response in response bad news coming from a company that has been listed in the investment portfolio of the investor. with the information released by management to be addressed as good news or bad news can help investors to make upward revisions to earnings company in the coming and decided to buy the company's stock. conversely, if the prediction is higher than actual, which means bad news, investors will revise down and immediately sell the shares of the company because the company's (ambarwati, 2008). 2.3. firm value the company's main objective is to increase shareholder value. value of the company is the investor's perception of the level of success of a company that is often associated with prices (sujoko and ugy, 2007). the value of the company will be reflected in its stock price. the market price of the company’s shares that is formed between the buyer and the seller in the transaction is called the market value of the company, beca reflection of the true value of the company's assets. the value of a company formed through the indicator value is strongly influenced by the stock market investment opportunities. the existence of investment opportunities can provide a positive signal about the company's growth in the future, so as to enhance shareholder value. literally, the value of the company can be observed through shareholder wealth that can be measured by its share price in the stock market (hasnawati, 2005) international journal of economic behavior, 5, n. 1, pp. 3-14, 201 relating to any source natural resources required to carry out social and environmental this is what is meant by corporate social responsibility. signaling theory offers an intriguing opportunity for reconciling the strategic materialist approaches in the social sciences with approaches centered on meaning, social value, and ritual. signaling theory is one theory that underlies the voluntary disclosure of where the company was driven to provide information to outside parties. signaling theory is useful for describing behavior when two parties (in organizations) have access to different information. typically, one party, the sender, must choose whether and how to communicate (or signal) that information, and the other party, the receiver, must choose how to interpret the signal. accordingly, signaling theory holds a prominent position in a variety of management literatures, including strategic management, entrepreneurship, and human resource management. signaling theory in science communication in the disciplines of accounting is used explain and predict the behavior patterns of communication to the public managers. signaling theory in accounting for one of its functions is to assess any private information that will be issued by the management to shareholders. the manager seeks to communicate private information which tends to contain good news is to increase shareholder wealth according to signal theory, companies with high earnings quality will result in persistent earnings, and are entitled to a high valuation from investors. instead, the company will quality earnings are not persistent, and deserves a low valuation of investors indicated a low stock market prices (bandi, 2009). the theory of signals related to the capital market response in response bad news coming from a company that has been listed in the investment portfolio of the investor. with the information released by management to be addressed as good news or bad news can help investors to make upward revisions to earnings and performance of the company in the coming and decided to buy the company's stock. conversely, if the prediction is higher than actual, which means bad news, investors will revise down and immediately sell the shares of the company because the company's performance does not match the expected the company's main objective is to increase shareholder value. value of the company is the investor's perception of the level of success of a company that is often associated with prices (sujoko and ugy, 2007). the value of the company will be reflected in its stock price. the market price of the company’s shares that is formed between the buyer and the seller in the transaction is called the market value of the company, because the market price of the stock is considered as a reflection of the true value of the company's assets. the value of a company formed through the indicator value is strongly influenced by the stock market investment opportunities. stment opportunities can provide a positive signal about the company's growth in the future, so as to enhance shareholder value. literally, the value of the company can be observed through shareholder wealth that can be measured by its share price (hasnawati, 2005). 33 14, 201 relating to any source natural resources required to carry out social and environmental signaling theory offers an intriguing opportunity for reconciling the strategic-actor and on meaning, social value, and ritual. signaling theory is one theory that underlies the voluntary disclosure of signaling theory is useful for describing behavior when two parties (individuals or organizations) have access to different information. typically, one party, the sender, must choose whether and how to communicate (or signal) that information, and the other party, the ngly, signaling theory holds a prominent position in a variety of management literatures, including strategic management, signaling theory in science communication in the disciplines of accounting is used to explain and predict the behavior patterns of communication to the public managers. signaling private information that will be ommunicate private information which tends to contain good news is to increase shareholder wealth (jaswadi, according to signal theory, companies with high earnings quality will result in persistent from investors. instead, the company will quality earnings are not persistent, and deserves a low valuation of investors the theory of signals related to the capital market response in response to good news and bad news coming from a company that has been listed in the investment portfolio of the investor. with the information released by management to be addressed as good news or bad and performance of the company in the coming and decided to buy the company's stock. conversely, if the prediction is higher than actual, which means bad news, investors will revise down and immediately sell performance does not match the expected the company's main objective is to increase shareholder value. value of the company is the investor's perception of the level of success of a company that is often associated with stock the value of the company will be reflected in its stock price. the market price of the company’s shares that is formed between the buyer and the seller in the transaction is called use the market price of the stock is considered as a reflection of the true value of the company's assets. the value of a company formed through the indicator value is strongly influenced by the stock market investment opportunities. stment opportunities can provide a positive signal about the company's growth in the future, so as to enhance shareholder value. literally, the value of the company can be observed through shareholder wealth that can be measured by its share price 34 2.4. corporate social responsibility and profitability the main objective of the company is gaining profits, yet in the development of today's companies can not just focus on maximum profit regardless of the surrounding environment. concept 3 p: profit, people, and planet must always strived to be run simultaneously and continuously. there is a significant relationship between csr activities and profitability of the industrial companies. adopting such activities will improve the company’s reputation and positioning in the community and increase customer satisfaction. this however will lead to increase the market share and maximize profits. there is a significant relationship between provide donations and establish non-profit projects and the profitability of industrial companies and there is a significant relationship between support projects and charities associations and the profitability of industrial companies (dabbas and al-rawashdeh, 2012). the results of other studies of olagunju and omeyele (2012) by using a questionnaire to staff from 10 companies located in logos obtain the result that the csr effect on profitability. the consequence of this is csr activities should not only be driven by profit motive but must also be ethical and transparent in the conduct of their business operation while remaining sensitive to the problems and aspirations of their host environment. 2.5. corporate social responsibility and firm value corporate social responsibility is expressed in a report called sustainability reporting (sustainability reporting). csr can be sustained if the program created by a company is really a shared commitment of all the elements that exist within the company itself. the company's main purpose is to increase the firm value. the value of the company is ensured sustainable growth (sustainable) when the company noticed the economic, social and environmental sustainability as a balance between economy, environment and society. csr will increase the value of the company's stock price and the views of corporate profits (earnings) as a result of investors who invest in company stock. nurlela and islahuddin (2008) stated that the presence of good csr practices, the expected value of the company will be judged well by investors. jensen (1986) stated that in the long run no company can maximize the value of the company, if it ignores the interests of stakeholders. in accordance with the views of stakeholder theory, khanifar (2012) found the value of the company in the long run will be determined by the company's relationships with internal and external stakeholder. 3. previous research and hypotheses a number of different methods have been applied to examine the relationship between csr performance and firm value. mcwilliams and siegel (2000) point to a number of problems with csr performance research; inconsistencies in defining csr, selecting samples, as well as research design and misspecification of the models. as a result, a lot of research on csr performance is not comparable. several papers have investigated the relationship between corporate social responsibility and firm value. barnett (2007) insight that the impact of csr on firm value depends on the ability of csr to influence stakeholders in the firm. mcwilliams and siegel (2001) examined the relationship between the corporate governance ratings of firms and their equity prices. their findings were the high governance ratings had higher firm value, higher profits, and higher sales growth. according to orlitzky, et al (2003) insight that the impact of csr on firm value has measured value as either market prices such as stock returns or accounting measures such as return on equity or return on assets. on the basis of previous research there is positive relationship between csr and firm value (sen and bhatachrya, 2001). according to mcguire, et al (1988) a firm has an international journal of economic behavior, 5, n. 1, pp. 3 investment in reputation, including its reputation for being socially responsible. dowell, et (2000) measure firm value and find that multin environmental norms is positively related to higher firm value. nurlela and islahuddin (2008) argued that the disclosure of csr significant effect on firm value more disclosure of csr then it shows the company's value supported by research conducted by and significant relationship between csr on firm value manufacturing handayani (2010) states value. the samples are 18 companies on the stock exchange in the period 2003 tool is regression analysis. his study states that the ratio is found to significantly affect the value of corporate profitability the stock exchange during 2005 of the company. the higher profitability ratios show the company in a will increase the value of his company and andreas (2009) and kiel (2003) value. the higher profitability ratios ( in a corporation showing its financial performance has increased due to greater profits will have an impact on increasing the company's value as more and more investors to their shares to the company in question. maksum and kholis (2003) do for a company and maslina (2007) grouped based on a theme that was revealed, the type of disclo well as locations where social responsibility is expressed. argued that the disclosure of csr significant effect on firm value more disclosure of csr then it shows th supported by research conducted by and significant relationship between csr on firm value manufacturing on the basis of the previous researches then the hypotheses develop in this study are: h1: csr gives positive impact on h2: profitability gives positive impact on firm value of indonesia firms 4. research method 4.1. data and sample firms used as samples are 25 listed firms (suspect) in indonesia stock exchange (idx) selected from sri-k.ehati index. sri indonesia firms that have excellent performance in having awareness on environmental, social and good corporate governance. sample firms were monitored from 2009 to 2010. 4.2. variable measurement and model firm value. firm value is an economic measure reflect business. this study will use market to book value (mtb) as a measurement of firm value. mtm is the proxy for growth opportunity gaver and gaver (1993) and black et al (2006). corporate social responsibility checklist that consists of 78 statements. the data of csr activities are collected from firm international journal of economic behavior, 5, n. 1, pp. 3-14, 201 investment in reputation, including its reputation for being socially responsible. dowell, et (2000) measure firm value and find that multinational enterprises’ adoption of strict global environmental norms is positively related to higher firm value. nurlela and islahuddin (2008) argued that the disclosure of csr significant effect on firm value. this is because more and then it shows the company's value, the better. something similar is supported by research conducted by wijayanti (2009) which concluded that there is a positive and significant relationship between csr on firm value manufacturing. states that the ratio of profitability have a significant effect on firm the samples are 18 companies on the stock exchange in the period 2003 his study states that the ratio is found to significantly affect the of corporate profitability. yuniasih and gede (2008) using a sample of 27 companies on the stock exchange during 2005-2006 with the result that profitability ratios affect the value the higher profitability ratios show the company in a good performance that will increase the value of his company. the results of a similar study revealed also by kiel (2003) which states that the ratio of profitability effect on firm the higher profitability ratios (roe) is the ratio between the net income by total equity in a corporation showing its financial performance has increased due to greater profits will have an impact on increasing the company's value as more and more investors to their ny in question. maksum and kholis (2003) states that social responsibility (csr) is an important thing to and maslina (2007) stated that csr disclosure in annual reports can be grouped based on a theme that was revealed, the type of disclosure, the level of disclosure social responsibility is expressed. nurlela and islahuddin (2008) argued that the disclosure of csr significant effect on firm value. this is because more and more disclosure of csr then it shows the company's value, the better. something similar is supported by research conducted by wijayanti (2009) which concluded that there is a positive and significant relationship between csr on firm value manufacturing. on the basis of the previous researches about the relation between csr and firm value, then the hypotheses develop in this study are: csr gives positive impact on firm value of indonesia firms profitability gives positive impact on firm value of indonesia firms firms used as samples are 25 listed firms (suspect) in indonesia stock exchange (idx) selected ehati index. sri-kehati index is stock market index that consists of 25 indonesia firms that have excellent performance in promoting sustainable businesses, as well as awareness on environmental, social and good corporate governance. sample firms were variable measurement and model . firm value is an economic measure reflecting the market value of a whole business. this study will use market to book value (mtb) as a measurement of firm value. mtm is the proxy for growth opportunity gaver and gaver (1993) and black et al (2006). esponsibility. corporate social responsibility is measured by the csri checklist that consists of 78 statements. the data of csr activities are collected from firm 35 14, 201 investment in reputation, including its reputation for being socially responsible. dowell, et.al ational enterprises’ adoption of strict global environmental norms is positively related to higher firm value. nurlela and islahuddin (2008) this is because more and something similar is which concluded that there is a positive significant effect on firm the samples are 18 companies on the stock exchange in the period 2003-2005. the his study states that the ratio is found to significantly affect the using a sample of 27 companies on 2006 with the result that profitability ratios affect the value good performance that the results of a similar study revealed also by frick which states that the ratio of profitability effect on firm ratio between the net income by total equity in a corporation showing its financial performance has increased due to greater profits, so it will have an impact on increasing the company's value as more and more investors to their is an important thing to stated that csr disclosure in annual reports can be the level of disclosure, as nurlela and islahuddin (2008) this is because more and something similar is which concluded that there is a positive about the relation between csr and firm value, profitability gives positive impact on firm value of indonesia firms firms used as samples are 25 listed firms (suspect) in indonesia stock exchange (idx) selected kehati index is stock market index that consists of 25 businesses, as well as awareness on environmental, social and good corporate governance. sample firms were ing the market value of a whole business. this study will use market to book value (mtb) as a measurement of firm value. mtm is the proxy for growth opportunity gaver and gaver (1993) and black et al (2006). corporate social responsibility is measured by the csri checklist that consists of 78 statements. the data of csr activities are collected from firm 36 annual reports and the content analysis used to check the information about csr activities done by the firms with the list of statements on csr disclosure checklist. if the csr activity of the firm is appropriate to the csr checklist then get score of 1 otherwise get score of 0. the csri score is calculated by score of firm csr activities is divided by total score of csr disclosure checklist. where: csrij = index of corporate social responsibility for company ∑xij = number of items that been disclosed by the companies j nj = number of item for the company j profitability. profitability measures the ability of the company to produce the earnings. profitability is one of the financial performance measurements. this study will use the return on assets (roa) as a measurement of profitability. roa is calculated from earnings after taxes (eat) divided by total assets. firm size. firm size is used as control variables. previous studies used firm size as control variables because the csr activities, in some cases, affected by firm size. the firm size is calculated by the ln of total asset. 4.3. research models the first regression model is used to examine the effect of csr index and profitability to the firm value with firm size as control variable. the multiple regression modelsare represented as follows: firmvaluesuspect = ß0 + ß1csrisuspect + ß2roasuspect + ß3firm_sizesuspect + e (1) firmvaluenonsuspect = ß4 + ß5csrinonsuspect + ß6roanonsuspect + ß7firm_sizenonsuspect + e (2) where: ß0, ß4 = intercept coefficient ß1, ß2, ß3, ß5, ß6, and ß7 = coefficient of each independent variable 5. results and discussion preliminary data used is 40, but due to problems of data normality, outlier removal is carried out as much as 4 data and data processes further as many as 36 data. table 1 presents the descriptive statistics for firm suspect. table 1 – descriptive statistics (firmsuspect) firm_values csris roas ln firm sizes mean 3.025978 0.294878 0.104042 31.49389 median 2.780850 0.282100 0.105950 31.48000 maximum 5.415200 0.512800 0.268400 33.94000 minimum 0.159800 0.230800 0.012300 29.40000 std. dev. 1.397022 0.068312 0.076955 1.454519 observed 36 36 36 36 international journal of economic behavior, 5, n. 1, pp. 3 firm value measured by market value divided book value of equity. the result shows average 3.025978. table 1 shows that the average to the book value of its equity. the standard deviation of this variable is 1.397022 means that the deviation from the average of data for the variable value of the company amounted to 1.397022. csri average of suspect number of social responsibility disclosure profitability measured by net income divided by total assets an average 0.104042. the average mean 10.4042% utilization of all assets owned. table 1 also appears that there is a small variation in csris and roas. it means that the csr activities among firms among firms. the variation of firm size is quite big that means the different of the firm size among firms are quite big. table 2 presents the data used as a non suspect is a company within the and has total assets of nearly the same alike. the data used is a financial statement data of 2009 and 2010 40, but due to problems of multicollinearity. o and data processed further as many as 34 data. table 2 – descriptive statistics (firm firm_values mean 3.485366 median 2.301091 maximum 18.92810 minimum 0.004436 std. dev. 3.677762 observed 34 firm value non suspect is 3.485366, means the value of its equity. value of non companies suspected. csri has an average 0.209653 means non suspect information is 20.9653%, or in other word required disclosure. total disclosure of this group is less than the suspected group. nonsuspect group is 0.063061, 6.3061% of the total utilization of assets. profitability of suspect suspect groups. table 2 also provided that value maximum value is very large when compared to the average value of the enterprise value 3.485366 means that the value of the average market price for 3:48 times compared to the book value of equity per share disclosure index is small, with an average of 0.209653 companies do as much disclosure of 14 items of 68 disclosure items that can be done variable roa as a measure of profitability has little variability with an average value of 0.063061, which means that the average non assets. firm size has a low variability the results of this study using multiple regression models are given in table 3. the first part of the table 3 is regression model with firm value suspect as dependent variable a csri suspect, roa suspect and firm size suspect as independent variables. the first model international journal of economic behavior, 5, n. 1, pp. 3-14, 201 firm value measured by market value divided book value of equity. the result shows shows that the average market value is 3.025978 times compared to the book value of its equity. the standard deviation of this variable is 1.397022 means that the deviation from the average of data for the variable value of the company amounted to suspect 0.294878 that means disclosure 29.4878%. the average number of social responsibility disclosure equal to 23 disclosure of 78 required disclosure. net income divided by total assets (roa). roa suspect he average mean suspect group was able to generate a net profit of 10.4042% utilization of all assets owned. appears that there is a small variation in csris and roas. it means that the are quite similar. the variation of roa is also quite small among firms. the variation of firm size is quite big that means the different of the firm size table 2 presents the data used as a non suspect is a company within the and has total assets of nearly the same, so the number of suspect and non the data used is a financial statement data of 2009 and 2010. preliminary data used is e to problems of multicollinearity. outlier removal is carried out as much as 6 data as many as 34 data. descriptive statistics (firmnonsuspect) firm_values csris roas 3.485366 0.209653 0.063061 2.301091 0.224359 0.054366 18.92810 0.269231 0.235380 0.004436 0.141026 -0.075353 3.677762 0.038381 0.070277 34 34 is 3.485366, means the market capitalization 3.485366 times value of its equity. value of non-suspects group companies is higher than the group of csri has an average 0.209653 means non suspect 20.9653%, or in other words, nonsuspect companies disclose 16 disclosure of this group is less than the suspected group. group is 0.063061, meaning that the company is able to produce tion of assets. profitability of suspect group higher than the non the variability of the data is very wide distance range minimum value maximum value is very large when compared to the average value. of the enterprise value 3.485366 means that the value of the average market price for 3:48 times compared to the book value of equity per share. variability to social responsibility disclosure index is small, with an average of 0.209653. average show companies do as much disclosure of 14 items of 68 disclosure items that can be done variable roa as a measure of profitability has little variability with an average value of that the average non-suspect firm has a profit of 6.3061 firm size has a low variability. the results of this study using multiple regression models are given in table 3. the first part of the table 3 is regression model with firm value suspect as dependent variable a csri suspect, roa suspect and firm size suspect as independent variables. the first model 37 14, 201 firm value measured by market value divided book value of equity. the result shows 3.025978 times compared to the book value of its equity. the standard deviation of this variable is 1.397022 means that the deviation from the average of data for the variable value of the company amounted to disclosure 29.4878%. the average of 78 required disclosure. roa suspect group have was able to generate a net profit of appears that there is a small variation in csris and roas. it means that the are quite similar. the variation of roa is also quite small among firms. the variation of firm size is quite big that means the different of the firm size table 2 presents the data used as a non suspect is a company within the same industry so the number of suspect and non-suspect firms are preliminary data used is moval is carried out as much as 6 data lnfirmsizes 30.41162 30.34814 32.74782 25.57283 1.627622 34 market capitalization 3.485366 times to book suspects group companies is higher than the group of csri has an average 0.209653 means non suspect disclosure csr companies disclose 16-17 item of 78 disclosure of this group is less than the suspected group. roa of meaning that the company is able to produce net profit higher than the nonthe variability of the data is very wide distance range minimum . the average value of the enterprise value 3.485366 means that the value of the average market price for 3:48 variability to social responsibility average shows that on average companies do as much disclosure of 14 items of 68 disclosure items that can be done. for variable roa as a measure of profitability has little variability with an average value of has a profit of 6.3061% of its total the results of this study using multiple regression models are given in table 3. the first part of the table 3 is regression model with firm value suspect as dependent variable and csri suspect, roa suspect and firm size suspect as independent variables. the first model 38 is used to examine the first hypothesis that stated csri suspect gives positive impact on firm value. table 3 – summary of regression model suspect firms coefficient std. error t-statistic prob. c -12.64501 5.637928 -2.242847 0.0320 csris -3.606223 2.931031 -1.230360 0.2275 roas 18.81931 3.098906 6.072889 0.0000 lnfirmsizes 0.469183 0.164355 2.854684 0.0075 r-squared 0.544995 mean dependent var. 3.025978 adjusted r-squared 0.502338 s.d. dependent var. 1.397022 s.e. of regression 0.985531 akaike info criterion 2.913167 sum squared resid. 31.08070 schwarz criterion 3.089114 log likelihood -48.43701 hannan-quinn criter. 2.974578 f-statistic 12.77631 durbin-watson stat. 2.092459 prob. (f-statistic) 0.000012 dependent variable: fvs method: least squares sample: 1 36 included observations: 36 the results showed that roasuspect had positive effect on firm value suspect. in otherwise, csrisuspect had no effect on firm value suspect. these results indicate that the more or less of the practices of csr of the company do not have affect on the increase in the value of the company. this is because many companies have a few disclosure on their csr compared with the total items that should be disclosed for industry. based on signaling theory which states that the company gives signals to the public with the intention of increasing the value of the company was not able to be explained by companies. leastwise those items disclosed to the readers of company annual reports make investors pay less attention to or consider the disclosure of corporate csr as one of the information that affects them in an investment. therefore, csr disclosures are not an element that affects the investor to assess overall company performance. investors are likely to consider other matters such the company's financial performance in investing. for non-suspect group of companies, explanatory power and csri roa variables are controlled by the size of the company amounted to 22:38%, so it can be said that as many as 77.62% of the variance explained by the variable value of the company to another. the results showed that the model fit to predict the variance of the value of the company at the level of 5%. variables roa and csri are not statistically affect the value of the company, but the size of the company is able to control the influence of profitability and broad social responsibility disclosure. the result of this research shows that there are differences in the influence of profitability on firm value. this indicates that companies listed in the sri kehati index have better financial performance han companies that are not in the category of sri-kehati index. in addition, companies that enter into the index must have sri-kehati positive roa and asset specific number. on the other hand, it shows that investors in indonesia are keener in investing. international journal of economic behavior, 5, n. 1, pp. 3 table 4 – summary of regression model coefficient c 42.14231 csri -2.595284 roa -1.445449 firmsize -1.250235 r-squared 0.294372 adj r-squared 0.223809 s.e. of regression 3.240171 sum squared resid 314.9612 log likelihood -86.08742 f-statistic 4.171772 prob(f-statistic) 0.013924 dependent variable: firmvalue method: least squares date: 08/15/12 time: 10:12 sample: 1 34 included observations: 34 the results of this study indicate in the value of the company. this is because own sake and for its stakeholders nurlela and islahuddin (2008) addition to the corporate social responsibility basamalah and jermias (2005 for strategic reasons. although listed on the indonesia stock exchange report. from an economic perspective necessity. the company will strength through the implementation of 6. conclusion this study aimed to investigate the influence of csr disclosure on firm value. object of this study were the firms listed in the sri kehati i market 2009 – 2010. the results of this paper give the evidences that profitabi effect on firm value, in otherwise, csr has processing of the data showed that there was no difference in the effect on firm value csr between suspect and non-suspect involvement so that the amount disclosed in the csri is not too large. it also shows that the company's csr program is not an important factor to be considered by investors in these results indicate that the more or less of the practices of csr of the company do not have affect on the increase in the value of the company. be used by investor in investing such as firm characteristics international journal of economic behavior, 5, n. 1, pp. 3-14, 201 summary of regression model non suspect firms coefficient std. error t-statistic 42.14231 12.21648 3.449628 2.595284 14.70827 -0.176451 1.445449 8.745687 -0.165276 1.250235 0.377762 -3.309583 0.294372 mean dependent var 0.223809 s.d. dependent var 3.240171 akaike info criterion 314.9612 schwarz criterion 86.08742 hannan-quinn criter. 4.171772 durbin-watson stat 0.013924 dependent variable: firmvalue this study indicate that the size of csr practices do not this is because the company is an entity that operates its stakeholders. the results of this study are consistent ) which states that csr variable has no effect corporate social responsibility (csr) as part of its business (2005) suggests that one reason is the social management although not mandatory, but it can be said that almost all the indonesia stock exchange already disclose information about an economic perspective, the company will disclose the information will acquire social legitimacy and maximize long through the implementation of csr (kiroyan, 2006) aimed to investigate the influence of csr disclosure on firm value. object of this study were the firms listed in the sri kehati index of the indonesian stock exchange 2010. the results of this paper give the evidences that profitabi in otherwise, csr has no effect on firm value. processing of the data showed that there was no difference in the effect on firm value csr suspect firms. it also shows that csr disclosures for sample firm involvement so that the amount disclosed in the csri is not too large. it also shows that the company's csr program is not an important factor to be considered by investors in dicate that the more or less of the practices of csr of the company do on the increase in the value of the company. there are other factors that can be used by investor in investing such as firm characteristics. 39 14, 201 prob. 0.0017 0.8611 0.8698 0.0024 3.48536 3.67776 5.29926 5.47883 5.36049 1.61401 do not affect the increase operates only for its this study are consistent with research has no effect on firm value. in its business strategy. management reporting almost all the companies information about csr in its annual the information because of long-term financial aimed to investigate the influence of csr disclosure on firm value. object of this ndex of the indonesian stock exchange 2010. the results of this paper give the evidences that profitability has positive no effect on firm value. in addition, the processing of the data showed that there was no difference in the effect on firm value csr . it also shows that csr disclosures for sample firm involvement so that the amount disclosed in the csri is not too large. it also shows that the company's csr program is not an important factor to be considered by investors in indonesia. dicate that the more or less of the practices of csr of the company do there are other factors that can 40 references 1. ambarwati, s. 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(2009). the effect of corporate social responsibility disclosure of semarang: catholic university soegijapranata (unpublished). characteristics influence firm's environmental and social diponegoro university, 2008). effect of financial performance of the companies value disclosure corporate social responsibility and good corporate (working paper no 1794). retrieved from 42 3 _16-10_ maryem the role of information diffusion on farmers good agricultural practices: a social network point of view – the case of the french agro received: august 1, 2015 accepted: many recent researches focus on the sustainable agriculture and the advantage of the adoption of good agriculture practices for farmers, consumers and for the environment. in this work, we agree on one thing: better information diffusion leads to better adoption of good agricultural practices by farmers. the objective of our article is double. firstly, we aim to propose an analytical model of the relevant factors which can help to better understandin the process of adoption of these practices. our framework is developed around three main elements: the individual level (the information seeker), the economic level and the social network level. secondly, we aim to test empirically this model, by confron experience in agro-environmental practices. our first empirical results put a lot of emphasis on the importance of the formal network in knowledge transfer. finally, we discuss the implication for theory and practice and present the n keywords: network; good agricultural practices 1. introduction sustainable agriculture is concerned with the ability of farmers to adopt good agricultural practices. they are defined as practices “that address environmental, economic and social sustainability for on-farm processes, and result in safe and quality food agricultural products” (fao coag 2003 gap paper). adopting them creates new market international journal of economic behavior, vol the role of information diffusion on farmers good agricultural practices: a social network point of the case of the french agro environmental practices maryem cherni institut polytechnique lasalle beauvais, france. hanitra randrianasolo institut polytechnique lasalle beauvais, france. nalini rakotonandraina institut polytechnique lasalle beauvais, france. accepted: november 27, 2015 online published: abstract many recent researches focus on the sustainable agriculture and the advantage of the adoption of good agriculture practices for farmers, consumers and for the environment. in one thing: better information diffusion leads to better adoption of good agricultural practices by farmers. the objective of our article is double. firstly, we aim to propose an analytical model of the relevant factors which can help to better understandin the process of adoption of these practices. our framework is developed around three main elements: the individual level (the information seeker), the economic level and the social network level. secondly, we aim to test empirically this model, by confronting it to some field environmental practices. our first empirical results put a lot of emphasis on the importance of the formal network in knowledge transfer. finally, we discuss the implication for theory and practice and present the next steps of this ongoing research ood agricultural practices; information diffusion; knowledge sustainable agriculture is concerned with the ability of farmers to adopt good agricultural practices. they are defined as practices “that address environmental, economic and social farm processes, and result in safe and quality food agricultural products” (fao coag 2003 gap paper). adopting them creates new market international journal of economic behavior, vol 6, n. 1, pp. 3131 the role of information diffusion on farmers good agricultural practices: a social network point of the case of the french agroenvironmental practices maryem cherni lasalle beauvais, france. hanitra randrianasolo-rakotobe lasalle beauvais, france. nalini rakotonandraina lasalle beauvais, france. online published: june 22, 2016 many recent researches focus on the sustainable agriculture and the advantage of the adoption of good agriculture practices for farmers, consumers and for the environment. in one thing: better information diffusion leads to better adoption of good agricultural practices by farmers. the objective of our article is double. firstly, we aim to propose an analytical model of the relevant factors which can help to better understanding the process of adoption of these practices. our framework is developed around three main elements: the individual level (the information seeker), the economic level and the social ting it to some field environmental practices. our first empirical results put a lot of emphasis on the importance of the formal network in knowledge transfer. finally, we discuss the ext steps of this ongoing research. nowledge. sustainable agriculture is concerned with the ability of farmers to adopt good agricultural practices. they are defined as practices “that address environmental, economic and social farm processes, and result in safe and quality food and non-food agricultural products” (fao coag 2003 gap paper). adopting them creates new market -40, 2016 32 opportunities for farmers, helping them optimizing their use of inputs (e.g. water, fertilisers, pesticides) yielding to safety and security products, which consequently leads to best health of the plant and for the environment. in this study we focus on the adoption of recent innovative practices that benefited from the existence of a historical and pioneering one as the organic farming. " in france, it is a well-known symbol of agro-environmental practices. from a political standpoint, the french national strategy considers the agricultural area engaged in organic farming as an official indicator of sustainable development. the development of this forerunner practice, for nearly half a century has greatly influencedthe context for agri-environmental practices. and recent innovative practices will be illustrated by the high environmental value (hev) and the conservation agriculture (ca), both launched in france in the middle of the 2000’s. more specifically, we look at the role of the information diffusion on the process of adoption of new agro-environmental practices. a review of the academic literature makes sure that this adoption process is a complex process that includes many factors. these factors could objective such as the increasing consumer willingness to pay environmental friendly products, and the institutional context, and subjective/intrinsic such as the psychological features of the farmer and his education level. all these factors are interconnected, and not easy to measure. as far as agro-environmental practices can be considered as a combination of technological and organizational innovation, the social network approach could be a pertinent framework to the comprehension of the information diffusion and the adoption of the agricultural innovation. that’s why, in addition to these elements mentioned earlier, we mobilize a new approach which is not addressed by agricultural researchs: the social network. for indeed a farmer isolated is not able to get useful information. farmers who are less isolated than others (they are members of cooperatives, members of networks, etc.) obtain useful knowledge either from colleagues, from other members of their networks or also from neighbours and friends. this view of farmers put a lot of emphasis on the importance of the network in knowledge transfer, incorporating both formal and informal dimensions. then in this paper we consider that the adoption of good agricultural practices is not the result of the unilateral farmer alone, but the result of a combination of many interconnected factors. information is the “lifeblood” that connects all these elements; it is also making the link of farmers with other actors. until recently, the subject of good agricultural practices interest many researchers in different disciplines. the dominant concern of studies was on the impact of the use of inputs on the environment (van der werf and petit, 2002; hansen, alrøe and kristensen, 2001). economic and management sciences studies have focused more specifically on the financial-economic concerns of good agricultural practices (mccann et al., 1997). sociological and psychological literature have focused on the farmer profile such as the farmer’s personal characteristics, farm operation characteristics, and farm’s perception of agricultural practices (willock et al., 1999; greiner and gregg, 2011; greiner, patterson and miller, 2009). there is however no unified framework to guide debates and methods for helping farmers achieving sustainable agriculture. little is said about how farmers have got access to information. nevertheless, it is evident that the adoption of good agricultural practices largely depends on the access by farmers to information. in social science and economics the challenge then is to examine how farmers could obtain useful knowledge about good agricultural practices. our key question in this research is: what are the determinants of the information diffusion within farmers leading them to adopt good agricultural practices? the objective of this study is double. first, we aim to understand the mechanisms and the process that conduct a farmer to adopt these good practices. this requires the examination of all indicators of information diffusion such as external and intrinsic indicators. second, our ambition is to mobilize a social network approach to the comprehension of this process, which is used in management literature but not yet explored in agriculture studies (thi will be developed in further researchs). this work follows in 3 further parts. in the first section we try to identify the main factors that are relevant to explain the adoption of good agricultural practices. in the second section we will explain the methodology that will be used in the next ste finally, int the third section we present our first results in focusing on agro practices in france and the network level. 2. literature review the aim of this section is to develop an analytical framework captu that could explain information diffusion and lead to the adoption of new good agricultural practices. this framework could help us to understand the relationship between the knowledge seeker (the farmer) and the knowledge source (agr and paper-based sources of information, persons, etc.). 2.1. psychological-based explanation the first actor concerned with the adoption of good agricultural practices is the farmer. information access depends largely science researches have offered clear evidence of the role of the farmer’s profile and psychological aspects in adopting good agricultural practices. the attitude of the farmer toward risk is identi adopt or not a new good agricultural practice. this decision is considered as risky because farmer cannot be sure about outcomes (greiner et al., 2009). economic analysis showed that farmers are generally risk aver which can slow the agricultural innovation process and the adoption of new practices. but, if economical approach profit maximization is the principal motive of farmer’s adoption of innovation, farmers could be driven by non motivation (greiner et al. (2009). greiner and gregg (2011) support the idea that “personal and family well-being” and ethical considerations are also motives for farmers to adopt innovation. in the same line of idea, for traoré, landry and amara (1998), farmer’s concern for personal health is an important determinant to his decisions. in addition, other intrinsic factors can influence the decision of a farmer of whether to adopt or not good agricultural practices such as his age, education level (gould, saupe and klemm 1989), and prior experience. 2.2. economic-based explanation we consider organic farming as a pioneering and forerunner event in the sense that its development has impacted the whole context for that, we can focus on the consumer’s willingness to pay the “environmental” quality of produced goods and on the presence of many institutions that encourage environmental practices. in this section we de adoption of other environmental benefits associated practices such as conservation agriculture and hve. the evolution of the final consumer demand the long term development of organic farming has surrounding societal demand on agro of information diffusion such as external and intrinsic indicators. second, our ambition is to mobilize a social network approach to the comprehension of this process, which is used in management literature but not yet explored in agriculture studies (thi will be developed in further researchs). this work follows in 3 further parts. in the first section we try to identify the main factors that are relevant to explain the adoption of good agricultural practices. in the second section we will explain the methodology that will be used in the next steps of this ongoing research. finally, int the third section we present our first results in focusing on agro practices in france and the network level. the aim of this section is to develop an analytical framework capturing that could explain information diffusion and lead to the adoption of new good agricultural practices. this framework could help us to understand the relationship between the knowledge seeker (the farmer) and the knowledge source (agricultural institutions, electronic based sources of information, persons, etc.). based explanation the first actor concerned with the adoption of good agricultural practices is the farmer. information access depends largely of intrinsic characteristics of the farmer. agricultural science researches have offered clear evidence of the role of the farmer’s profile and psychological aspects in adopting good agricultural practices. the attitude of the farmer toward risk is identified as important in deciding whether to adopt or not a new good agricultural practice. this decision is considered as risky because farmer cannot be sure about outcomes (greiner et al., 2009). economic analysis showed that farmers are generally risk averse (willock et al., 1999), which can slow the agricultural innovation process and the adoption of new practices. but, if economical approach profit maximization is the principal motive of farmer’s adoption of innovation, farmers could be driven by non-financial motives such as “life motivation (greiner et al. (2009). greiner and gregg (2011) support the idea that “personal being” and ethical considerations are also motives for farmers to adopt of idea, for traoré, landry and amara (1998), farmer’s concern for personal health is an important determinant to his decisions. in addition, other intrinsic factors can influence the decision of a farmer of whether to adopt or not good agricultural ces such as his age, education level (gould, saupe and klemm 1989), and prior based explanation we consider organic farming as a pioneering and forerunner event in the sense that its development has impacted the whole context surrounding the agro-environnemental practices. for that, we can focus on the consumer’s willingness to pay the “environmental” quality of produced goods and on the presence of many institutions that encourage environmental practices. in this section we develop these elements that are important for the launch and adoption of other environmental benefits associated practices such as conservation agriculture the evolution of the final consumer demand the long term development of organic farming has positively influenced the context surrounding societal demand on agro-environmental practices. organic farming has spread 33 of information diffusion such as external and intrinsic indicators. second, our ambition is to mobilize a social network approach to the comprehension of this process, which is used in management literature but not yet explored in agriculture studies (this point this work follows in 3 further parts. in the first section we try to identify the main factors that are relevant to explain the adoption of good agricultural practices. in the second section ps of this ongoing research. finally, int the third section we present our first results in focusing on agro-environmental ring the main elements that could explain information diffusion and lead to the adoption of new good agricultural practices. this framework could help us to understand the relationship between the icultural institutions, electronic the first actor concerned with the adoption of good agricultural practices is the farmer. of intrinsic characteristics of the farmer. agricultural science researches have offered clear evidence of the role of the farmer’s profile and fied as important in deciding whether to adopt or not a new good agricultural practice. this decision is considered as risky because se (willock et al., 1999), which can slow the agricultural innovation process and the adoption of new practices. but, if economical approach profit maximization is the principal motive of farmer’s adoption of ncial motives such as “life-style” and “social motivation (greiner et al. (2009). greiner and gregg (2011) support the idea that “personal being” and ethical considerations are also motives for farmers to adopt of idea, for traoré, landry and amara (1998), farmer’s concern for personal health is an important determinant to his decisions. in addition, other intrinsic factors can influence the decision of a farmer of whether to adopt or not good agricultural ces such as his age, education level (gould, saupe and klemm 1989), and prior we consider organic farming as a pioneering and forerunner event in the sense that its environnemental practices. for that, we can focus on the consumer’s willingness to pay the “environmental” quality of produced goods and on the presence of many institutions that encourage environmental velop these elements that are important for the launch and adoption of other environmental benefits associated practices such as conservation agriculture positively influenced the context environmental practices. organic farming has spread 34 the idea that one could simultaneously satisfy a nutritional need and do not destroy the environment. despite the tensions between the different movements that constitute the french organic farming, a consensus ariseed around the fact that it has greatly contributed to education and information of consumers on environmental quality, in a context of globalization and standardization of production. in industrialized and developed countries such as france, consumers are searching for identity and diversity (brodhag, 2000) in accordance with the principles relating to environmental, social and ethical preoccupation (mathe, 2009). this is reflected to the consumer awareness about environment issues and the development of a new behaving, such asthe willingness tu search and to pay an environmental quality. in france, according to a national survey conducted by the research center for study and observation of conditions of life (credoc) in 2009, french consumers are interested to products with specific qualities. that brings a significant number of them to consider accepting to pay more to obtain products environmentally and animal welfare (67%). the role of institutions in diffusing information the contextual environment can play an important role on the diffusion of knowledge. that means that the capacity of individues (or organizations) to get useful information depend on the context where they are. more specifically, at the institutional level, the national systems of innovation play a considerable role in the diffusion of information and encouraging networking activities. it is evident that formal institutions can make knowledge transfer easier. by institutions we mean the “legal system, the banking and finance system, the structure of labour markets, the education system and the political system” (grandori and soda 1995). normally, all farmers are similarly concerned with the institutional environment. but they do not equally benefit from opportunities and information diffused by these institutions. access by farmers to information can be influenced, among others, by their profiles, localizations, etc. 2.3. the contribution of a social network approach the social context is also important to consider when to speak about information diffusion. in the literature, many authors have clearly demonstrated the role of the social network in information and knowledge diffusion, in particular in helping individuals to develop theirs innovative ability (duysters and al., 2003), to get information (burt, 1992; borgatti & cross, 2003)) and to stimulate knowledge diffusion (rogers, 1995). networking promotes social interactions which generate trust and reciprocity that facilitate knowledge transfer between people (almeida and kogut, 1999). for entrepreneurs, networking enhances the success rate of entrepreneurial initiatives (baum and al., 2000), because it allows partners to access to other resources and also to gather informations and advices (smeltzer and al., 1991). it appears also that, when they need information, people prefer seek it from other people. because searching information could take a lot of time, people prefer using less documentation. for cross (2001), even people who have access to paper or electronic sources of information, tend to seek information from their colleagues. that is the case also in the research done by allen (1977) on engineers and scientists. the social network approach is also concerned with the identification of local cultures and "opinion leader" personalities that can play a considerable role in the decision of a farmer to adopt good agricultural practice. the presence of key personalities in the network of a farmer can influence his way in doing agriculture. the idea of opinion leaders, called also “influentials” by (merton 1968), is occupying a central place in the literatures of the diffusion of innovations. for example, coleman (1966 processes in adults, showed that the adoption of a new behavior results from the interaction between the medical community and the opinion leaders who are members of the same community but are able to influence other sharing, interpersonal trust has a crucial role (abrams and al., 2003). figure 1 conceptual model (this is a simplified version of the model. it does not show all variables) 3. methodology the methodology was conducted in two steps. first step: case study this step is about starting to characterize the relationship between the information diffusion, the social network and the adoption of go with the field experience in agro agro-environmental practices mainly address environmental and economic sustainability. they take sources in the concept of agroecology, first defined in 1930, studied and highly enriched up in the 1990s to become a strong orientation of french agriculture twenty years (schaller, 2013). second step: comparative analysis this step is about conducting a comparative analysis to complement the results on the network level and focus on the producer and institutional ones, in focusing on other ty good agricultural practices 3.1. data the empirical study will be done in two steps. first, a qualitative research will be conducted in two regions in france: aquitaine (10 operations of hight environmental value “hev” in viticulture sector) and picardie profil informati on diffusion the network level (formal and informal network) of innovations. for example, coleman (1966) who developed the theory of cognitive processes in adults, showed that the adoption of a new behavior results from the interaction between the medical community and the opinion leaders who are members of the same community but are able to influence other opinions or decisions. in this context of knowledge sharing, interpersonal trust has a crucial role (abrams and al., 2003). conceptual model (this is a simplified version of the model. it does not show all conducted in two steps. this step is about starting to characterize the relationship between the information diffusion, the social network and the adoption of good agricultural practices in confronting the model with the field experience in agro-environmental practices (poux, faure and villien, 2015) environmental practices mainly address environmental and economic sustainability. they take sources in the concept of agroecology, first defined in 1930, studied and highly enriched up in the 1990s to become a strong orientation of french agriculture twenty years (schaller, 2013). second step: comparative analysis this step is about conducting a comparative analysis to complement the results on the network level and focus on the producer and institutional ones, in focusing on other ty the empirical study will be done in two steps. first, a qualitative research will be conducted in two regions in france: aquitaine (10 operations of hight environmental value “hev” in icardie (2 operations of hev in polyculture-breeding farms). second, the institutional level individual level: farmer profil adoption of good agricultural practices the network level (formal and informal network) 35 ) who developed the theory of cognitive processes in adults, showed that the adoption of a new behavior results from the interaction between the medical community and the opinion leaders who are members of the same opinions or decisions. in this context of knowledge conceptual model (this is a simplified version of the model. it does not show all this step is about starting to characterize the relationship between the information diffusion, in confronting the model (poux, faure and villien, 2015). environmental practices mainly address environmental and economic sustainability. they take sources in the concept of agroecology, first defined in 1930, studied and highly enriched up in the 1990s to become a strong orientation of french agriculture over the last this step is about conducting a comparative analysis to complement the results on the network level and focus on the producer and institutional ones, in focusing on other types of the empirical study will be done in two steps. first, a qualitative research will be conducted in two regions in france: aquitaine (10 operations of hight environmental value “hev” in breeding farms). second, adoption of good agricultural practices 36 a quantitative survey will be conducted. a questionnaire will be administered to all farmers from these regions. the study will include surveys and data collect. we propose a multi-level approach which includes: analyzing of data-bases other case studies, in particular in two geographical areas in france (aquitaine and picardie) on adoption of organic agriculture (bio), conservation agriculture, and the high environmental value (hve) for the empirical part, to test our conceptual model, two case studies of farming environmental initiatives were investigated: the conservation agriculture (ca) and the high environmental value (hev) certification. case studies information was collected from technical documents and reports, various dedicated press communications related to the both practices and existing interviews of farmers (adopting hve or using ca) and support organizations and websites. especially for hve program, interviews of pioneers’ farmers (first hve certified farmers in year 2012) were analyzed composed by 2 farmers from champagne region and 1 farmer from picardie region). we used firstly a qualitative method which must be further complemented by a quantitative method within a questionnaire emailed to conventional and certified farmers, and also some semi directive interviews of institutional operators. the data analysis focuses on the adoption process (by responding to following question how and why), thus and also the motives and barriers of adoption of such practices. 3.2. summary description of the case studies the ca and hve are seen as an approach which meets the society demand of sustainable food production with various benefits for farmers and the environment. the both approach are marginally used in france but on progress. france records an increase of the area dedicated to the ca from 400,000 hectares in 2001 to 630,000 hectares in 2006, according to shaller (2013). the hev approach, launched in the end of 2011, accounts 138 certified farms on 2014 against two dozen on year 2012 (france agricole, 2014) the conservation agriculture according to the food and agriculture organization (fao) is an approach to managing agro-ecosystems for improved and sustained productivity, increased profits and food security while preserving and enhancing the resource base and the environment. the ca principle is based on a strong reduction, even an abolition of the ground labor, a permanent soil cover and crop rotations. the hve is an official environmental approach stemming from the environmental law «grenelle environment number 2 “and set up on the end of 2011. the hve certification is a progressive approach and includes 3 levels of environmental requirements: the first level (1) including requirements to access the approach. the second level (2) includes a set of best practices regarding the biodiversity, the use of phytosanitary products and fertilizers and the water management. farmers implementing already specific environmental approach can reach directly the level 2 of the process. indeed, 22 environmental approaches (example organic agriculture, iso 14000, etc.) are officially recognized equivalent to the level 2 of the hve certification process. the level (3) allows the obtention of hve certification conditioned by an external audit by a third certification body. this hev initiative is in constant evolution although more modest on a national scale. however, regional and sectorial disparities are observed. some region like aquitaine or champagne counts more certified farms than picardie. in addition, among the certified farms, 85% are from the wine sector but tends to become widespread. 3.3. case study results and discussion the case study analysis highlights key factors influing willingness o environmental approach: farmers attitude and beliefs play a key role in the decision of good environmental practice adoption. meeting consumer behavior towards environmental concerns (more demanding of environmental friendly product) ar farmers. indeed, viticulture farmers particularly adopt the hve approach to improve their image towards the environment conservation and to communicate about their effort about the good agricultural practice. the farmers already engaged on environmental approach, for example environmental management systems (ems) iso 14001, organic agriculture, etc.) are the majority of hve certified. certified farmers are members of farmers association or e (example dehpy). interviews of pioneers farmers’ show that information was provided by the chamber of agriculture firstly and also from the farmers’ network (example in the wine sector, qualenvi association or independent wine owners indépendands de france vif). indeed independent wine owners’ network counts 75 of hve certified farms within their members. the adoption or conversion was accompanied by the support organization (farmers associations, territorial network like dephy and area approach etc.). they provide information, learning process and training for farmers. the referee ( technician from agriculture chamber ) play also an important role (preparation for audit, information diffusion about the certification). information and knowledge are diffused through platform and farmers networks (example for ca and dedicated project through dephy). the combination of networking and learning. the adoption of ca requires a knowledge that explain the necessity of strong support through networking. at the institutional level, it seems also essential to effectively support farmers committing to conservation agriculture because of t training in agronomy, technical references. mobilizing chain actors is finally necessary to fit crop diversification often requires new markets (shaller, 2013). these systems are subject to numerous projects and research, worn both by non international institutes, or large groups of agro conducted in partnership with farmers, including through the base network (biodive agriculture, soil and environment), sustainable agriculture institute or the cooperative group vivescia. finally, confronting our model with the field experiences in agro practices led in france (poux and al., 2015) enable to character relation between the formal network environmental practices. the major role of the french network “réseau rural” (rural network environmental policies based on a top adoption of good practicess. indeed, the rural network was built to develop a bottom producers who join the network can participate in any deliberation needed for the construction of the technico-economi ase study results and discussion the case study analysis highlights key factors influing willingness of farmers to adopt farmers attitude and beliefs play a key role in the decision of good environmental meeting consumer behavior towards environmental concerns (more demanding of environmental friendly product) are among the motivation of the conversion of farmers. indeed, viticulture farmers particularly adopt the hve approach to improve their image towards the environment conservation and to communicate about their effort about the good agricultural practice. e farmers already engaged on environmental approach, for example environmental management systems (ems) iso 14001, organic agriculture, agriculture raisonée etc.) are the majority of hve certified. certified farmers are members of farmers association or environmental network interviews of pioneers farmers’ show that information was provided by the chamber of agriculture firstly and also from the farmers’ network (example in the wine sector, qualenvi association or independent wine owners association viticulteurs indépendands de france vif). indeed independent wine owners’ network counts 75 of hve certified farms within their members. the adoption or conversion was accompanied by the support organization (farmers network like dephy and area approach etc.). they provide information, learning process and training for farmers. the referee ( technician from agriculture chamber ) play also an important role (preparation for audit, information diffusion information and knowledge are diffused through platform and farmers networks (example for ca and dedicated project through dephy). the combination of networking and learning. the adoption of ca requires a high management skills for farm manage knowledge that explain the necessity of strong support from dedicated project, and exchange at the institutional level, it seems also essential to effectively support farmers committing to conservation agriculture because of their complexity: financial supporting technical advice, training in agronomy, technical references. mobilizing chain actors is finally necessary to fit crop diversification often requires new markets (shaller, 2013). these systems are subject to rojects and research, worn both by non-governmental organizations, national or international institutes, or large groups of agro-industry. in france, several experiments are conducted in partnership with farmers, including through the base network (biodive agriculture, soil and environment), sustainable agriculture institute or the cooperative group finally, confronting our model with the field experiences in agro practices led in france (poux and al., 2015) enable to characterize first and foremost the the formal network, the information diffusion and the adoption of agro the major role of the french network “réseau rural” (rural network environmental policies based on a top-down logic have shown their limits in terms of adoption of good practicess. indeed, the rural network was built to develop a bottom producers who join the network can participate in any deliberation needed for the economic “referential” which is the basis for the knowledge and 37 f farmers to adopt farmers attitude and beliefs play a key role in the decision of good environmental meeting consumer behavior towards environmental concerns (more demanding of e among the motivation of the conversion of farmers. indeed, viticulture farmers particularly adopt the hve approach to improve their image towards the environment conservation and to communicate about their e farmers already engaged on environmental approach, for example environmental agriculture raisonée nvironmental network interviews of pioneers farmers’ show that information was provided by the chamber of agriculture firstly and also from the farmers’ network (example in the wine sector, association viticulteurs indépendands de france vif). indeed independent wine owners’ network counts 75 of the adoption or conversion was accompanied by the support organization (farmers network like dephy and area approach etc.). they provide information, learning process and training for farmers. the referee ( technician from agriculture chamber ) play also an important role (preparation for audit, information diffusion information and knowledge are diffused through platform and farmers networks (example for ca and dedicated project through dephy). the combination of networking and high management skills for farm management and from dedicated project, and exchange at the institutional level, it seems also essential to effectively support farmers committing heir complexity: financial supporting technical advice, training in agronomy, technical references. mobilizing chain actors is finally necessary to fit crop diversification often requires new markets (shaller, 2013). these systems are subject to governmental organizations, national or industry. in france, several experiments are conducted in partnership with farmers, including through the base network (biodiversity, agriculture, soil and environment), sustainable agriculture institute or the cooperative group finally, confronting our model with the field experiences in agro-environmental ize first and foremost the , the information diffusion and the adoption of agrothe major role of the french network “réseau rural” (rural network):agrologic have shown their limits in terms of adoption of good practicess. indeed, the rural network was built to develop a bottom-up logic. producers who join the network can participate in any deliberation needed for the c “referential” which is the basis for the knowledge and 38 practices dissemination. "farmers who participated in the deliberations have a high propensity to adopt practices that they helped to be institutionalized" the interdependent role of the “territorial network” and the “agricultural network”: the success in terms of adoption of good practices within a territory is assured when these two networks are able to collaborate. the territorial network is seen as an engine that boosts the involvement of farmers. and the agricultural one has been identified as a support of group dynamics. it sees the creation and the strengthening of relations and exchanges between farmers and other stakeholders. the famers’ proximity with the “environmental referee”: at last and not the least, the famers’ proximity with the “environmental referee”, which is working closely with the “territorial, agricultural and rural networks”. throughout decades of experimentation, public policy and the different networks have institutionalized a group named "environmental referent." it is seen as the guarantor of environmental objectives in any agricultural projects. networks are needed to establish a link between farmers and this group of “environmental referent”, to learn about current issues affecting farms, and about how to defend their concerns, and about the associated fundings and european and national supports. insights from this confrontation are needed to improve our model. 4. concluding comments the aim of this research is to contribute to the understanding of the factors determinants the impact of information diffusion on the adoption by farmers of good agricultural practices. the first result of this work is theoretical. we propose a conceptual framework to summarize the relevant variables of this phenomenon that came out mainly from literature on food and rural studies, economic and management studies. with a focus on the social network concept, our framework is developed around five main items: information diffusion, adoption of good agricultural practices, the individual level (the information seeker), the institutional and the network level. secondly, we provide primary empirical support for the conceptual model by confronting it with some experiences in agro-environmental practices such as the “rural network”, the “agricultural network” and the “environmental referent”. all these examples show mainly the important role of the formal network on the information diffusion and on the adoption of good environmental practices. that is, while these examples are very useful to understand the role of the formal network, they don’t allow us to understand how the informal relationships make easier (or more difficult) the information diffusion. that’s why more empirical research needs to be conducted on the complex role of the informal network, notably interviews with practitioners (farmers and institutions). the project will offer many insights that can be helpful to practitioners (farmers, institutions, etc.). first, it will offer evidence that knowledge diffusion consistently matters in the adoption by farmers of good agricultural practices. second, it can help understanding the mechanisms of knowledge transfer and assimilation by farmers regarding good agricultural practices. third, it can help all stakeholders to focus on ways to improve knowledge diffusion, especially by networking activities. in addition to interviews, it seems important, in the next phases of this research, to compare the two french regions. as previously announced, there are less hev operations in picardie than in aquitaine. consequently, we need to understand the factors related to information diffusion which prevent farmers in picardie to adopt hev practices. references 1. abrams, l.c., cross, r., lesser e. & l trust in knowledge-sharing networks. 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(1999). farmers' attitudes, objectives, behaviors, and personality traits: the edinburgh study of decision making on farms. journal of vocational behavior, 54(1), 5-36. 8 _16-02_ pencarelli-dinii the tourism intermediation system: the relationship between travel agencies and tour operators received: april 10, 2015 the study aims to investigate the characteristics of the relationships between travel agencies (ta) and tour operators (to) number, and the duration of the relationships that are created in the italian tourism intermediation system. an empirical research was conducted on a sample of italian travel agencies (202, covering all of the regions in italy). results show that, although the products supplied by tos are fundamental to the realization of ta turnover, in most cases channel relationships are of short duration and highly variable. relationships do not sufficiently exploit areas of potential cooperation. keywords: travel agencies; tour operators; tourism; business to business; disintermediation. 1. introduction over the last decades, the growth of tourism consumption in t vigorous, pulling the development of the tourism industry and of the actors who are part of it, such as tour operators and travel agencies. this means that it has become more and more important to connect consumers’ needs wit the international image of tourism destinations (mariani, 2013). however, despite this important growth phase, the tourism industry and the tourism intermediation system, in particular, is undergoing a prof relationships and competitive positions among the major players in the system. therefore, the changed conditions of competition between the different intermediaries are leading to an evolution of the distribution channel’s features which cannot be defined with certainty. this is especially due to the advent of new internet technologi era, that have profoundly changed consumer buying and tourist behavior, with a high impact international journal of economic behavior, vol the tourism intermediation system: the relationship between travel agencies and tour operators tonino pencarelli carlo bo university of urbino, italy carlo bo university of accepted: june 6, 2016 online published: abstract the study aims to investigate the characteristics of the relationships between travel agencies (to). through an empirical analysis, we highlight the weight, the number, and the duration of the relationships that are created in the italian tourism intermediation system. an empirical research was conducted on a sample of italian travel covering all of the regions in italy). results show that, although the products supplied by tos are fundamental to the realization of ta turnover, in most cases channel relationships are of short duration and highly variable. this could mean that vertical relationships do not sufficiently exploit areas of potential cooperation. travel agencies; tour operators; tourism; business to business; over the last decades, the growth of tourism consumption in the world has been constant and vigorous, pulling the development of the tourism industry and of the actors who are part of it, such as tour operators and travel agencies. this means that it has become more and more important to connect consumers’ needs with the tourism service supply chain and to promote the international image of tourism destinations (mariani, 2013). however, despite this important growth phase, the tourism industry and the tourism intermediation system, in particular, is undergoing a profound transformation by changing the dynamics of both the relationships and competitive positions among the major players in the system. therefore, the changed conditions of competition between the different intermediaries are of the distribution channel’s features which cannot be defined with certainty. this is especially due to the advent of new internet technologi era, that have profoundly changed consumer buying and tourist behavior, with a high impact international journal of economic behavior, vol 6, n. 1, pp. 97-11 97 the tourism intermediation system: the relationship between travel agencies and tour operators tonino pencarelli carlo bo university of urbino, italy mauro dini carlo bo university of urbino, italy online published: july 23, 2016 the study aims to investigate the characteristics of the relationships between travel agencies . through an empirical analysis, we highlight the weight, the number, and the duration of the relationships that are created in the italian tourism intermediation system. an empirical research was conducted on a sample of italian travel covering all of the regions in italy). results show that, although the products supplied by tos are fundamental to the realization of ta turnover, in most cases channel that vertical channel travel agencies; tour operators; tourism; business to business; he world has been constant and vigorous, pulling the development of the tourism industry and of the actors who are part of it, such as tour operators and travel agencies. this means that it has become more and more h the tourism service supply chain and to promote the international image of tourism destinations (mariani, 2013). however, despite this important growth phase, the tourism industry and the tourism intermediation system, in ound transformation by changing the dynamics of both the relationships and competitive positions among the major players in the system. therefore, the changed conditions of competition between the different intermediaries are of the distribution channel’s features which cannot be defined with certainty. this is especially due to the advent of new internet technologies and the web 2.0 era, that have profoundly changed consumer buying and tourist behavior, with a high impact 12, 2016 98 also on tourism supply (bastakis et al., 2004; pencarelli et al., 2005; buhalis and law, 2008; sigala, 2012; standing et al, 2014). from the supply side, the advent of new information and communication technologies allows economic actors to facilitate the creation, the development, and the maintenance of intraand inter-organizational relationships. for example, as a response to market changes, independent travel agents are increasing horizontal cooperation by creating various types of networks that can be ownership networks (direct ownership, association in participation) or associative forms of networks, such as franchising or buying groups (gentile, 2003; yevstafyev v. and yevstafyev n., 2015). moreover, thanks to internet technologies, communication by tour operators is facilitated because they can send and receive catalogues and other promotional materials by e-mail, all along the supply chain. this reinforces vertical agreements both upstream and downstream of the value chain. at the same time, the internet reveals aspects of conflict behind each form of collaboration, creating the conditions for cancellation or reorganization of existing relationships. indeed, new technologies can reduce transaction costs along the vertical chain (malone et al, 1987; martini, 2001), causing disintermediation processes where travel agents could disappear (van rekom et al., 1999), as well as the birth of new intermediaries (on-line travel agents, infomediaries, portals). thus, potential conflict situations could reduce the cooperation areas along the value supply chain. so, the relationship presents a dual nature and internet technologies are influencing the relational dynamics by changing the balance of power between the various actors in the tourism industry, especially in vertical channel brokerage, where collaboration and conflict intertwine and overlap. 2. literature review and research questions the recent dynamics manifested in situations that have occurred (e.g., economic crisis, political instability, etc.) in some tourist areas of primary importance, combined with the impact of new icts, have led to a profound change in the dynamics of the system of tourist intermediation. in recent years numerous publications have attempted to study the relationships among the various subjects that make up the tourism supply system (see table 1) from several points of view. nevertheless, there do not emerge from the literature analysis any outstanding studies that have focused attention on the relationship between travel agencies and tour operators which, besides representing two key players in the tourism network, have undergone deep relational changes dues to the recent changes in ict. the new information and communication technologies have created a more competitive environment in the tourism industry as they have become an indispensable element of business development, involving inter-organization, intra-organizations, and business-toconsumer relationships (berné et al., 2015). the new icts have changed the decision-making and buying habits of tourists, and in particular, how they search for information and book their travel (buhalis, 1998, 1999; bertozzi, 2005; pencarelli et al., 2005, sciarelli and della corte, 2005; buhalis and law, 2008; abou-shouk et al., 2016). on the supply side, the historic role of the travel distribution sector has undergone profound changes: the conventional outgoing travel agents, tour operators, and incoming travel agents have been progressively integrated or replaced by new electronic intermediaries, namely gds, e-platforms, internet portals or vortals, interactive digital television and mobile devices (buhalis and licata, 2002). the new electronic intermediaries include a wide number of firms within the tourism value supply chain, such as airlines, hotels, cruise or railway companies, web-based travel agents, etc., all looking for direct contact with customers. table 1 – publications that have addressed the relationships between entities in tourism distribution channels. author, year shi and liao (2013) between hotels and restaurants guo and he (2012) between tourism hotel and tour operator ford, wang and vestal (2012) within tourism distribution network including consumer, suppliers and travel trade intermediaries huang, chen, song and zhang (2010) between three actors: theme park, hotel and accomodation provider and operators (does not distinguish between tos and travel agents) andreu, aldas, bignè and mattila (2010); between travel agencies and suppliers castillo-manzano and lopez-valpuesta (2010) customers (spanish airline market) christodoulidou, connolly and brewer (2010); between online travel agencies, travel meta sites and suppliers li and tang (2009) between travel agency and tourist, between tour operator and transport system pan (2003) between agents whit australian nominated inbound to in the process of building up business network wu and chang (2006) bettween travel agencies (taiwan) holma (2004) triadic business relationship in travel distribuition: buyers (travellers) intermediaries (travel agencies) (service suppliers) bastakis, buhalis and butler (2004) between small and medium tourism enterprise (smtes) and european tour operators (tos) medina-munoz, medina munoz and garciafalcon (2003) tour operators and accommodation companies tse (2003) travel agents and hotels medina-munoz, garciafalcon and medinamunoz (2002) hotel and travel agencies medina-munoz and garcia-falcon (2000) hotels and agencies (us) buhalis (2000) hotels and tour operators (mediterranean region) garcia-falcon and medina-munoz (1999) hotel companies and travel agencies (us market) source: tran m., jeeva a. s., pourabedin z. (2016) publications that have addressed the relationships between entities in tourism relationship research method between hotels and restaurants social exchange theory and resource dependence theory between tourism hotel and tour operator stackelberg game model (game theory) within tourism distribution network including consumer, suppliers and travel trade intermediaries strategic contingencies theory perspective between three actors: theme park, hotel and accomodation provider and tour operators (does not distinguish between tos and travel agents) sequential game (game theory) and sensitivity analyses between travel agencies and suppliers structural equation modelling (sem) customers travel agent and airlines (spanish airline market) survey and multinominal logit model between online travel agencies, travel meta sites and suppliers multiple case study approach, data evidence came from field study interview and document analysis between travel agency and tourist, between tour operator and transport game theory and classical newsboy model between chinese authorized travel agents whit australian nominated inbound to in the process of building up business network questionnaire and interview chinese travel agencies and australia inbound tos bettween travel agencies (taiwan) adapting tra as the concept framework, likert scale questions in the survey triadic business relationship in travel distribuition: buyers (travellers) intermediaries (travel agencies) sellers (service suppliers) re-constellation of triadic relat between small and medium tourism enterprise (smtes) and european tour operators (tos) exploratory study (interview) whit secondary research tour operators and accommodation companies five-point likert-type questionnaires statistics data analysis travel agents and hotels discussion hotel and travel agencies survey, five-point questionnaires-statistics data analysis hotels and agencies (us) statistics data analysis (f test, questionnaires) hotels and tour operators (mediterranean interviews (likert scale 1 hotel companies and travel agencies (us market) empirical survey source: tran m., jeeva a. s., pourabedin z. (2016) 99 publications that have addressed the relationships between entities in tourism research method social exchange theory and resource dependence theory stackelberg game model (game theory) strategic contingencies theory sequential game (game theory) and sensitivity analyses structural equation modelling (sem) survey and multinominal logit model ltiple case study approach, data evidence came from field study interview and document analysis game theory and classical newsboy questionnaire and interview chinese travel agencies and australia inbound ng tra as the concept framework, likert scale questions in the constellation of triadic relationship exploratory study (interview) whit secondary research type questionnaires statistics data analysis point likert-type scale for statistics data analysis statistics data analysis (f test, likert scale 1-5) 100 the proliferation of new electronic tourism intermediaries has confused consumers and also many marketing managers who are now required to simultaneously manage a number of sales and communication channels. a further effect of this has been the disintermediation in the value system of organized tourism, where many conventional travel agents are disappearing from the market (lang, 2000, buhalis and laws, 2001; buhalis and licata; 2002; kotler et al., 2010; del chiappa, 2013). this restructuring process in the tourism industry is producing a negative impact on travel agents, who perceive service cannibalization. perceived cannibalization reflects sales agents' attitudinal reactions to challenges created by the expansion of distribution channels, including the internet. extant research suggests that the psychological effects of perceived cannibalization are motivationally, emotionally, relationally, and financially detrimental to travel agents (sharma and gassenheimer, 2009). the impact is negative, namely in terms of job insecurity, job dissatisfaction, job alienation, risk-aversion, and required travel agent effort and training (diaz et al., 2015). moreover, the advent of new icts is causing a surge in the on-line distribution channel, due to lower costs and more competitive performance. the on-line intermediaries are gaining market shares and competitive advantage against the more traditional competitors along the distribution channel (maria et al., 2015). this happens above all for two reasons: first, because the online suppliers are more able to personalize tourism products in which operators and consumers can easily co-create value and second, because the conventional, independent travel agents are not exploiting the potential of the new technologies and web 2.0. therefore, the process of disintermediation has not led to overcoming the traditional distinction between tos and tas, as some have argued (baldarelli, 2000; becheri and biella, 2013), but has led to increased complexity in the relationships among the actors of the distribution channel. the structure of the distribution channel has become a complex global network where, in order to thrive in this environment, competing actors at all levels find themselves involved in collaboration, partnerships, and the continuing evolution of relationships (kracht and wang, 2010; ruiz molina et al., 2010). in addition to altering the balance of power in the distribution channel (berné et al., 2012; 2015), this trend implies a context characterized by areas of cooperation and conflict1, both upstream and downstream of the tourism industry, as well as at the intra-sector level (pencarelli, 2010; vasanth et al., 2012). 1 as regards the relationship between tos and tas, the new network technologies can accentuate phenomena of conflict and heighten the risk of disintermediation (pencarelli, 2003), on the one hand. on the other hand, it can facilitate different areas of collaboration caused by the strong interdependence among a wide range of goods and services necessary for building the tourism product, the small size of many individual operators, and the spatial separation between the vacation and the home (berné et al., 2015). the cooperation areas involve travel agents and tour operators, in the following ways : • by strengthening cooperation and trade marketing activities between tos and tas, enabling both parties to communicate directly with end buyers (suarez et al., 2007; cioppi, 2013) by deepening and broadening the value of customer relationships in the long term, in terms of profitability and of customer loyalty due to the personal interactions made possible (pencarelli et al., 2013); • by improving the efficiency of trade (less time needed to research suppliers, fewer errors, reduced costs of research information, etc.), thus reducing transactional costs and improving mutual economic and competitive performances; • by having a positive effect that is reflected in enhanced business performance and value creation for consumers, through the cooperation activities based on icts and carried out in a vertical integration approach (bernè et al, 2015). thus, in pursuing a policy to strengthen one’s own competitive market position, travel agencies must necessarily develop collaborative processes with the other stakeholders in the tourism supply system who, traditional tourism network roles are, in fact, their competitors, also. this phenomenon of contraposition has been coined coopetition (bagdoniene and hopeniene, 2015) in the literature on competition and cooperation in the tourism industry. nonetheless, as maintained by numerous scholars (von friedrichs grängsjö, 2003; kylänen and mariani, 2012), within the tourism industry the relationships and the relations among the various interlocutors are parad boundaries between competition, cooperation, and coopetition. this paper aims to position itself in this space, attempting to make a theoretical contribution to filling this gap in the literature on the rel moreover, at the empirical level, it aims to provide some elements that may help to identify the type of relationship that exists between travel agencies and tour operators in the italian context. therefore, the objective o characteristics of the relationship between travel agencies and tour operators in terms of economic turnover, number and turnover of relationships; to try to define the critical success factors that are the basis for travel agencies’ choice of tour operators; to assess whether the “image and reputation” effect transmitted by individual to brands really help tas to attract clients (succurro, 2006). in particular, this study seeks to answer the fol what are the characteristics of the relationship between tas and tos, and in particular, how stable are they and how many distribution channel relationships are there? (§3.3.1) what are the key factors in the selection of tos by the travel agency? (§3.3.2) what role does the to brand play in the choice of product made by those clients that use travel agencies? (§3.3.3) 3. paper content 3.1. methodology the study aims to answer the research questions through an empirical analysis. a structured questionnaire was administered on between september of 2013 and april of 2014. the respondents were contacted by e total of 202 travel agencies responded. 2 the selection was made through the google search engine, by keying in "travel number of tas in each region was chosen based on the percentage of tas in that region. (sourse: “ii rapporto sull’ intermediazione turistica in italia 2011”, for example, trentino alto adige 1.2% of the italian travel agencies, number 24/2000). 3the answers (202) are geographically distributed as follows: friuli (0.5%), molise (0.5%), sardinia (1%), abruzzo (1.4% ), basilicata (1.9%), trentino alto adige (1.9%), liguria (2.0%), calabria (2.4%), puglia (3.0%), umbria (3.9%), sicily (5.9%), veneto (5,9%), tuscany (6.4%), marche (7.9%), campania (8.9%); lazio (8.9%), emilia romagna (9.4%), piedmont (11.8%), lombardy (15.3%). thus, in pursuing a policy to strengthen one’s own competitive market position, travel agencies must necessarily develop collaborative processes with the other stakeholders in the tourism supply system who, nevertheless, through the very process of overcoming the traditional tourism network roles are, in fact, their competitors, also. this phenomenon of contraposition has been coined coopetition (bagdoniene and hopeniene, 2015) in the n and cooperation in the tourism industry. nonetheless, as maintained by numerous scholars (von friedrichs grängsjö, 2003; kylänen and mariani, 2012), within the tourism industry the relationships and the relations among the various interlocutors are paradoxical, thus making it difficult to identify the boundaries between competition, cooperation, and coopetition. this paper aims to position itself in this space, attempting to make a theoretical contribution to filling this gap in the literature on the relationships between tos and tas. moreover, at the empirical level, it aims to provide some elements that may help to identify the type of relationship that exists between travel agencies and tour operators in the italian objective of this exploratory research is threefold: to characteristics of the relationship between travel agencies and tour operators in terms of economic turnover, number and turnover of relationships; to try to define the critical success hat are the basis for travel agencies’ choice of tour operators; to assess whether the “image and reputation” effect transmitted by individual to brands really help tas to attract in particular, this study seeks to answer the following research questions: what are the characteristics of the relationship between tas and tos, and in particular, how stable are they and how many distribution channel relationships what are the key factors in the selection of tos by the travel agency? (§3.3.2) what role does the to brand play in the choice of product made by those clients that use travel agencies? (§3.3.3) answer the research questions through an empirical analysis. a structured questionnaire was administered on-line, to a selected sample of 2,0002 italian travel agencies, between september of 2013 and april of 2014. the respondents were contacted by e total of 202 travel agencies responded. the selection was made through the google search engine, by keying in "travel number of tas in each region was chosen based on the percentage of tas in that region. (sourse: “ii rapporto sull’ intermediazione turistica in italia 2011”, for example, trentino alto adige 1.2% of the italian travel the answers (202) are geographically distributed as follows: friuli-venezia giulia (0.5%), valle d'aosta (0.5%), molise (0.5%), sardinia (1%), abruzzo (1.4% ), basilicata (1.9%), trentino alto adige (1.9%), liguria a (3.0%), umbria (3.9%), sicily (5.9%), veneto (5,9%), tuscany (6.4%), marche (7.9%), campania (8.9%); lazio (8.9%), emilia romagna (9.4%), piedmont (11.8%), lombardy (15.3%). 101 thus, in pursuing a policy to strengthen one’s own competitive market position, travel agencies must necessarily develop collaborative processes with the other stakeholders in the nevertheless, through the very process of overcoming the traditional tourism network roles are, in fact, their competitors, also. this phenomenon of contraposition has been coined coopetition (bagdoniene and hopeniene, 2015) in the nonetheless, as maintained by numerous scholars (von friedrichs grängsjö, 2003; kylänen and mariani, 2012), within the tourism industry the relationships and the relations oxical, thus making it difficult to identify the this paper aims to position itself in this space, attempting to make a theoretical ationships between tos and tas. moreover, at the empirical level, it aims to provide some elements that may help to identify the type of relationship that exists between travel agencies and tour operators in the italian research is threefold: to investigate the characteristics of the relationship between travel agencies and tour operators in terms of economic turnover, number and turnover of relationships; to try to define the critical success hat are the basis for travel agencies’ choice of tour operators; to assess whether the “image and reputation” effect transmitted by individual to brands really help tas to attract lowing research questions: what are the characteristics of the relationship between tas and tos, and in particular, how stable are they and how many distribution channel relationships what are the key factors in the selection of tos by the travel agency? (§3.3.2) what role does the to brand play in the choice of product made by those clients answer the research questions through an empirical analysis. a structured italian travel agencies, between september of 2013 and april of 2014. the respondents were contacted by e-mail.3 a the selection was made through the google search engine, by keying in "travel agents" region.” the number of tas in each region was chosen based on the percentage of tas in that region. (sourse: “ii rapporto sull’ intermediazione turistica in italia 2011”, for example, trentino alto adige 1.2% of the italian travel venezia giulia (0.5%), valle d'aosta (0.5%), molise (0.5%), sardinia (1%), abruzzo (1.4% ), basilicata (1.9%), trentino alto adige (1.9%), liguria a (3.0%), umbria (3.9%), sicily (5.9%), veneto (5,9%), tuscany (6.4%), marche (7.9%), campania (8.9%); lazio (8.9%), emilia romagna (9.4%), piedmont (11.8%), lombardy (15.3%). 102 to create the questionnaire, the authors followed the main indications provided by the extant literature, along with semi-structured (or free, cfr. corbetta, 1999) interviews with the director of marketing and the director of sales4 of eden viaggi of pesaro, a leader in the sector of tourism intermediation in italy5. as with any non-structured interview, the conversations did not include a set of pre-determined questions but followed a general guideline that served to highlight the main features of the relationship between tas and tos6 as well as the critical success factors in the sector7. 3.2. characteristics of the sample in 65% of the tas the turnover does not exceed 500,000 euros, 19% are positioned between 500,000 and 1 million euros, while the remaining 10% of the sample are over the 1 million mark, and 6% gave no response. in terms of the number of employees, 86% have one or two employees, 6% have between three and five employees, while only 8% have more than five employees. as concerns the size of the premises, 70% of the travel agencies occupy an area not exceeding 60 m², 21% between 61 and 99 m², while only 6% a larger area of up to 100 m². the remaining 3% did not respond. the data indicates that the majority of the respondents are small travel agencies both in terms of turnover and in the other defining features. 3.3. findings 3.3.1. characteristics of the relationship between tas and tos in order to define the relationship between tour operators and travel agencies, three different questions, considered critical by the managers who were interviewed during the process of setting up the questionnaire. they regarded the following aspects: • turnover achieved by travel agencies through the sale of to products (§3.3.1.1); • number of tos with whom the travel agencies maintain contemporary relationships (§3.3.1.2); • turnover rate in these relationships between tas and tos, defined as the number of accounts closed versus the number activated (§3.3.1.3). turnover achieved by travel agencies through the sale of to products. the ta turnover resulting from the sale of to products is fairly high on average, i.e. 50% of the sample declared that more than 70% of their turnover comes from these products, while only 17% of the sample stated that it is less than 40%. on average, 60% of the turnover is realized through the sales of to products. in addition, travel agents were asked to indicate how much of their turnover comes from the sale of to products, derived from their relationships with the top six tos. the responses indicate that, of the total number of products sold, on average 70% comes from the relationship with just six tour operators. this information will be very useful for some final considerations. 4 the interviewees were: angelo cartelli (director of marketing and sales) and andrea ancarani (head of the office of marketing and communication). the interviews took place on several occasions from march through june of 2013. 5 cfr. pencarelli et al., 2013. 6 see par. 3.3.1. 7 see par. 3.3.3. figure 1 – percentages of turnover derived from the sale of to products source: our data number of tos with whom the travel agencies maintain contemporary relationships second question seeks to define how many relationships travel agencies have with tos in order to build their tourism offers. the results show that mos a relationship with several different tos at the same time (81% answered "more than nine relationships"). the large number of tos with whom the tas carry on contemporary relationships is symptomatic of a high level of comp make use of numerous different suppliers in order to provide the tourism offer. in sum, the majority of the tas in the sample make the bulk of their turnover from having a large number of to relationships contemporar figure 2 – number of tos with whom the travel agencies maintain contemporary relationships source: our data 21% 17% 81% percentages of turnover derived from the sale of to products number of tos with whom the travel agencies maintain contemporary relationships second question seeks to define how many relationships travel agencies have with tos in order to build their tourism offers. the results show that most of the travel agencies maintain a relationship with several different tos at the same time (81% answered "more than nine relationships"). the large number of tos with whom the tas carry on contemporary relationships is symptomatic of a high level of competition among tas and of their need to make use of numerous different suppliers in order to provide the tourism offer. in sum, the majority of the tas in the sample make the bulk of their turnover from having a large number of to relationships contemporarily. number of tos with whom the travel agencies maintain contemporary 34% 28% over 80% between 60 % and 79% between 40 % and 59% under 39 % 9% 10% 103 number of tos with whom the travel agencies maintain contemporary relationships. the second question seeks to define how many relationships travel agencies have with tos in t of the travel agencies maintain a relationship with several different tos at the same time (81% answered "more than nine relationships"). the large number of tos with whom the tas carry on contemporary etition among tas and of their need to make use of numerous different suppliers in order to provide the tourism offer. in sum, the majority of the tas in the sample make the bulk of their turnover from number of tos with whom the travel agencies maintain contemporary over 80% between 60 % and 79% between 40 % and 59% under 39 % fewer than 4 between 5 and 8 over 9 104 delving more deeply into the analysis (table 2), if we cross two variables, i.e., the number of tos with which tas maintain contemporary relationships and the turnover rate, it is plain that those agencies that earn most of their turnover (60/100%) through to product are also those that have the greatest number of relationships with tos 11% have between 5 and 8 and 89% have over 9. this is highly significant in that it indicates that there is a directly proportional relationship between turnover earned from to products and the number of tos with which an agency maintains a business relationship. this tendency is probably attributable to the need to supply a wide and varied range of offers geared toward the many requests made by clients that could otherwise remain unfulfilled if there were too few tos and/or too highly specialized products. table 2 – number of tos with whom the travel agencies maintain contemporary relationships in relation to the level of turnover in tas ta turnover 0/59% ta turnover 60/100% average fewer than 4 24% 0% 9% between 5 and 8 9% 11% 10% over 9 67% 89% 81% source: our data turnover rate (defined as the number of accounts closed vs the number activated). another indicator that defines the relationship between travel agents and tour operators is the turnover rate (expressed in the number of tos). this rate is defined as the number of accounts that are closed versus the number that are activated in a short period of time (three years). the time period considered for the purposes of this study is the last three years. regarding the relationships that were terminated, 38% of the tas said they had put an end to working relationships with fewer than four tos, 39% with between five and nine tos, and 8% with more than ten tos. it is worthy of note that there is also a minority (15%) who did not terminate any relationship. as for the accounts that were activated, 50% said they had initiated up to four relationships, 31% between five and nine, and 13% over ten. the number of tour operators who did not foster any relationship is 7%. the results show a high rate of turnover in terms of relationships that were either activated or terminated. this data is indicative of the high turbulence of the relationship between tour operators and travel agencies (pencarelli et al., 2013). it is likely that this turbulence is fueled by low entry barriers typical of this context, which result in the presence of numerous actors. figure 3 terminated and activated relationships over the last three years source: our data in conclusion, the analysis shows that the relationship between tour operators agencies displays the following characteristics: • the widespread and generalized presence of multi • a very high interdependence between the turnover of travel agencies and the number of tour operators with which there are working relationships • a very high exchange rate in ter between tour operators and travel agencies. 3.3.2. key factors in the selection of tos by the travel agency in order to evaluate which factors have the highest impact on travel agencies’ selection of operators8, we asked the sample travel agents to select the three factors (among 10 proposed) they considered most important. the factors that appear to carry the most weight in the selection of the to are, in decreasing order, product quality and level of customization (51%), customer service to agencies and end users (44%), intermediation margin (44%), ec problem solving (37%), price and value (35%), prompt, effective and appropriate response (26%), incentives (24%), and image and reputation (24%), catalogue the data highlights the tendency of tas to give priority to the joint aspects of effectiveness and customer management, to require customized products to satisfy the increasingly more complex demand, to consid close attention to the intermediation margins and economic incentives. it is worth pointing out how much attention the tos put into assisting tas in the daily processes of problem solving and management, which to develop effective crm processes aimed at the retail network. 8 the factors chosen were identified through the interviews conducted with the two managers of eden viaggi tour operator, see par. 3.1. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% fewer than 4 50% 38% activated relationships terminated and activated relationships over the last three years in conclusion, the analysis shows that the relationship between tour operators agencies displays the following characteristics: the widespread and generalized presence of multi-supply relationships; a very high interdependence between the turnover of travel agencies and the number of tour operators with which there are working relationships; a very high exchange rate in terms of the activation and termination of relationships between tour operators and travel agencies. ey factors in the selection of tos by the travel agency in order to evaluate which factors have the highest impact on travel agencies’ selection of , we asked the sample travel agents to select the three factors (among 10 proposed) they considered most important. the factors that appear to carry the most weight in the selection of the to are, in product quality and level of customization (51%), customer service to agencies and end users (44%), intermediation margin (44%), economic stability (43%), problem solving (37%), price and value (35%), prompt, effective and appropriate response (26%), incentives (24%), and image and reputation (24%), catalogue quality (12%). the data highlights the tendency of tas to give priority to the joint aspects of effectiveness and customer management, to require customized products to satisfy the increasingly more complex demand, to consider both efficiency and profitability by paying close attention to the intermediation margins and economic incentives. it is worth pointing out how much attention the tos put into assisting tas in the daily processes of problem solving and management, which emphasizes how important is for tos to develop effective crm processes aimed at the retail network. the factors chosen were identified through the interviews conducted with the two managers of eden between 5 and 9 more than 10 31% 13% 7% 39% 8% activated relationships terminated relationships 105 in conclusion, the analysis shows that the relationship between tour operators and travel supply relationships; a very high interdependence between the turnover of travel agencies and the number ms of the activation and termination of relationships in order to evaluate which factors have the highest impact on travel agencies’ selection of tour , we asked the sample travel agents to select the three factors (among 10 proposed) the factors that appear to carry the most weight in the selection of the to are, in product quality and level of customization (51%), customer service to onomic stability (43%), problem solving (37%), price and value (35%), prompt, effective and appropriate response quality (12%). the data highlights the tendency of tas to give priority to the joint aspects of effectiveness and customer management, to require customized products to satisfy the er both efficiency and profitability by paying it is worth pointing out how much attention the tos put into assisting tas in the daily emphasizes how important is for tos the factors chosen were identified through the interviews conducted with the two managers of eden none 15% 106 table 3 – key factors in the selection of tos, as indicated by tas, classified by level of turnover from to products average ta turnover 0/59% ta turnover 60/100% product quality and level of customization 51% 45% 53% customer service to agencies and end users 44% 49% 40% intermediation margins 44% 36% 48% economic stability 43% 37% 46% problem solving 37% 47% 30% price and value 35% 32% 36% promt, effective and appropriate response 26% 29% 23% incentives 24% 24% 25% image and reputation 24% 28% 22% catalogue quality 12% 17% 9% source: our data when the individual factors driving the ta’s choice of to are compared and classified by amount of turnover earned from to products, a number of interesting aspects come to light. first of all, economic factors as well as intermediation margins and the financial stability of suppliers (not counting incentives) are judged to be more important by those tas that earn a high portion of their turnover from to products. thus, those travel agencies that are more heavily dependent on their business relationships with tos are also those that are more sensitive to economic aspects. services like problem solving and customer service to agencies and users are considered important by those tas that are less financially dependent on to-generated turnover (up to 59%), while they are considered less significant by those agencies with a higher rate (over 60%). this difference in sensitivity to these services could be due to the fact that the former category of ta is seeking business relationships that can complement their own portfolio of offers and that can guarantee high levels of service to the agencies themselves and to their clientele. instead, the latter category of ta may put lesser emphasis on services because most of their offer is based on the intermediation of their suppliers’ products and so, these agencies are mainly looking to gain greater commission margins and to ensure a stable, high quality supply of products, with a highly personalized services. this could help explain the fact that the quality of the product and the level of customization both represent critical success factors for those tas with a higher percentage of to-dependent turnover. in order to investigate retailers’ assessment of the major italian tour operators and to verify whether tour operators meet the critical factors for a strong partnership, the to market leaders were evaluated (and given a score of 1 to 5) according to the critical success factors considered important by the tas. table 4 – evaluation of the to market leaders for the critical success factors considered most important by the tas tour operator image and reputation economic stability a 3.78 3.53 b 3.46 3.32 c 2.81 3.01 d 3.26 3.29 e 3.46 3.37 f 3.79 3.74 avg 3.43 3.38 source: our data the average scores are positioned in an intermediate zone of the scale from 1 to 5 (minimum 2.78, maximum 3.43), showing that the level of ta satisfaction is not high. this first fact could explain why tas have a very incidence of multi are not completely satisfied by the market leaders (especially as regards the intermediation margins and economic incentives). among the six tos no dominant position emerges, showing the existence of a very competitive environment. the factors that are scored highest are image and reputation (3.43), economic stability (3.38), and customization of products (3.13). the economic factors that get the lowest scores are intermediation margin and incentives (2.78). the factor that was most appreciated linked to the economic soundness of the same. one can reasonably deduce that the recent crisis in northern africa, with the resulting failure of tos, has shifted the focus of tas on these factors; thus, they consider them a priority in the selection of their supplier relationships. a similar finding emerged in the recent study by yevstafyev and yevstafyev (2015) referred to the russian market, in which the authors highlight that tour operators with a high brand reputation and a high index of geographical concentration of their agent network are more likely to create partnerships with travel agencies, rather than with other tour operators. we can say that in this historically turbulent time period, tas are pr products with lower profit margins, as long as they are organized by tos that offer greater guarantees, in order to avoid reputational and financial damage deriving from the possible cancellation of the holiday package sold. however, tas c to offers and this can also explain the high rotation of the relationships between tos and tas. 3.3.3. role that the to brand travel agencies the aim of the question is to understand the attitude of the client who goes to travel agencies, in order to assess the role played by the products. evaluation of the to market leaders for the critical success factors considered most customiz ation of products assistance to agencyes and end customers problem solving price intermedi 2.94 2.98 2.92 2.52 3.17 3.20 3.05 3.13 2.68 2.89 2.81 3.35 3.40 3.05 3.14 3.03 3.15 3.09 3.05 2.80 3.40 3.20 3.16 2.98 3.13 3.07 3.02 2.97 the average scores are positioned in an intermediate zone of the scale from 1 to 5 (minimum 2.78, maximum 3.43), showing that the level of ta satisfaction is not high. this first fact could explain why tas have a very incidence of multi-supplier relationsh are not completely satisfied by the market leaders (especially as regards the intermediation margins and economic incentives). among the six tos no dominant position emerges, showing the existence of a very competitive environment. that are scored highest are image and reputation (3.43), economic stability and customization of products (3.13). the economic factors that get the lowest scores are intermediation margin and incentives (2.78). the factor that was most appreciated in the to market leaders is image and reputation, linked to the economic soundness of the same. one can reasonably deduce that the recent crisis in northern africa, with the resulting failure of tos, has shifted the focus of tas on ey consider them a priority in the selection of their supplier relationships. a similar finding emerged in the recent study by yevstafyev and yevstafyev (2015) referred to the russian market, in which the authors highlight that tour operators with rand reputation and a high index of geographical concentration of their agent network are more likely to create partnerships with travel agencies, rather than with other tour we can say that in this historically turbulent time period, tas are pr products with lower profit margins, as long as they are organized by tos that offer greater guarantees, in order to avoid reputational and financial damage deriving from the possible cancellation of the holiday package sold. however, tas cannot be totally satisfied with the to offers and this can also explain the high rotation of the relationships between tos and brand plays in the choice of product made by those clients that use he question is to understand the attitude of the client who goes to travel agencies, in order to assess the role played by the brand of tour operator in the selection of tourism 107 evaluation of the to market leaders for the critical success factors considered most intermedi ation margin incentives 2.32 2.47 2.89 2.88 2.83 2.92 2.88 2.50 2.81 2.83 2.93 3.08 2.78 2.78 the average scores are positioned in an intermediate zone of the scale from 1 to 5 (minimum 2.78, maximum 3.43), showing that the level of ta satisfaction is not high. this supplier relationships, as they are not completely satisfied by the market leaders (especially as regards the intermediation margins and economic incentives). among the six tos no dominant position emerges, that are scored highest are image and reputation (3.43), economic stability and customization of products (3.13). the economic factors that get the lowest scores in the to market leaders is image and reputation, linked to the economic soundness of the same. one can reasonably deduce that the recent crisis in northern africa, with the resulting failure of tos, has shifted the focus of tas on ey consider them a priority in the selection of their supplier relationships. a similar finding emerged in the recent study by yevstafyev and yevstafyev (2015) referred to the russian market, in which the authors highlight that tour operators with rand reputation and a high index of geographical concentration of their agent network are more likely to create partnerships with travel agencies, rather than with other tour we can say that in this historically turbulent time period, tas are prepared to choose products with lower profit margins, as long as they are organized by tos that offer greater guarantees, in order to avoid reputational and financial damage deriving from the possible annot be totally satisfied with the to offers and this can also explain the high rotation of the relationships between tos and in the choice of product made by those clients that use he question is to understand the attitude of the client who goes to travel agencies, of tour operator in the selection of tourism 108 for this question the respondent could select one of the following "request for specific brands, irrespective of product", "request for specific products, irrespective of brand", "no request: total freedom of the agency." the questionnaire findings show that only 34% of customers request a specific b figure 4 – client attitude towards the to brand in choosing a product source: our data in most cases the buying behavior of customers (79%) is not bound to the to brand, thus leaving tas the opportunity to guide them in their choices. in fact, 34% have a clear idea of the product or of the brand" and leave the decision completely to the travel agent, whereas 45% of the clients’ requests are focused exclusively on the type of product. this consumer behavior gives important contrac distribution channel of the "intermingled tourism" market. this happens because in the internet era the role tas play in providing truthful and credible information concerning the quality of the tourist products remai quality to tourists, thereby increasing informational efficiency both in quality and content, because of its role as a reputation provider. thus, the ta’s main role in the vertical tourism chain is and should be the transmission of credible and reliable information to customers (calveras, 2006). it follows that the tos that are able to establish solid relationships with tas and make ict investments downstream can gain considerable competitive advan competitors. this is because consumers demonstrate store loyalty to tas rather than brand loyalty to tos. 4. conclusions and implications the study was exploratory, aiming to investigate the characteristics of the relationship between tos and tas, the role of the to brand in the process of selling tourism products to the consumer, as well as the critical success factors for the selection tos, in order to truly assess the potential conflicts and collaborative processes in place between the two from the analysis of the relationship between tas and tos divergent aspects come to light. on the one hand, there is a high interdependency between the turnover of the travel agency and the number of tour operators with which they have relationships of supply at the same time. this dynamic indicating the 45% 21% for this question the respondent could select one of the following three answer options: "request for specific brands, irrespective of product", "request for specific products, irrespective of brand", "no request: total freedom of the agency." the questionnaire findings show that only 34% of customers request a specific b client attitude towards the to brand in choosing a product in most cases the buying behavior of customers (79%) is not bound to the to brand, thus leaving tas the opportunity to guide them in their choices. in fact, 34% have a clear idea of the product or of the brand" and leave the decision completely to the travel agent, whereas 45% of the clients’ requests are focused exclusively on the type of product. this consumer behavior gives important contractual power to retail agents along the distribution channel of the "intermingled tourism" market. this happens because in the internet era the role tas play in providing truthful and credible information concerning the quality of the tourist products remains important. a ta is able to credibly provide a signal of quality to tourists, thereby increasing informational efficiency both in quality and content, because of its role as a reputation provider. thus, the ta’s main role in the vertical tourism s and should be the transmission of credible and reliable information to customers it follows that the tos that are able to establish solid relationships with tas and make ict investments downstream can gain considerable competitive advan competitors. this is because consumers demonstrate store loyalty to tas rather than brand conclusions and implications the study was exploratory, aiming to investigate the characteristics of the relationship d tas, the role of the to brand in the process of selling tourism products to the consumer, as well as the critical success factors for the selection tos, in order to truly assess the potential conflicts and collaborative processes in place between the two from the analysis of the relationship between tas and tos divergent aspects come to light. on the one hand, there is a high interdependency between the turnover of the travel number of tour operators with which they have relationships of supply at the same time. this dynamic indicating the need for both parties to establish cooperation geared 34% request for specific brands, irrespective of product request for specific products, irrespective of brand no request: total freedom of the agency three answer options: "request for specific brands, irrespective of product", "request for specific products, the questionnaire findings show that only 34% of customers request a specific brand. in most cases the buying behavior of customers (79%) is not bound to the to brand, thus leaving tas the opportunity to guide them in their choices. in fact, 34% of clients "do not have a clear idea of the product or of the brand" and leave the decision completely to the travel agent, whereas 45% of the clients’ requests are focused exclusively on the type of tual power to retail agents along the distribution channel of the "intermingled tourism" market. this happens because in the internet era the role tas play in providing truthful and credible information concerning the ns important. a ta is able to credibly provide a signal of quality to tourists, thereby increasing informational efficiency both in quality and content, because of its role as a reputation provider. thus, the ta’s main role in the vertical tourism s and should be the transmission of credible and reliable information to customers it follows that the tos that are able to establish solid relationships with tas and make ict investments downstream can gain considerable competitive advantage over their competitors. this is because consumers demonstrate store loyalty to tas rather than brand the study was exploratory, aiming to investigate the characteristics of the relationship d tas, the role of the to brand in the process of selling tourism products to the consumer, as well as the critical success factors for the selection tos, in order to truly assess the potential conflicts and collaborative processes in place between the two actors. from the analysis of the relationship between tas and tos divergent aspects come to light. on the one hand, there is a high interdependency between the turnover of the travel number of tour operators with which they have relationships of supply at the sh cooperation geared request for specific brands, irrespective of product request for specific products, irrespective of brand no request: total freedom of the towards increasing the value for both customers and businesses. on the other hand, there is a generalized and widely diffused presence of multi turnover rate, showing a conflictual context that than to the processes of deepening and broadening the value of the relationship. these issues lead us to hypothesize that the relationship between tas and tos is characterized by elements that can foster areas of al., 2012). in particular, the fact that in most cases the channel relationships are of short duration and highly variable probably means that the travel intermediaries do not sufficiently ex areas of potential cooperation along vertical channel relationships. the research findings lead us to believe, in keeping with the outcome of other studies 2015), that the relationships between tas and tos are collaborative, thereby indicating that said relationships show little cohesion and interdependence (tran et al, 2016). the factors that are central to tas’ selection of tos are, above all, the quality and level of customization of products, followed by the customer service provided to tos and ta end customer and intermediation margin. the possibility of customizing products shows the strong need for tas to respond to new demand trends (sambri and pegan, 2007; fabris dalli and romani, 2011) through a wide and diversified tourism offer which requires multi supplier relationships. the high attention to intermediation margins is a classic factor which can lead to conflict between tas division of the value in the distribution channel. so, tour operators are obliged to pay great attention to these key factors in order to create and maintain strong and durable relationships with travel agents. this is also due t aspects is expressed more markedly by the travel agencies that report higher turnover volumes thanks to their intermediation for package deals supplied by tour operators. from this point of view, it has been useful to compare the main critical success factors with respect to the assessment, for the same factors, of the six tos market leaders. the results show that in addition to collaboration, there is also a "context of conflict" and a "relatio distance" between the tas interviewed and the leading tos. the factors considered most important by the tas in their relationships with tos only receive a medium from the market leader tos, (especially those related to the financial as relationship, i.e., "intermediation margins/ economic incentives"). this could explain why tas show a high incidence of multi with the to market leaders and therefore, continuously se provide the best conditions. the factors that receive the highest rating by the tas, are " image and reputation", related to the economic solidity of the tos. this aspect would let one assume that agencies are prepared to overlook the profitability of the products in their portfolio, provided that the offers are proposed by tos of high reputation and high credit standing, in order to avoid reputational or financial damage resulting from either the low quality or the cancellatio the holiday sold. with reference to the role played by to brands in the choice of product by clients who use travel agencies, this study highlights that in most cases (about 80%), during the process of purchasing the product, customers are little sway a lot of room for the ta to influence their choices. therefore, consumers recognize the fact that it is the agents, not the to brand, that act as guarantors of the quality of the tourist offer. nevertheless, the reputation of the producers of these package deals is, instead, important to travel agents. towards increasing the value for both customers and businesses. on the other hand, there is a generalized and widely diffused presence of multi-supplier relationships with a very high turnover rate, showing a conflictual context that is more closely related to market dynamics than to the processes of deepening and broadening the value of the relationship. these issues lead us to hypothesize that the relationship between tas and tos is characterized by elements that can foster areas of collaboration as well as conflict (pencarelli, 2010; in particular, the fact that in most cases the channel relationships are of short duration and highly variable probably means that the travel intermediaries do not sufficiently ex areas of potential cooperation along vertical channel relationships. the research findings lead us to believe, in keeping with the outcome of other studies (bagdoniene and hopeniene, 2015), that the relationships between tas and tos are potentially more conflictual that they are collaborative, thereby indicating that said relationships show little cohesion and 2016). the factors that are central to tas’ selection of tos are, above all, the quality and level customization of products, followed by the customer service provided to tos and ta end customer and intermediation margin. the possibility of customizing products shows the to respond to new demand trends (sambri and pegan, 2007; fabris dalli and romani, 2011) through a wide and diversified tourism offer which requires multi supplier relationships. the high attention to intermediation margins is a classic factor which can lead to conflict between tas and tos, who pursue opposite financial objectives in the division of the value in the distribution channel. so, tour operators are obliged to pay great attention to these key factors in order to create and maintain strong and durable relationships with travel agents. this is also due to the fact that, as our study shows, sensitivity to financial aspects is expressed more markedly by the travel agencies that report higher turnover volumes thanks to their intermediation for package deals supplied by tour operators. w, it has been useful to compare the main critical success factors with respect to the assessment, for the same factors, of the six tos market leaders. the results show that in addition to collaboration, there is also a "context of conflict" and a "relatio interviewed and the leading tos. the factors considered most in their relationships with tos only receive a medium from the market leader tos, (especially those related to the financial as relationship, i.e., "intermediation margins/ economic incentives"). this could explain why tas show a high incidence of multi-supply relationships, as they are not completely satisfied with the to market leaders and therefore, continuously seek new relationships that can the factors that receive the highest rating by the tas, are " image and reputation", related to the economic solidity of the tos. this aspect would let one assume that agencies are look the profitability of the products in their portfolio, provided that the offers are proposed by tos of high reputation and high credit standing, in order to avoid reputational or financial damage resulting from either the low quality or the cancellatio with reference to the role played by to brands in the choice of product by clients who use travel agencies, this study highlights that in most cases (about 80%), during the process of purchasing the product, customers are little swayed by the brand reputation of the to, leaving to influence their choices. therefore, consumers recognize the fact that it is the agents, not the to brand, that act as guarantors of the quality of the tourist offer. e reputation of the producers of these package deals is, instead, important to 109 towards increasing the value for both customers and businesses. on the other hand, there is a supplier relationships with a very high is more closely related to market dynamics than to the processes of deepening and broadening the value of the relationship. these issues lead us to hypothesize that the relationship between tas and tos is characterized by conflict (pencarelli, 2010; vasanth et in particular, the fact that in most cases the channel relationships are of short duration and highly variable probably means that the travel intermediaries do not sufficiently exploit the areas of potential cooperation along vertical channel relationships. the research findings lead bagdoniene and hopeniene, ly more conflictual that they are collaborative, thereby indicating that said relationships show little cohesion and the factors that are central to tas’ selection of tos are, above all, the quality and level customization of products, followed by the customer service provided to tos and ta end customer and intermediation margin. the possibility of customizing products shows the to respond to new demand trends (sambri and pegan, 2007; fabris, 2008; dalli and romani, 2011) through a wide and diversified tourism offer which requires multisupplier relationships. the high attention to intermediation margins is a classic factor which inancial objectives in the division of the value in the distribution channel. so, tour operators are obliged to pay great attention to these key factors in order to create and maintain strong and durable relationships o the fact that, as our study shows, sensitivity to financial aspects is expressed more markedly by the travel agencies that report higher turnover volumes thanks to their intermediation for package deals supplied by tour operators. w, it has been useful to compare the main critical success factors with respect to the assessment, for the same factors, of the six tos market leaders. the results show that in addition to collaboration, there is also a "context of conflict" and a "relationship interviewed and the leading tos. the factors considered most in their relationships with tos only receive a medium-low evaluation from the market leader tos, (especially those related to the financial aspects of the relationship, i.e., "intermediation margins/ economic incentives"). this could explain why supply relationships, as they are not completely satisfied ek new relationships that can the factors that receive the highest rating by the tas, are " image and reputation", related to the economic solidity of the tos. this aspect would let one assume that agencies are look the profitability of the products in their portfolio, provided that the offers are proposed by tos of high reputation and high credit standing, in order to avoid reputational or financial damage resulting from either the low quality or the cancellation of with reference to the role played by to brands in the choice of product by clients who use travel agencies, this study highlights that in most cases (about 80%), during the process of ed by the brand reputation of the to, leaving to influence their choices. therefore, consumers recognize the fact that it is the agents, not the to brand, that act as guarantors of the quality of the tourist offer. e reputation of the producers of these package deals is, instead, important to 110 this aspect highlights the importance of tas in the competitiveness of organized tourism. therefore, the tos that can establish collaborative relationships with tas have the opportunity to gain a competitive advantage of no small importance compared to their competitors. this also emerges from the study carried out by pencarelli et al. (2013) which showed how the success of a leading to in the italian tourism market is strongly based on a relational marketing approach geared toward creating loyalty from the network of travel agents. in summary, the relationship between tas and tos is complex and ambivalent, one that is pushed both towards collaboration and towards channel conflict (von friedrichs grängsjö, 2003; kylänen and mariani, 2012). some managerial challenges emerge for tos who should aim to retain the ta, by implementing policies of relationship marketing and making use of new icts (pencarelli et al., 2013). in this perspective, it is particularly important for tos to invest in the expansion of crm (customer relationship management), which may allow them to improve relationships with tas who are the true "ambassadors" of the tos (silvestrelli and gregori; 1998), because they contribute to enhancing the image and reputation of tos, in addition to ensuring them a certain level of sales. however, the presence of multi-supply relationships highlights how the type of relationship between tas and tos is characterized by poor stability and scarce loyalty, making certain aspects of channel conflict prevalent (pencarelli, 2010). despite the limitation resulting from the fact that most of the questionnaires were selfcompiled on-line, leading to a phenomenon of self-selection of respondents, the research highlights some interesting findings and managerial challenges for italian tos. in line with these considerations, research must continue to delve into the characteristics of the relationship between tas and tos, looking to validate the hypotheses through more complex and reliable statistical tools. references 1. abou-shouk, a., & mun lim, w., & megicks, p. 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(2015). factors affecting the partnership between tour operators and travel agents in russia. procedia economics and finance, 24, 777784. editorial ijeb 14 senza citazioni traditionally, strategic management has been analyzed from an economic perspective, with approaches aiming at understanding the mechanisms underlying firms' performance. the relevant theories, such as the analysis of competitive advantage, the evolutionary perspective, and the resource mechanisms of competitiveness, linking internal resources to the generation of value in a market context. more recently, a psychological perspective has been adopted in several studies in order to contribute to understanding organization from the external environment to the internal resources of an economic organization, paying increasing attention to the cognitive and behavioral processes. however, the emphasis psychology of strategic management formulation brought to undervalue emotional and affective aspects, leading to a still inadequate representation of strategic management. there is still a relevant amount succeed in capturing a vision complete understanding of the decision this journal aims at encourag economic and the management the first article entitled "explaining customer loyalty markets", by arturo vasquezcustomer store loyalty. the generation of customer loyalty, from initial customer satisfaction to trust, to commitment, to loyalty. results of an empirical research show that c in customer loyalty. in today's environment of increasing competition among stores, earning "true" customer loyalty is required an essential component in the path to reach customer loyalty in the long term. the second article from domenico consoli entitled (" collaborative tools 2.0 in websites art about the use of interactive tools in websites of small some experimentations in this direction. the analysis entrepreneurs or managers think that new digital cha goals. results show that small feel the need to be present on social networks, although this awareness does not always imply the mastery of adequate logic and languages simplice asongu, with the article entitled "new financial development indicators: with a critical contribution to inequality empirics" introduces complementary indicators to the existing financial development and structure database (f practicable way to disentangle the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning in countries. “moon phase as the cause of monday irrationality: case of asean day of the week anomaly” is the subject of the article from and zamri ahmad. the authors investigated editorial traditionally, strategic management has been analyzed from an economic perspective, with approaches aiming at understanding the mechanisms underlying firms' performance. the relevant theories, such as the structure-strategy-performance paradigm analysis of competitive advantage, the game theory about competitive interaction, and the resource-based view, tried to point out con mechanisms of competitiveness, linking internal resources to the generation of value in a more recently, a psychological perspective has been adopted in several studies in order to contribute to understanding organizational and market dynamics. the field of analysis shifted from the external environment to the internal resources of an economic organization, paying increasing attention to the cognitive and behavioral processes. however, the emphasis ategic management literature on behavioral and cognitive aspects of strategy formulation brought to undervalue emotional and affective aspects, leading to a still inadequate representation of strategic management. relevant amount of work to be done in terms of interdisciplinary studies to a vision which includes all perspectives that need to be taken complete understanding of the decision-making process of companies and organizations. encouraging this interdisciplinary approach, firstly the management perspectives with the behavioral and psycholog the first article entitled "explaining customer loyalty to retail stores -parraga and miguel sahagun provides a better understanding of . the study employs a model describing key relationships in the generation of customer loyalty, from initial customer satisfaction to trust, to commitment, to results of an empirical research show that customer satisfaction alone will not result in customer loyalty. in today's environment of increasing competition among stores, earning "true" customer loyalty is required. additionally, attaining customer trust and commitment is an essential component in the path to reach customer loyalty in the long term. the second article from domenico consoli entitled ("the integration n websites of micro and small enterprises") analyse art about the use of interactive tools in websites of smaller companies that have introduced some experimentations in this direction. the analysis was oriented to understand if entrepreneurs or managers think that new digital channels are relevant in reaching business show that small firms understood the potentiality of web 2.0 and increasingly feel the need to be present on social networks, although this awareness does not always imply logic and languages. simplice asongu, with the article entitled "new financial development indicators: with a critical contribution to inequality empirics" introduces complementary indicators to the existing financial development and structure database (fdsd). the paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing “moon phase as the cause of monday irrationality: case of asean day of the week anomaly” is the subject of the article from rayenda khresna brahmana and zamri ahmad. the authors investigated anomalies in investors behavior depending on the 1 editorial traditionally, strategic management has been analyzed from an economic perspective, with approaches aiming at understanding the mechanisms underlying firms' performance. the most by porter for the competitive interaction, the based view, tried to point out conditions and causal mechanisms of competitiveness, linking internal resources to the generation of value in a more recently, a psychological perspective has been adopted in several studies in order to al and market dynamics. the field of analysis shifted from the external environment to the internal resources of an economic organization, paying increasing attention to the cognitive and behavioral processes. however, the emphasis put by behavioral and cognitive aspects of strategy formulation brought to undervalue emotional and affective aspects, leading to a still nterdisciplinary studies to includes all perspectives that need to be taken for a organizations. ly by integrating the psychological ones. o retail stores in u.s. hispanic provides a better understanding of study employs a model describing key relationships in the generation of customer loyalty, from initial customer satisfaction to trust, to commitment, to ustomer satisfaction alone will not result in customer loyalty. in today's environment of increasing competition among stores, earning st and commitment is an essential component in the path to reach customer loyalty in the long term. the integration of interactive and analyses the state of the companies that have introduced oriented to understand if in reaching business understood the potentiality of web 2.0 and increasingly feel the need to be present on social networks, although this awareness does not always imply simplice asongu, with the article entitled "new financial development indicators: with a critical contribution to inequality empirics" introduces complementary indicators to the dsd). the paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid formal financial sector in developing “moon phase as the cause of monday irrationality: case of asean day of the week rayenda khresna brahmana, chee-wooi hooy anomalies in investors behavior depending on the 2 day of the week, trying to verify if a moon-induced mood could be a determinant of an irrational behavior. the article entitled “retailer consumer relationships for durable goods market in romania. a multimethod analysis” by manuela rozalia gabor, examines the relationship between romanian consumers of durable goods and retailers that operate on this market. trough an empirical research on 300 households in romania, the research revealed a paradox, since romanian consumers showed distrust in sales personnel and confidence in commercials. this can be considered an indicator of immaturity of romanian market in comparison with that of other eu member countries nikola perovic, with the paper entitled “psychological pricing in modern retailing: the case of wine sector in hard-discounter chains of russia”, analyses how psychological pricing could be a source of competitive advantage. results show that psychological pricings bring advantages to retail chains in many aspects, like increasing demand, attracting new business deals, growing profits and customer base by increasing customer loyalty. the article from liviu catalin andrei offers a contribution to the debate on the field of convergence policies and optimum currency area (oca). convergence and oca are different from free trade area and customs union meaning a paradox in comparison to what was being developed at the beginning of the integration process. marco cioppi, fabio musso, tonino pennarelli and elisabetta savelli present a research on small and medium-sized enterprises in the furniture sector in italy, with the aim to analyze which kind of strategies smes are adopting in order to face the economic crisis. results revealed the ability of firms in reacting by a strategy change, being able to improve their position in the market. the impact of productive safety net program on poverty is the subject of the paper authored by yibrah hagos gebresilassie. the paper revealed that the program has positive and significant effect on consumption, livestock holdings, and productive assets. the study also revealed that the program has positive and significant effects on poverty reduction and protecting productive assets. abolaji joachim abiodun, kenneth sola adeyemi and adewale omotayo osibanjo (“quality dimensions, value, service cost and recommendation behaviour: evidence from the nigerian cellular industry”) analyze both affective and cognitive factors in cellular services to customers’ recommendation behavior. results of an empirical research indicate that core cellular service dimensions, service cost (price) and hedonic values are significant determinants of customers’ recommendation behavior. “lying for the greater good: bounded rationality in a team” is the title of the last article, authored by oktay sürücü. the article is focused on the interaction between fully and boundedly rational agents in situations where their interests are perfectly aligned. the cognitive limitations of the boundedly rational agent do not allow him to fully understand the market conditions and lead him to take non-optimal decisions. on the other side, the fully rational agent can manipulate the information he sends and decrease the expected loss caused by the boundedly rational agent. fabio musso editor-in-chief 8 _15-20_ raval the impact of balanced scorecard announcement on firm value received: july 3, 2016 in recent years, the balanced scorecard has emerged as a popular performance measurement and management system used by many organizations globally. this system helps link the strategy and vision of a company to its day that have successfully implemented the balanced scorecard, the palladium group, a leading organization of strategic management, established a widely balanced scorecard hall of fame for executing strategy. since 2000, 152 companies have been inducted into the hall of fame. an event study was conducted to test the impact on firm value from the announcement of induction into the balanced scorecard hall of fame. if the balanced scorecard properly aligns the business strategy with the short these benefits should impact positively on the firm’s value. the results suggest some market price effect fiveand ten-days prior to, but none following the announcement. the study’s findings and opportunities for further research are di keywords: balanced scorecard, 1. introduction the balanced scorecard (hereafter bsc) is a strategic measurement and management system that was first formally introduced to the public by drs. robert s. kaplan and david p. norton (1992). they have produced several subsequent articles outlining in detai performance system (1993, 1996a, 1996b, 2001a, 2001b, 2001c). in an ever competitive, and highly interconnected environment, they argued, a firm can no longer rely on the traditional approach of solely focusing on financ such measures to value-creating non international journal of economic behavior, vol 5, n. 1, pp the impact of balanced scorecard hall of fame induction announcement on firm value john r. wingender, jr. heider college of business, creighton university,usa vasant raval heider college of business, creighton university,usa samantha j. schuett heider college of business, creighton university,usa accepted: october 7, 2015 online published: abstract balanced scorecard has emerged as a popular performance measurement and management system used by many organizations globally. this system helps link the strategy and vision of a company to its day-to-day operations. to recognize those companies e successfully implemented the balanced scorecard, the palladium group, a leading organization of strategic management, established a widely-respected global program: balanced scorecard hall of fame for executing strategy. since 2000, 152 companies have een inducted into the hall of fame. an event study was conducted to test the impact on firm value from the announcement of induction into the balanced scorecard hall of fame. if the balanced scorecard properly aligns the business strategy with the short these benefits should impact positively on the firm’s value. the results suggest some market days prior to, but none following the announcement. the study’s findings and opportunities for further research are discussed. balanced scorecard, firm value, firm performance, strategy execution, the balanced scorecard (hereafter bsc) is a strategic measurement and management system that was first formally introduced to the public by drs. robert s. kaplan and david p. norton (1992). they have produced several subsequent articles outlining in detail the bsc as a strategic performance system (1993, 1996a, 1996b, 2001a, 2001b, 2001c). in an ever competitive, and highly interconnected environment, they argued, a firm can no longer rely on the traditional approach of solely focusing on financial measures that mask the relationship of creating non-financial measures. traditional models suffer from an international journal of economic behavior, vol 5, n. 1, pp. 121-132 121 the impact of balanced scorecard hall of fame induction announcement on firm value john r. wingender, jr. heider college of business, creighton university,usa vasant raval college of business, creighton university,usa samantha j. schuett heider college of business, creighton university,usa online published: nov 28, 2015 balanced scorecard has emerged as a popular performance measurement and management system used by many organizations globally. this system helps link the day operations. to recognize those companies e successfully implemented the balanced scorecard, the palladium group, a leading respected global program: balanced scorecard hall of fame for executing strategy. since 2000, 152 companies have een inducted into the hall of fame. an event study was conducted to test the impact on firm value from the announcement of induction into the balanced scorecard hall of fame. if the balanced scorecard properly aligns the business strategy with the short-term operations, these benefits should impact positively on the firm’s value. the results suggest some market days prior to, but none following the announcement. the study’s execution, event study. the balanced scorecard (hereafter bsc) is a strategic measurement and management system that was first formally introduced to the public by drs. robert s. kaplan and david p. norton l the bsc as a strategic performance system (1993, 1996a, 1996b, 2001a, 2001b, 2001c). in an ever-changing, competitive, and highly interconnected environment, they argued, a firm can no longer rely on ial measures that mask the relationship of financial measures. traditional models suffer from an 132, 2015 122 explicit identification of the linkage between long-term strategies of a company, formulated mostly by top management, and the short-term operational measures, which are often in the form of budgets created by the finance department. this deficiency limits the management’s potential to drive performance and is often the reason for failure of many organizations in executing strategy effectively. the bsc has the potential to improve firm performance for various reasons. it offers a holistic, disciplined approach to measuring and managing an entity’s progress toward its mission, goals, and objectives. in addition to commitment of the firm’s leadership, it requires involvement of the entire hierarchy. because of the presence of the bsc, stakeholders are aware of the organization’s vision and path to achieve it. the organization is fully and constantly involved in measuring and monitoring progress toward goals, identifying which parts the value chain need improvement, and allocating resources with a focus on improvement of processes and people to bridge such deficiencies. while there is a degree of concern that expectations of impressive results from the bsc implementation are unrealistic, it appears that if the path to strategic goals is laid out and resources are allocated properly, the results would be better than when the bsc is not adopted and pursued with passion. when the value chain is managed through implementation of a clear vision, ultimately, financial performance – the lagging indicators in the bsc – will show better, more persistent, or more predictable outcomes. under such conditions, an alignment of company performance with investor expectations is much more likely; when it is achieved, the financial markets can be expected to respond positively to the firm performance. as more companies adopt the bsc system, the discussion of decision usefulness of the system and its impact on results has spread across the global corporate scene. the media coverage touting the achievements of adopters is not uncommon. consequently, when the track record of successful bsc implementations is widely accepted by the investor community, it is likely that any news about a company’s decision to adopt the bsc may be interpreted by investors as a positive sign of earnings stream expected from the company. the hope of company performance in line with expectations takes hold among present and future investors. one widely publicized media event that resonates with the financial markets and its players is the induction of selected organizations in the bsc hall of fame, a resounding recognition that the inductee has successfully implemented the system. the investor confidence would likely get a boost from such news, resulting in a positive attitude toward firm practices to create value for its stakeholders. thus, we present the following hypotheses for our study and discuss the findings in the following sections. h0: stock returns do not react to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for executing strategy. h1: stock returns react positively to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for executing strategy. 2. literature review as kaplan and norton state, the bsc is a comprehensive framework that translates a company’s strategic objectives into a coherent set of performance measures. to enrich the dashboard of performance, the bsc typically adds three non-financial perspectives that complement the financial perspective: customer, internal business processes, and innovation and learning. the customer perspective focuses on the satisfaction of the firm’s customer base and how well their expectations are being met. supplementing t is the internal business perspective. this function takes into consideration the business processes that have a significant impact on the company’s value chain and aims at bettering these processes. the innovation and learning per to existing products and processes and the ability to introduce entirely new products with expanded capabilities (see kaplan and norton, 1992). as with the traditional method, the financial perspective examines bo equity, operating income, and cash flow. importantly, the scorecard makes explicit the relationships between such financial measures (lagging indicators) with measures in the other three non-financial perspectives. this in turn provides insights on how to drive performance by leveraging these relationships. a high degree of articulation of the bsc system makes it rather intuitive and on the surface, without any downside risks. however, the bsc has been constructively examined to suggest its limitations. a notable contribution in this regard comes from norre who concludes that the bsc is a “hierarchical, top dynamic environment or in the organization. if the balanced scorecard is to become more realistic, [its] control processes should be more interactive the building of the scorecard and during the subsequent implementation (p. 81 wongrassamee, gardiner, and simmons (2003) compared two organizational improvement models, bsc and efqm (european foundation for quality ma key perspectives: objectives, strategies and plans, target setting, reward structures and information feedback loops. they concluded that “a problem common to both is “being able to integrate them into a business unit or a whole c find a perfect match between a company and a performance measurement framework (p. 28).” in spite of the noted limitations, experimentation of the bsc in the corporate world and among the non-profits continues at a steady pace. in part, this may due to the fact that the bsc allows managers to view the organization through a comprehensive framework of both non-financial and financial measures, rather than focusing on one class of measures alone. it focuses managers on the most critical measures that will promote the most future success within the objectives of the corporate strategy. measures of progress are determined for each of the four perspectives and then target goals are set. next, managers take act help the company progress towards their set goals which should stem directly from the strategic objectives of the company. progress is continually assessed in order to determine the appropriateness of the measures and the targets set. the communicated throughout the organization to employees at all levels so as to connect the strategic vision to the daily operations performed by the employees. the bsc encourages continuous improvements as target goals are adjusted. one organization that kaplan and norton co the balanced scorecard collaborative). the palladium group is recognized as a leader in helping organizations execute their strategies by focusing on strategic management, performance management, and business intelligence. a powerful initiative that the firm has instituted is the balanced scorecard hall of fame for executing strategy. each year, organizations who have achieved extraordinary performance results following the implementation of kaplan and norton’s bsc are inducted into the hall of fame. to be inducted, the organization (enterprise or leading business unit, public agency, or government entity) must have implemented the bsc by the standards of kaplan and norton, s breakthrough performance results for at least 24 months, and provided a testimonial in which and learning. the customer perspective focuses on the satisfaction of the firm’s customer base and how well their expectations are being met. supplementing the customer perspective is the internal business perspective. this function takes into consideration the business processes that have a significant impact on the company’s value chain and aims at bettering these processes. the innovation and learning perspective focuses on continual improvement to existing products and processes and the ability to introduce entirely new products with expanded capabilities (see kaplan and norton, 1992). as with the traditional method, the financial perspective examines bottom line numbers such as return on investment, return on equity, operating income, and cash flow. importantly, the scorecard makes explicit the relationships between such financial measures (lagging indicators) with measures in the other ial perspectives. this in turn provides insights on how to drive performance by leveraging these relationships. a high degree of articulation of the bsc system makes it rather intuitive and on the surface, without any downside risks. however, the bsc has been constructively examined to suggest its limitations. a notable contribution in this regard comes from norre who concludes that the bsc is a “hierarchical, top-down model that is not easily rooted in a dynamic environment or in the organization. if the balanced scorecard is to become more realistic, [its] control processes should be more interactive during strategy formulation, during the building of the scorecard and during the subsequent implementation (p. 81 wongrassamee, gardiner, and simmons (2003) compared two organizational improvement models, bsc and efqm (european foundation for quality management) model from five key perspectives: objectives, strategies and plans, target setting, reward structures and information feedback loops. they concluded that “a problem common to both is “being able to integrate them into a business unit or a whole company. . . practically, it is difficult to find a perfect match between a company and a performance measurement framework (p. 28).” in spite of the noted limitations, experimentation of the bsc in the corporate world and ues at a steady pace. in part, this may due to the fact that the bsc allows managers to view the organization through a comprehensive framework of both financial and financial measures, rather than focusing on one class of measures alone. it managers on the most critical measures that will promote the most future success within the objectives of the corporate strategy. measures of progress are determined for each of the four perspectives and then target goals are set. next, managers take act help the company progress towards their set goals which should stem directly from the strategic objectives of the company. progress is continually assessed in order to determine the appropriateness of the measures and the targets set. the target measures are communicated throughout the organization to employees at all levels so as to connect the strategic vision to the daily operations performed by the employees. the bsc encourages continuous improvements as target goals are adjusted. organization that kaplan and norton co-founded is the palladium group (formerly the balanced scorecard collaborative). the palladium group is recognized as a leader in helping organizations execute their strategies by focusing on strategic management, formance management, and business intelligence. a powerful initiative that the firm has instituted is the balanced scorecard hall of fame for executing strategy. each year, organizations who have achieved extraordinary performance results following the mplementation of kaplan and norton’s bsc are inducted into the hall of fame. to be inducted, the organization (enterprise or leading business unit, public agency, or government entity) must have implemented the bsc by the standards of kaplan and norton, s breakthrough performance results for at least 24 months, and provided a testimonial in which 123 and learning. the customer perspective focuses on the satisfaction of the firm’s customer he customer perspective is the internal business perspective. this function takes into consideration the business processes that have a significant impact on the company’s value chain and aims at bettering spective focuses on continual improvement to existing products and processes and the ability to introduce entirely new products with expanded capabilities (see kaplan and norton, 1992). as with the traditional method, the ttom line numbers such as return on investment, return on equity, operating income, and cash flow. importantly, the scorecard makes explicit the relationships between such financial measures (lagging indicators) with measures in the other ial perspectives. this in turn provides insights on how to drive performance a high degree of articulation of the bsc system makes it rather intuitive and on the surface, without any downside risks. however, the bsc has been constructively examined to suggest its limitations. a notable contribution in this regard comes from norreklit (2000) down model that is not easily rooted in a dynamic environment or in the organization. if the balanced scorecard is to become more during strategy formulation, during the building of the scorecard and during the subsequent implementation (p. 81).” wongrassamee, gardiner, and simmons (2003) compared two organizational improvement nagement) model from five key perspectives: objectives, strategies and plans, target setting, reward structures and information feedback loops. they concluded that “a problem common to both is “being able ompany. . . practically, it is difficult to find a perfect match between a company and a performance measurement framework (p. 28).” in spite of the noted limitations, experimentation of the bsc in the corporate world and ues at a steady pace. in part, this may due to the fact that the bsc allows managers to view the organization through a comprehensive framework of both financial and financial measures, rather than focusing on one class of measures alone. it managers on the most critical measures that will promote the most future success within the objectives of the corporate strategy. measures of progress are determined for each of the four perspectives and then target goals are set. next, managers take actions that will help the company progress towards their set goals which should stem directly from the strategic objectives of the company. progress is continually assessed in order to determine target measures are communicated throughout the organization to employees at all levels so as to connect the strategic vision to the daily operations performed by the employees. the bsc encourages founded is the palladium group (formerly the balanced scorecard collaborative). the palladium group is recognized as a leader in helping organizations execute their strategies by focusing on strategic management, formance management, and business intelligence. a powerful initiative that the firm has instituted is the balanced scorecard hall of fame for executing strategy. each year, organizations who have achieved extraordinary performance results following the mplementation of kaplan and norton’s bsc are inducted into the hall of fame. to be inducted, the organization (enterprise or leading business unit, public agency, or government entity) must have implemented the bsc by the standards of kaplan and norton, shown breakthrough performance results for at least 24 months, and provided a testimonial in which 124 a senior executive credits the bsc in part to its success. the hall of fame is a highly regarded program that spans the globe. the bsc, properly implemented, is effective and over time, has been embraced as an universal key for the performance improvement of almost any organization, for-profit or notfor-profit (ashworth, 1999). whereas other efforts to weave non-financial measures with financial measures into a holistic dashboard achieved very little attention in practice (see for example, pyramid model by mcnair, et al., 1990, and ep2m model by adams and roberts, 1993), the bsc – introduced by maisel (1992) and in the same year, by kaplan and norton (1992) has become a widely popular strategic measurement and management system. its potential to add value has been established over the past 20 years. not unlike any system, the benefit of the bsc implementation lies in its successful implementation. poorly implemented bsc is unlikely to produce impressive gains in the company performance. a high degree of support to the bsc adoption is required from the top management, adequate resources must be provided, stakeholder acceptance should be systematically sought, and persistent efforts should be made across the organization in order for the implementation to succeed. given these prerequisites, it is likely that successful implementation of the bsc can be found only at a limited number of entities in the universe of all bsc adopters. put differently, even the bsc could fail (schneiderman, 1999). we believe an invitation to an organization for induction into the balanced scorecard hall of fame is a strong indicator the entity’s successful implementation of the scorecard. the link between financial performance and stock prices has been a subject of numerous studies. however, there is limited evidence of the impact of non-financial data on the stock prices. an early study conducted by ittner and larcker (1996) examined the information content of announcement of customer satisfaction rankings. their findings suggest that nonfinancial information, such as the customer satisfaction rankings, is of value to the market and as well, is incremental information to the investors. the investor interest in studying qualitative, non-financial information such as in the bsc has been recognized (light, 1998), for the value created by the combined use of both quantitative and qualitative information to drive strategy ultimately mirrors in the market cap of the company. similarly, an ernst & young study (mavrinac and siesfeld, 1998) offered evidence that shareholders strongly rely on a broad range of non-financial factors which potentially provide the foundation for the future firm performance. presumably, the bsc implementation leads to superior company performance and the analysts take this into consideration. whereas a series of dedicated events over a long period of time drive the implementation of the bsc, the trigger event that clearly establishes a milestone of successful implementation is the adopter’s induction into the hall of fame. numerous major and minute efforts prior to this announcement can only be considered steps toward the goal of successful bsc implementation. while the invitation for induction is a distinct and credible event arising from a third party outside of the company, its consideration as an event that impacts the company’s market price has two limitations. first, the media announcements, company newsletters, or other interactions between the company and its stakeholders may already have resulted in the leakage of the news; this may have been absorbed into the market price of the company stock over time. second, the market participants may not recognize long-term (positive) consequences of the event, may suspect that this was hype with no real significance to the company’s performance, or may just downplay the future impact of the bsc in the life of the company. nevertheless, we believe the announcement of induction is a high-profiled, credible, and impactful event in the life of a company, and should produce market price effects following the event. 3. methodology 3.1 hypothesis in order to test the theory whether announcements of a firm’s induction scorecard hall of fame has an effect on firm value, a hypothesis is developed. the null hypothesis assumes that the announcement of a firm being inducted into the balanced scorecard hall of fame will have no impact on firm value. the al the firm’s value will be positively impacted by the hall of fame announcement. the hypothesis is formally stated as follows: h0: stock returns do not react to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for executing strategy. h1: stock returns react positively to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for executing strategy. kaplan and norton (2001a, p. 102) state they have “observed several organizations achieving performance breakthroughs within two to three years of [bsc] implementation.” the impact on firm value from successfully using the balanced scorecard should already be imputed into the stock price. as mentioned above, this feature is one of the criteria for a company to be inducted into the balanced scorecard hall of fame. thus, gains from increasing the value of the firm from implementing this strategy should be already incorporated into the firm’s stock price (h0). however, if the announcement of a firm’s induction into the balanced scorecard hall of fame conveys news to the market that this company has achieved economic rents from practicing this management strategy, then there should be a positive impact on the firm’s value (h1). crabtree and debusk (2008) test for evidence of long that implement the balance scorecard. examine the relationship between bsc adoption and shareholder returns. using a matched pair design, they showed that firms who adopt the bsc significantly outperform firms that do not adopt the bsc over a three year period beginning with the year of adoption. their extensive analysis indicates that there is a statistically positive impact of its implementation on firm value. this study extends their research by using event study methodology to test for any market price impact from the induction of a company into the balanced scor fame. 3.2 methods we use standard event study methodology to measure the magnitude of the effect of the announcement of a firm being inducted into the balanced scorecard hall of fame on firm value. campbell et al (1997) discuss the summarize commonly used event study methodologies. event studies measure the value effect of an event under the assumption of market rationality, allowing us to assume that investor assessment of firm val consequently, any abnormal returns experienced in the event window can be interpreted as a measure of the impact of the event balanced scorecard hall of fame in order to test the theory whether announcements of a firm’s induction scorecard hall of fame has an effect on firm value, a hypothesis is developed. the null hypothesis assumes that the announcement of a firm being inducted into the balanced scorecard hall of fame will have no impact on firm value. the alternative hypothesis is that the firm’s value will be positively impacted by the hall of fame announcement. the hypothesis is formally stated as follows: stock returns do not react to the announcement of induction into the balanced fame as presented by the palladium group for executing stock returns react positively to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for executing strategy. 2001a, p. 102) state they have “observed several organizations achieving performance breakthroughs within two to three years of [bsc] implementation.” the impact on firm value from successfully using the balanced scorecard should already be he stock price. as mentioned above, this feature is one of the criteria for a company to be inducted into the balanced scorecard hall of fame. thus, gains from increasing the value of the firm from implementing this strategy should be already d into the firm’s stock price (h0). however, if the announcement of a firm’s induction into the balanced scorecard hall of fame conveys news to the market that this company has achieved economic rents from practicing this management strategy, then there hould be a positive impact on the firm’s value (h1). crabtree and debusk (2008) test for evidence of long-term impacts on firm value to firms nt the balance scorecard. they used a long-horizon event study methodology to between bsc adoption and shareholder returns. using a matched pair design, they showed that firms who adopt the bsc significantly outperform firms that do not adopt the bsc over a three year period beginning with the year of adoption. their ysis indicates that there is a statistically positive impact of its implementation on firm value. this study extends their research by using event study methodology to test for any market price impact from the induction of a company into the balanced scor we use standard event study methodology to measure the magnitude of the effect of the announcement of a firm being inducted into the balanced scorecard hall of fame on firm value. campbell et al (1997) discuss the historical development of event study research and summarize commonly used event study methodologies. event studies measure the value effect of an event under the assumption of market rationality, allowing us to assume that investor assessment of firm value is accurate and reflected in the firm’s stock prices. consequently, any abnormal returns experienced in the event window can be interpreted as a measure of the impact of the event – the announcement of a firm being inducted into the hall of fame – on the value of the firm. 125 in order to test the theory whether announcements of a firm’s induction into the balanced scorecard hall of fame has an effect on firm value, a hypothesis is developed. the null hypothesis assumes that the announcement of a firm being inducted into the balanced ternative hypothesis is that the firm’s value will be positively impacted by the hall of fame announcement. the stock returns do not react to the announcement of induction into the balanced fame as presented by the palladium group for executing stock returns react positively to the announcement of induction into the balanced scorecard hall of fame as presented by the palladium group for 2001a, p. 102) state they have “observed several organizations achieving performance breakthroughs within two to three years of [bsc] implementation.” the impact on firm value from successfully using the balanced scorecard should already be he stock price. as mentioned above, this feature is one of the criteria for a company to be inducted into the balanced scorecard hall of fame. thus, gains from increasing the value of the firm from implementing this strategy should be already d into the firm’s stock price (h0). however, if the announcement of a firm’s induction into the balanced scorecard hall of fame conveys news to the market that this company has achieved economic rents from practicing this management strategy, then there term impacts on firm value to firms horizon event study methodology to between bsc adoption and shareholder returns. using a matched pair design, they showed that firms who adopt the bsc significantly outperform firms that do not adopt the bsc over a three year period beginning with the year of adoption. their ysis indicates that there is a statistically positive impact of its implementation on firm value. this study extends their research by using event study methodology to test for any market price impact from the induction of a company into the balanced scorecard hall of we use standard event study methodology to measure the magnitude of the effect of the announcement of a firm being inducted into the balanced scorecard hall of fame on firm historical development of event study research and summarize commonly used event study methodologies. event studies measure the value effect of an event under the assumption of market rationality, allowing us to assume that ue is accurate and reflected in the firm’s stock prices. consequently, any abnormal returns experienced in the event window can be interpreted as a the announcement of a firm being inducted into the 126 to study whether an event has any impact on the market, we measure event-day cumulative abnormal returns (cars) and test their statistical significance. we focus primarily on whether or not there was a market price effect of the announcement of a firm being inducted into the balanced scorecard hall of fame for executing strategy within a reasonable time period, called the event window, following the announcement of such news. the event window is the amount of time, usually measured in number of trading days, taken by investors to absorb the impact of a new event. according to the efficient market hypothesis, new information is immediately incorporated into the stock price. consequently, a short event window is likely to more reliably test the market effect of an event. an event study methodology is used to determine the price effect of the disclosure of an event (conrad, 1989; holland and wingender, 1997; groff and wingender, 2010). single factor market model parameters are calculated using the estimation period of trading days before the event date to approximate one year of stock returns. the estimation period begins 321 trading days before the event and ends 70 days before it. across the companies in our sample, these dates cover several market cycles. for this study, we use market model event study method and test the results for significance with the standard residual method. the market model event study method uses a linear regression to predict stock returns; then it compares the predicted value to its actual return. to test whether the cumulative abnormal return is significantly different from zero, we use the standardized cross-sectional method. we use the equally-weighted crsp (center for research in security prices) index for the model’s market returns. we also employ a generalized sign test, which differs from the simple sign test in that the fractions of positive and negative returns under the null hypothesis are determined by the fractions observed in the estimation period, rather than fixed at 0.5. betas in the market model are estimated using the method of scholes and williams (1977). to statistically test the data, the null hypothesis that the introduction of the event has no effect on the returns of the underlying security will be rejected if the z-statistic is significant at the 0.10 level or lower in a one-sided test. the abnormal return (abrjt) is the difference between the actual return (rjt) on a specific date and the expected return (e(rjt)) calculated for the firm on that specific date. the expected return is calculated using the parameters of a single index regression model during the pre-event estimation period. the regression model parameters are determined by the following equation: rjt = aj + bjrmt + ejt where rjt = the return on security j for period t, aj = the intercept term, bj = the covariance of the returns on the jth security with those of the market portfolio’s returns, rmt = the return on the crsp equally-weighted market portfolio for period t, and ejt = the residual error term on security j for period t. betas (βj) in the market model are estimated using the method of scholes and williams (1977). ordinary least squares (ols) was used to estimate the slope and intercept parameters for each security in the data set. the market model estimation is adjusted for possible first order autocorrelation with a garch(1,1) approach. these estimates were then used to calculate the expected return for the event window, from which the abnormal returns (arjt) can be calculated as follows: where rjt is the observed return of security equally-weighted market index on day above from the estimation period. the average abnormal return ( mean arjt for all n securities: where t is the trading day relative to the event. the cumulative average abnormal return from day t1 to day t2 (������,��� test statistics are calculated as in patell ( are defined as follows: sjt is further defined as the square root of the security �� where rmt is the observed return on the market index on day over the estimation period, and the parameters for firm j, and finally, the test statistic defined as: where �� � � � � � �� � � ���� is the observed return of security j on day t and rmt is the return of the crsp weighted market index on day t. the estimates of alpha and beta are those calculated above from the estimation period. the average abnormal return (aart) is calculated as the ���� � � ��� �� � � is the trading day relative to the event. the cumulative average abnormal return from is calculated as follows: ������,�� � � ���� �� ���� test statistics are calculated as in patell (1976). standardized abnormal returns ( �� � � �� � � is further defined as the square root of the security j estimated forecasted variance: � � � ��1 � 1 � � ���� � ��� � � �� !" ��� � ���� is the observed return on the market index on day t, rm is the mean market return over the estimation period, and dj is the number of trading day returns (251) used to estimate � is calculated as follows: � � � �� !" �� � � � 2 ��,�� for the null hypothesis that the ���� ��,�� � 1 √� � ��,�� � � � 127 is the return of the crsp . the estimates of alpha and beta are those calculated ) is calculated as the is the trading day relative to the event. the cumulative average abnormal return from 1976). standardized abnormal returns (sarjt) estimated forecasted variance: is the mean market return is the number of trading day returns (251) used to estimate ������,�� equals zero is 128 ��,�� = 1 %&��,�� � �� � �� ���� and &��,�� = �'� − '� + 1� � − 2 � − 4 to test the data, the null hypothesis that the announcement of a firm being inducted into the balanced scorecard hall of fame for executing strategy event has no effect on the returns of the underlying security will be rejected if the z-statistic is significant at the 0.10 level or better. the generalized sign test is used as a nonparametric test of the impact of the announcements. for each trading day or month in the event periods the number of securities with positive and negative average abnormal returns (cumulative or compounded abnormal returns for windows) is calculated. the generalized sign test statistic controls for the normal asymmetry of positive and negative abnormal returns in the estimation period. the significance levels for the generalized sign test are calculated. the null hypothesis for the generalized sign test is that the fraction of positive returns is the same as in the estimation period. for example, if 46% of market adjusted returns are positive in the estimation period, while 60% of firms have positive market adjusted returns on event day −1, then the test, based on the normal approximation to the binomial distribution, reports whether the difference between 60% and 46% is significant at various levels. 3.3 data collection/organization in order to collect the necessary data, the list of current hall of fame members was retrieved from the palladium group’s website (2011). research was then conducted through an electronic search of news media containing the press release with the date of induction announcement. the time period explored spanned from january 1, 2000 to december 31, 2010. of the 152 companies currently in the hall of fame, the dates of announcement for 142 of them were retrieved from press releases. eight more dates were retrieved via electronic communication with robert howie, the chief marketing officer of the palladium group and director of the balanced scorecard hall of fame. according to mr. howie, there was no press release announcement for the first group of initiates. he supplied the date of june 1, 2000 for these initial eight companies. the sample was sorted by date of announcement, industry, and region. the inductees to the hall fame comprised of u.s. corporations (20%), non-u.s. corporations (42%), and nonprofit/governmental organizations (38%). the latter category of inductees does not have equity investors and thus could not be included in the analysis. the event study used the daily return data available on the files of the center for research in security prices (crsp). since crsp data do not include non-u.s. corporations, we had to also exclude this category from the final sample. consequently, the sample consisted of only 28 u.s. corporations listed on the new york stock exchange or nasdaq. of these, eight companies did not have data during the model’s required estimation and event periods. consequently, the final sample comprised of only 20 firms. 4. hypotheses testing and discussion of results 4.1 hypotheses testing the results for the event study are reported in table 1. the one on day 0 is 0.43% with a generalized sign z statistic of 2.005 that is statistically significant (p < .05). there are 14 firms with positive abnormal returns on the event date of announcement that the firm has been selected for the b are 6 firms with negative abnormal returns on the event date. the announcement and the subsequent trading day is calculated to s news. the event window [t0,t that is statistically significant (p < .05) week of trading days after the days after the announcement date of [t 0.40% and -1.28%, respectively) and they are not significantly different than zero. table 1 – the market price effects of the announcement of becoming a member of the balanced scorecard hall of fame event day n mean hall of fame announcement 20 (-10,-1) 20 (-5,-1) 20 (-1,0) 20 (0,0) 20 (0,+1) 20 (+1,+5) 20 (+1,+10) 20 the symbols $, *, **, and *** denote respectively, using a one-tail test. an interesting observation from the results in table 1 is that there is a statistically significant positive cumulative abnormal return in the 2 weeks announcement that a firm is being recognized for its induction into the balanced scorecard hall of fame. for the one week before the announcement [t abnormal return is 1.76% (p < .01). for the two weeks b the cumulative average abnormal return is 2.31% (p < .05). this movement would suggest that the information of the firms to be inducted into the balanced scorecard hall of fame is leaking out before the actual announceme information as very positive and it has a significant impact on firm value. we find that membership in the balanced scorecard hall of fame is an economically positive event for the average firm. 4.2 discussion of results from the results of the event period, each expected result was compared to the actual results. it was then determined whether or not each result was determined if the variances were significant or not. significance was determined for the following days: ten, five, and one day before and after announcement as well as the actual announcement day itself. hypotheses testing and discussion of results the event study are reported in table 1. the one-day average abnormal return on day 0 is 0.43% with a generalized sign z statistic of 2.005 that is statistically significant there are 14 firms with positive abnormal returns on the event date of announcement that the firm has been selected for the balanced scorecard hall of fame. are 6 firms with negative abnormal returns on the event date. the event window of the day of the announcement and the subsequent trading day is calculated to see if there is any spill ,t1] has a positive cumulative average abnormal return of 0.83% that is statistically significant (p < .05). however, after this event period, the windows for one week of trading days after the announcement date of [t1,t5] and for two weeks of trading days after the announcement date of [t1,t10] have negative cumulative abnormal returns ( 1.28%, respectively) and they are not significantly different than zero. rice effects of the announcement of becoming a member of the balanced scorecard hall of fame mean car (%) positive:negative portfolio time-series (cda) t 2.31 14:6* 1.417$ 1.76 16:4** 1.524$ 0.16 11:9 0.215 0.43 14:6* 0.831 0.83 14:6* 0.626 -0.40 12:8 -0.346 -1.28 11:9 -0.788 the symbols $, *, **, and *** denote statistical significance at the 0.10, 0.05, 0.01, and 0.001 levels, an interesting observation from the results in table 1 is that there is a statistically significant positive cumulative abnormal return in the 2 weeks leading up to the announcement that a firm is being recognized for its induction into the balanced scorecard hall of fame. for the one week before the announcement [t-5, t-1] the cumulative average abnormal return is 1.76% (p < .01). for the two weeks before the announcement [t the cumulative average abnormal return is 2.31% (p < .05). this movement would suggest that the information of the firms to be inducted into the balanced scorecard hall of fame is leaking out before the actual announcement. it indicates that the market values this information as very positive and it has a significant impact on firm value. we find that membership in the balanced scorecard hall of fame is an economically positive event for the from the results of the event period, each expected result was compared to the actual results. it was then determined whether or not each result (variance) was abnormal was determined if the variances were significant or not. significance was determined for the following days: ten, five, and one day before and after announcement as well as the actual 129 day average abnormal return on day 0 is 0.43% with a generalized sign z statistic of 2.005 that is statistically significant there are 14 firms with positive abnormal returns on the event date of the alanced scorecard hall of fame. there the event window of the day of there is any spill-over ] has a positive cumulative average abnormal return of 0.83% however, after this event period, the windows for one ] and for two weeks of trading ] have negative cumulative abnormal returns (1.28%, respectively) and they are not significantly different than zero. rice effects of the announcement of becoming a member of the portfolio series generalized sign z 2.005* 2.901** 0.662 2.005* 2.005* 1.110 0.662 statistical significance at the 0.10, 0.05, 0.01, and 0.001 levels, an interesting observation from the results in table 1 is that there is a statistically leading up to the announcement that a firm is being recognized for its induction into the balanced scorecard ] the cumulative average efore the announcement [t-10, t-1] the cumulative average abnormal return is 2.31% (p < .05). this movement would suggest that the information of the firms to be inducted into the balanced scorecard hall of fame is nt. it indicates that the market values this information as very positive and it has a significant impact on firm value. we find that membership in the balanced scorecard hall of fame is an economically positive event for the from the results of the event period, each expected result was compared to the actual results. was abnormal. additionally, it was determined if the variances were significant or not. significance was determined for the following days: ten, five, and one day before and after announcement as well as the actual 130 the results showed significance for only two of the days analyzed: ten days before announcement and five days before announcement. there was a 99% confidence level of the abnormal returns at the 10 day mark and a 95% confidence of the abnormal results five days before announcement. of the other days analyzed, no significant results were returned. these results were somewhat different than what was expected before testing. it was assumed that the significant abnormal returns would result after the announcement date but this was not the case. we surmise that there may be a possible leak of information from the companies before induction. the hall of fame organizers, the palladium group, notify winners of their induction status about 30 days before the actual award, with a requirement that the recipients will make no pre-announcement prior to the actual award ceremony. the organizers believe there have been no inductees that have ever violated this policy. the only other conceivable reason that was determined was that the small sample size skewed the results. although there was significance, there were only 20 companies used in the study which makes the results less reliable. it could be the case where the firms used in the study had a correlation that was actually random and not a true correlation. as the years go on and more firms are inducted into the hall of fame, a larger pool sample will be available for further testing. 5. conclusion in the long-horizon study by crabtree and debusk (2008), the definition of event was rather broad; their study covered the first three years of bsc implementation. in addition, the study used matched-pair sample, which provided relative and yet important contrast between the doers and non-doers of the bsc. indeed, the contribution of a holistic strategic measurement and management system such as the bsc is practically undeniable. whether this will surface as a one-time event effect in an event study is contingent on the definition of “event.” in this study, the event – induction into the hall of fame – is a culmination of tireless efforts of a company over a period of time (24 months) preceding the event. any hint of the company’s efforts to implement the bsc could have generated earlier, and perhaps gradual, absorption of the news into the company’s stock price. a limitation of this study comes from the final sample size. we couldn’t control the sample size; it was limited by the number of inductees into the hall of fame whose shares traded in the u.s. financial markets. data similar to crsp can be found for non-u.s. corporations, but may not be comparable to, and thus cannot be combined with, crsp data. additionally, since no public information was available regarding the candidates for the hall of fame that were rejected in the same industry as the inductees, we could not use a matchedpair sample. in the years following the bsc implementation, other things remaining the same, the company is likely to remain financially healthy. however, an event study would not capture this due to the efficient market. consequently, other ways to explore this question should be considered. one possibility is to create a hypothetical portfolio of all companies actively engaged in the bsc and track its financial performance, controlling other variables, and comparing the portfolio’s return with non-bsc-users’ matched portfolio with similar risk levels. on the flip side, it would be interesting to see if companies that exited active use of the bsc (due to leadership change, for example) had any material adverse effects on their stock prices. for an effective implementation of a comprehensive dashboard, a great deal of efforts and other resources need to be committed. therefore, an overriding question for chief executives is whether the balanced scorecard is worth the cost (compared to its value). future studies to develop insights in a cost-vs.-value comparison of a 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(2003). performance measurement tools: the balanced scorecard and the efqm excellence model. measuring business excellence, 7(1), 14-29. 9 puka 147 political and economic aspects in education: an analysis of citizen formation process through active citizenship edi puka, european university of tirana, albania dilina beshiri, university a. moisiu durres, albania received: april 15, 2013 accepted: september 14, 2013 online published: october 14, 2013 abstract the human being grows in relationship with others of its fellows, and it is by virtue of this relationship that it receives a particular cultural heritage and acquires its own identity, differentiating itself, finding its own space of freedom and autonomy allowing it to interact and extend its own network of relations. in such a dynamic of reciprocity, the man realizes himself as such as a conscious member of a “social body”, i.e. of a radical society in an organic human context, which has become nowadays a clearly planetary one, by virtue of the unpublished migration flows and obvious interdependence of the planet. the education is a line of human civility and it causes that grounds of anonymity, fears, consumerism, prejudice, haste, indifference, abuse, insecurity, solitude, become grounds of hospitality, trust, sharing, security, friendship, and brotherhood. the patterns of political education having prevailed so far are: the academic model with its explanation and dissent in the abstract of a great deal of knowledge, and that of the laboratory, which tilts and leans over, even by moments of simulation, toward vital worlds of operational policy. it is now manifested a widespread social demand about the necessity to provide to everybody, but especially in the range of basic youth socio-political information, an equipment of historical and values’ nature, and by providing comparative elements on the different socio-political matrices and traditions, raising the incentive at a renewing and increasingly conscious commitment in the face of growing difficulties, inherent to the political perspectives disputed so far in the world. it is necessary to refocus and reestablish a political culture uniting the breath of the ideal with the reality of administrative experience, supporting this political culture with the contribution of a dynamic and open reflection, capable of understanding the reality. keywords: education; policy; citizenship; culture; emancipation 148 1. introduction educating in politics responds to a social necessity, with the society being thus composed by and taking advantages of citizens capable of asking for and exercising democracy in a critical and independent way, according to a precise draft of man and woman. a project raising from the belief of man and woman being at the center, subject-object of political demand in a continuous, constructive relationship between the common good and the individual one, where the common good is also understood as a set of all legislative and instrumental equipment allowing everyone to achieve their individual goals. i consider important the education in politics and legality, because it is necessary to develop among young people a sense of individual responsibility and awareness of the rights for the common good; teach them that the delegating process through citizens’ participating in elections constitutes a representative and not intellectual delegation, and that the effort at whatever explicative level must tend to research of organic solutions of problems (problem – thought – action). it seems to me that we must finally recognize that it is time to bring forth with all forces and in all available educational settings a formative commitment with the political dimension being not only clearly and consciously present, but also considered to be one of its main features. our times call for urgent: the alternative is likely to be the defeat of the entire humanity and thus make it impossible for the person to be fulfilled in his higher significance and true value. politics and education have formed since the ancient world an almost inseparable binomial. it is well known that the state was the center of social and individual life in ancient greece and rome: ancient men (of course the free ones) were first and foremost citizens. civic education and human formation have always been intertwined. the idea of education is based on fundamental concepts, those of paideia and humanitas that, in large measure, are proportional to ethical-political reflection. the image of man was that of an individual whose existence made sense only within the community and whose activity was essentially political. the polis was a solid support and guide to life. plato himself speaks of “inner city that every man carries within himself”, destined to evolve and transcend itself. (plato ix, 591) usually the concept of education has meant the transmission of knowledge with training purposes of adult generations to younger ones. (piaget, 1980: 129) the perspective of a political education is actualized in family, school and out of school contexts. the sharing of project that promotes the person and the conviviality that is pursued in the relation are essential factors for success in educating. cooperation is the other factor that favors the constitution of a sense of community. the fact that education and politics may be recognized as primary and necessary dimensions to the life and development of man is founded on the epistemological assumption that the individual is in need of a duality for his own survival and development as a human being. the man, in order to survive, needs what ferrarotti calls “l’insiemità sociale” (social together-being) which, as he himself says, “is not accidental, but it doesn’t even respond to the imperatives of meta-historical archetypes.” “man is in any case forced to choose not in absolute, but in the dated and lived situation, to make a gesture that saves him or leads toward getting lost in a horizon set in motion by historically variable needs identifiable in their profound essence: culture, values and citizenship”. (ferrarotti, 1999: 13) educating in politics requires you to give space to the autonomy and solidarity of the person, to consolidate the sense of responsibility connected with freedom and a sense of duty related to the right. it becomes essential, therefore, in the scholastic institution to get into 149 political education and ban ideologies, (snyders, 1986: 193), and give rise to the development of routes and procedures that will educate into politics. the philosopher of science karl popper argued that it is sufficient, in a liberal democracy, “to be all judges”, and such minimalism seemed, in his open society, plausible and easy: it’s time to reintroduce, re-vivify such an attitude, which necessitates maturation, a vibrant style of personal involvement. rather than lamenting for the thickening night, let’s try to clear it up step by step; with a similar but even more realistic minimalism, some anglo-saxon authors today warn: "if you want a clean city, begin to sweep the road in front of your house.” through “political education” can be maximally highlighted the importance of the path leading to a personal choice rather than drawn attention to a specific content. (aa.vv. 1999: 177) on the other hand, the forms of citizen activism in public policy emerged already all over the world in the last thirty years and aiming to protect rights and ensure the care of common goods in the reality of democracy’s everyday life of, represent a change of the same boundaries of democracy from which you can restart. 2. educating in politics and active citizenship political education can be defined as the process of critical elaboration of the content of political socialization, which tends to promote an independent ability to develop an own attitude or political choice. it becomes a mature expression of social education and civic education taking shape as an antidote not only against individual self-referentiality, but also against possible exclusiveness of political parties, social classes, and various localisms. educating at politics means developing an own vision of the world made up of projects and commitments, with a capacity to express the own presence in active and participatory terms. (santelli, 2001: 77) to understand what education to citizenship is necessary today, i will outline briefly the historical passages of the concept of citizenship. the concept of citizenship is complex and changing, whether it is considered in its transformation over time, whether it is analyzed in modern times from points of view that provides different interpretations and realizations. since the earliest days of civilization, the organized human groups tended to ensure their own safety and separating themselves from other groups by drawing boundaries between “citizens” and “foreigners”. each group internally tended to give themselves a hierarchy structure, differentiating the elective powers and responsibilities. the polis of ancient greece is an example of this dual differentiation. the citizen is opposed to foreigners, although not all are the same: barbarians, women, servants, slaves, the poor, are not citizens. citizenship, says aristotle in the third book of politics, should be granted only to adult and free males; free also in the sense that freedom from servile work enables them to take part in the ekklesia, an assembly in which were taken the key political decisions and completed the highest public offices, such as those of judge, magistrate, and priest. not much different is the conception of roman citizenship in the republican era. also in rome, the citizen is identified with the adult male that is free and is also a “pater familias” exercising his power over the whole family group composed by his wife, his children, his freedmen, his clientes. the roman citizen is opposed not only to the non-resident alien, but also to foreign residents, women, children, slaves. the modern conception of citizenship emerges thanks to the theorists of absolute monarchy that operate between the sixteenth and seventeenth centuries, such as jean bodin and thomas hobbes. the concept of citizenship loses its meaning of attendance at public functions and of honors associated with it: being citizens is 150 equivalent to being faithful and obedient subjects of the sovereign, subject to the same laws and customs, regardless of differences in religion, language and ethnic origin. with the great bourgeois revolutions between the seventeenth and eighteenth centuries and the works of authors such as john locke and jean-jacques rousseaux, was affirmed the modern conception of citizenship as equal “legal status” of all citizens as subjects of law, holders of sovereignty and members of the nation. for long remain excluded women and nonowners. the modern citizenship is stated as the container for a set of individual rights: men are rational beings, free, morally responsible, equal before the law and independent from the economic point of view. citizens are involved in politics, but as pointed out by b. constant, they are also jealous guardians of their privacy against the intrusion of public power. since the last decades of the 800s, the model of liberal state tends to result in forms that have been defined as “liberal democracy”. on this process, since the early decades of the last century, further institutional evolution was assumed, leading – after the fascist and nationalist parenthesis – to the “social state”. thus, a new conception of citizenship was established; the “democratic-social one, attributing to all citizens beyond civil and political rights also social rights”, with everybody entitled to a degree of education, welfare and social security commensurate to standards prevailing within the political community. 3. the social and economic citizenship rights despite principal declarations that: «all peoples have the right of self-determination. by virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development» and «all peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law. in no case may a people be deprived of its own means of subsistence» t mentioned in articles 1.1 and 1.2., part i of the international covenant on economic, social and cultural rights, it is important to note that nowadays, at the beginning of the third millennium, social and economic citizenship is living a rather deep crisis that doesn’t allow it to cope with the radical changes imposed by the current globalized society. the space for the exercise of rights has been greatly restricted, in a seemingly inexorable movement of estrangement between citizens, who can not find space for effective political participation. the same political institutions seem not to want to give areas of power able to support shared decision-making processes. in addition, due to the increasing immigration and global conflicts that feed a narrowing of the community around an identity which is more visible from outside than inside, citizenship has shifted from an inclusive concept to a unique concept. in order to properly educate for active citizenship, political education must ensure the necessary resources for formation and the best possible instruction. (izzo, 2003: 187) there must be a refraining from dictating educational precepts and didactic prescriptions, and knowledge by itself must be encouraged. this constitutes a prerequisite for acquiring progressively “self-control” and then the ability to act and interact on awareness. the image of educational activity is thus that of delivery of a know-how, which constitutes itself knowledge and possession of reality and it has to be immediately operational. political education is operational not because it is marked on the complaint, but because it encourages a proactive and affirmative sensitivity, capable of planning, ready to comply the change, along the thread of events. it is not enough, therefore, the notionism of education. we need moments of true education, such as to encourage political judgment in the context of a healthy realism. 151 the four guiding values of this educational journey are linked to: the common good mentality, loyalty to people and to concrete reality, loyalty to the ethical dimension, and last but decisive, loyalty to the policy itself, with its own rules. neither abstraction, since the formation without commitment is empty, nor activism, since commitment without training is blind. the education at politics is configured as a path to empowerment of the own presence in the world and thus, it takes a particularly important role in stimulating cognitive, emotional, ethical, and social abilities and in finalizing this in a single act for the common good. (santelli, 2001: 77) the discourse on political education could really lead to a society of a higher moral. however, it is clear that whatever meaning you want to attribute to political activity, whether negative or positive, it is necessary to deal with it, also because political education is nothing more than the institutionalization and improvement of political “formation” that in each case, randomly or accidentally, badly or adequately, takes place in each individual. in short, it’s not about creating something new, but not leaving to chance what is the first task of the citizen. 4. the citizen’s formation through active citizenship “if education is an investment for the future, education for active citizenship is an investment for the democratic future of europe. democracy is neither something taken for granted, nor an abstract concept. it requires investment and responsible actions by the citizens in their daily life. in an age of young people’s deserting the polling stations and the public and political life, it is urgent to address the question of education for democratic citizenship a long-term investment for the promotion of human rights, tolerance and cultural pluralism.”1 in defining the "concept of responsible citizenship", the majority of european states recognized three key objectives: development of a political culture: study of social institutions, political and civic activities in which the individuals can live in harmony, and preparing young people for the exercise of rights and duties defined by national constitutions; development of critical thinking and certain attitudes and values: skills necessary for active participation in public life as a responsible and critic citizen; development of respect for oneself and for others for greater mutual understanding and acquisition of social and moral responsibility; learning to listen and resolve conflicts peacefully, learning how to contribute to a secure environment, development of effective strategies to combat racism and xenophobia; the active participation of young people, that can be encouraged by allowing them to get more involved in the community and providing them with practical experience of democracy in school. a concept of citizenship stands in contrast with that proposed by the models developed since a long time in civic education in our schools. the rise of democratic states has placed for a long time the problem of educating citizens on the principles governing the community, the rules that must be followed in the public sphere of society, as well as raise awareness of the subject to the rights of their acquired status. it was therefore introduced in public schools (1877) the study of civic education “first notions of the duties of man and citizen”. 1 these are some of the significant phrases of the foreword to notebook no 24 of eurydice, “citizenship education at school in europe", organized by the ministry of education and indire, with the objective of divulgating in '"european year of citizenship through education” (2005) programs of education for citizenship of the council of europe. 152 at the center of civic education, there is a strong emphasis on the laws and regulations of the state, as it is argued that a good citizen knows about and how to respect the order in which he lives; it is thus a transmission of knowledge acts to adjust the individual to correct the behavior sanctioned by the society. the aim remains to instruct rather than to educate. in 1991, the year in which italy rectified the convention on the rights of child, civic education was transformed into citizenship education. it is about promoting a formation that pays attention to the value of the law and to the significance that leads us to respect it. education is interested in a behavior that is not only legal, but also and first of all moral, namely, inspired by the reasons that make the law worthy of respect. (corradini, 1999: 171) civic education can represent the passage through which subjects learn and understand the operation of the regulated community in which they live, but it can not stimulate the individual to become a co-builder of the society in which he lives. it is thought, therefore, about a citizenship education including in itself the protagonist role that each person needs to earn, not only as a “citizen”, but above all as an “active” one. democracy must treat not only the representative forms of power, but also and above all encourage and facilitate participatory forms at every level that can influence and conduct decisions for the entire collectivity. active citizenship is not something that is given once and for all, but it is an instance that needs to be built. in order to get implemented, it needs to be formed, educated. an essential contribution stimulating the creation and growth of education for active citizenship is undoubtedly that of the american philosopher and educator j. dewey. what matters is not only that a democratic system put in place resources to eliminate, in fact, the effects of economic inequalities and to ensure to all members of the younger generation a chance to be educated and trained. there is need above all of “modifications of the traditional ideals of culture, of traditional disciplines of study and traditional methods of teaching and discipline, in order to free the individual abilities of young people until they are sufficiently equipped to become arbiters of their own economic and social career”. (dewey, 2004: 107) . the subject has therefore a responsible and active role in the own education and in the definition of society that is modified with the changing generations. it is necessary, therefore, to activate forms of participation that are not only meetings designed to inform citizens about what public bodies have already decided to do, but to draw a path through which the citizen not only learns to be present in the construction of the environment he lives in, but also to participate together with other citizens: “the common participation is the only dynamic that can transform a group of individuals into a social community”. (lorenzo, 1998: 97) this model of citizenship education involves not only those concerned with education, but requires a synergy with those managing the city, with those working to design and implement interventions aimed at improving the conditions of life. a model that requires commitment and resources to be used where it will be carried out, provided that participation is radical because it “bridges the gap between those who govern and the governed ones, between who decides and who is affected by the decisions, presupposes a delegation of power and sovereignty, and therefore casts serious doubts on the consolidated power structures”. (tarozzi, 2008: 129) this participation, therefore, emancipates and is subversive, because it requires the political and administrative spheres to be made in respect of its authenticity. educating and being citizens brings with it a part of participatory instance that places each subject at the center of decision-making dynamics affecting the collectivity in which he lives, and on the other hand, it admits a concept of inter-subjective citizenship, or rather negotiated, discussed and reformulated by related subjects who pose themselves a goal and conceive the reality in which they live as necessitating to be built by those same relationships. 153 5. concluding remarks given these premises, it is clear the value that has a possible educational process in the direction of active citizenship, as it does not arise extemporaneously by the course of events (or it can do it, but still needs to be supported), but it requires to be powered by paths that have a decidedly pedagogical value. if the concept of citizenship to which the society we live in has to do with politics, understood as a decision-making and illuminated process, with the authentic and effective participation of as many subjects as possible and in any age group, with the responsibility perceived by the subject as taking charge of the world where the social environment is built, then a set of participatory formal and informal processes, inside and outside the school, are necessary to prevent that the political culture becomes a prerogative of a few subjects living far away from the living world, from everyday experiences that the city, the community offers and demands to signify. the socio-political formation is required by that necessary selection, by that exchange, the crisis of which involves the sclerosis, with risks of notability and too easy co-optations within the political class. the business intertwinements, advocacy groups – especially the occult ones – and transformatic opportunism seem to be three deadly risks of a political system with shortness of breath that could reduce us inadvertently to “shadow people”. our attitude must change. in italy in particular, there is a tendency to discredit lightly the politics, and then make use of it, often in logic of patronage. our society looks tired, no more thoughtful of its european and planetary future; and of institutions, we tend to get served with a distracted selfishness: we use them without any complexes, to complain then without any shame. it’s not enough just show the necessity of politics, even at a world which is young in research; there is need of helping to move from politics as a destiny to politics as an ethical option, encouraging fidelity as the cardinal virtue of the commitment in the dimension of continuity and consistency. bibliography aa.vv., (1999), mediterraneo-europea. dalla multicilturalità alla interculturalità, bari: pensa. corradini, l., (1999), educare a una nuova cittadinanza, in educazione civica e cultura costituzionale corradini, l., refrigeri, g., (a cura di), , bologna: il mulino, p.171. dewey, j., (2004), democrazia e educazione, (trad. it.) enriques agnoletti, e., paduano, p., firenze: sansoni. ferrarotti, f., (1999), l’ultima lezione, bari: laterza. izzo, d., (2003), educazione e politica, in senso della politica e fatica di pensare. atti del convegno «educazione e politica» encyclopaideia, antonio erbetta (ed.), bologna: clueb. lorenzo, r., (1998), la città sostenibile, milano: elèuthera. ministero dell’istruzione e dell’indire., (a cura di), (2005), ”l’educazione alla cittadinanza nelle scuole in europa”, in quaderno n.24 di eurydice. piaget, j., (1980), psicologia e pedagogia, trad.it. di m.v. lombardi boffito, torino: loescher. platone., repubblica, (ix, 591). santelli beccegato, l., (2001), pedagogia sociale, brescia: la scuola. snyders, g., (1986), pedagogia progressista, roma: feltrinelli. tarozzi, m., (2008), per una cittadinanza planetaria, attiva e intercultural, in educare alla cittadinanza partecipata, mortari, l., (a cura di), milano: bruno mondadori. 7 obamiro 117 effects of waiting time on patient satisfaction: nigerian hospitals experience john kolade obamiro lagos state university, nigeria received: june 21, 2013 accepted: august 29, 2013 online published: october 10, 2013 abstract the time spent waiting for services at outpatient department couple with some factors of quality care are major determinants of patient satisfaction. this study examines the relationship between waiting time and patient satisfaction. data was obtained through structured questionnaire distributed to a randomly selected 240 outpatients of the selected public and private health centres to ascertain their views as regards to waiting time and evaluation of level of satisfaction with service delivery. data obtained were analysed using descriptive statistics. this study has shown that a good numbers of the patients were satisfied with the service delivery despite experiencing long waiting time. though, lengthy waiting line is evident in the public hospital than the other private hospitals. but this does not affect patient perception of quality care offered because long waiting time is a general occurrence in nigerian hospitals especially in publicly funded health centres. efforts should be made by hospital administrators and medical personnel to eliminate unnecessary delay in service delivery and where unavoidable; the waiting time should be made productive. also, emphasis should be directed toward training of medical personnel on ways to create patient-oriented services and deliver more efficient services. keywords: waiting time; healthcare centre; medical personnel; service delivery; quality care; patient satisfaction. 1. introduction ma managing waiting time in healthcare settings is a concept that has been receiving attention among researchers, healthcare practitioners and administrators over the years (anderson, camacho and balkrishnan, 2007; umar, oche and umar,2007; senti and lemire, 2011; gup, ofoedu, njoku, odu, ifedigbo and iwuamanam, 2012). waiting in line has become an integral part of healthcare services and it is considered to be central to assessing patient satisfaction. yeddula (2012) is of the opinion that as patients experience a greater squeeze on their time, short waits seem longer than even before. this queuing situation is worst in publicly funded or highly busy hospitals and managing it has become a serious challenge. waiting lines occur where resources (doctors, nurses, beds, etc.) are limited and demand for service exceeds supply. patient waiting time can be described as the amount of time patient spent before being served. in hospitals, patients can wait for minutes, hours, days or months to receive services. yeddula (2012) asserts that the amount of time patient wait during clinic visit is a source of dissatisfaction with healthcare. generally, patients are annoying or 118 not interested in waiting for services, they want to receive immediate services on arrival. in healthcare setting, waiting time can be described in two folds: waiting room wait time and exam room wait time. waiting room wait time is described as the time spent between requesting the patient be seated in the waiting room and the time he/she was called to see the medical personnel such as nurse, doctor, pharmacist, etc. this can occur in between different services. exam room wait time is described as the amount of time spent from the time the patient was seated in an exam room and the time the physicians, nurses, pharmacists, etc. spent with patients (micheal, schaffer, egan, little and pritchard, 2011). nowadays, medical service delivery is patient-centred in which patients have become increasingly demanding, expecting high quality services at competitive price and delivered promptly. the general queue discipline adopted in hospital is that patients are served immediately on arrival on first come first serve or join a queue if the server is temporary engaged (brahma, 2012). the length of time a patient spent waiting to be served affects the desired satisfaction and it’s central to patients’ evaluation of service delivery process. afolabi and erhun, (2003) assert that a patient’s experience of waiting can radically influence his/her perceptions of service quality. several studies have documented that patients’ long waiting times are barriers to actually obtaining quality services (kurata, nogawa, philips, hoffman and werblum 1992) which results to dissatisfaction with health care (anderson, barbara and fildman, 2008) and patient frustration. afolabi and erhun’s, (2003) and prasanna, bashith and sucharith’s (2009) revealed that excessive patient waiting time undermines system efficiency, patient satisfaction and patronage which lead to the loss of some patients to competitors. unmanaged waiting lines in hospitals negatively affect the quality of care which in turn adversely affects patient satisfaction. increased waiting time results to patient disappointment, frustration and decrease the patient's sense of control and lead to loss of patronage on the part of the hospital patronage. literature shows that waiting time is one of the key predictors of patient satisfaction (umar et al, 2011; camacho, anderson, safrit, jones and hoffmann, 2006 anderson, camacho and balkrishnan, 2007; karaca, erbil and ozmen, 2011; yeddula, 2012) and it is useful to evaluate system efficiency. waiting time reduces the efficiency of production time and adds to the indirect costs of both the patients and hospitals. lovelock (1996) as cited in karaca, et al. (2011) posited that american spent 37 billion hours per year waiting in emergency rooms. what is experienced in some departments (such as outpatient department, pharmacy, diagnostic, ante-natal, etc.,) of the hospital is similar. the waiting time experience in developing country such nigeria is worst than what is obtainable in developed country. in fact, it has been assumed to be part of health care delivery. the amount of time patients wasted waiting to receive medical service can be productivity invested. yeddula (2012) found that if the healthcare organizations can improve patients’ perceptions of the time they spend waiting then patients will experience less frustration and may feel more satisfied with the services and results to improvement in hospital performance. drain (2007) study reveals that reducing wait times can lead to improved financial performance of the practice. patient satisfaction is a highly desirable outcome of care in the health centres, but it is difficult to measure because it is a function of both clinical and non-clinical activities (sodani, kumar, srivastava and sharma, 2008). though, it centres on patient’s judgment on the quality and goodness of care (sixma, spreeuwenberg and van der, 1998). so, healthcare resources should be channeled towards the outcomes that are consistent with patient values and preferences (gup, ofoedu, njoku, odu, ifedigbo and iwuamanam, 2012). although, patient satisfaction is acclaimed to be subjective judgment of the quality of medical service (merkouris, andreadou, athini, hatzimbalasi, rovithis, papastavrou, 2013) but it has long 119 been considered an important component in the assessment of health care quality (harutyunyan, demirchyan, thompsonand petrosyan 2010; yeddula, 2012). also, despite describing several methods of evaluating the quality of care (hermida, nicholas and blummenfeld, 1999) and no universal accepted of assessing quality of care (gup, et al, 2012), there is growing agreement that patient satisfaction survey will be the best to measure quality of care (press, 2006; turnbull and hembree 2006; merkouris, 2013). patients are satisfied when their numerous expectations are met and dissatisfied when they are not met. bopp (1989) and matulich and finn (1989) reveal that patients expected free flow of information from servers. they expected equality in treatment and be treated in a caring, professional, and competent manner. they expected a reasonable and justifiable waiting time. each factor encounter enhances or detracts from a patient's appraisal of overall service quality, hence patient satisfaction. in senti and lemire’ (2011) opinion, patient satisfaction is a function of the degree of agreement between the patient;s preconceived expectation and perceptions of the actual care. furthermore, jenkinson, coulter, bruster, richards and chandola (2002) assert that patient satisfaction is an attribute of many factors such as: quality of medical services provided, availability of medicine, behavior of doctors and other health staff, cost of services, hospital infrastructure, physical comfort, emotional support, and respect for patient preferences. an important factor in assessing patient satisfaction is timely service delivery which can be achieved with reasonable waiting time. in mowen, licata and mcphail’s (1993) opinion, there are four key attributes associated with patient satisfaction: trust, adequate communication flow, behavior of the service providers and waiting time. this study focuses more on the fourth attribute (waiting time) of mowen et al’s (1993) study. this implies that in this research, patient satisfaction was defined importantly as satisfaction with waiting room wait time and exam room wait time, and other patient satisfaction indexes. therefore, this study wants to investigate the relationship between waiting time and patient satisfaction of outpatients focusing on waiting experience and some satisfaction attributes. although, few researches have been done on relationship between waiting time and patient satisfaction, with longer waiting times being associated with decreased patient satisfaction (camacho, anderson, safrit, jones and hoffmann, 2006), but the degree of the association between waiting time and patient satisfaction varies across nations, hospitals and departments. most of these studies were conducted in developed nations and few that were conducted in nigeria focused mostly on government funded university teaching hospitals. furthermore, it is evident in nigeria that patient and society comments negatively about public hospitals operations ranging from long waiting time, unpleasant behaviours and negligence of staff, incompetence and discontinuity of care. these negative experiences and comments have resulted to poor public confidence in public hospitals and increased the patronage of private hospitals. despite the relevance of these negative comments especially concerning waiting time management to practice outcomes and patient satisfaction, timeliness of care has not been taken serious and among the least studied in nigeria. there is limited publication in the western nigerian on the relationship between prompt service delivery and patient satisfaction in both public and private hospitals. it is against this development that this study focuses on how efficient waiting time can improve quality of care and patients satisfaction in the selected hospitals (i.e. both public and private). 2. materials and methods a survey method was carried out at the outpatient units of the selected hospitals which are located in ogun state. ogun state is a bounder state to lagos; nigeria’s biggest commercial centre and former federal capital. covenant university health centre is situated 120 at the entrance of covenant university, ota, and it provides medical services to the students and staff of the university. also, it services the staff and families of living faith church, ota, nigeria. covenant university is one of the leading private universities in nigeria, with population of over 7000 (staff and students). medicare is one of the best private hospitals in ota, adoodo-ota, local government, nigeria. it provides services for workers of numerous national and multinational companies, and elite people of sango-ota. ota general hospital is a publicly funded health centre that caters for both elite and low income earners of ado-odoota, local government. the selected hospitals serve as referral centres in sango-ota. also, by virtue of their locations in areas that accommodate many people working in lagos, the patients’ visits to these health centres are high. data were collected from patients who visited the outpatient units of these hospitals through observation and well structured questionnaire. owing to the constraint of fund being a self sponsored paper, a sample of 240 patients (i.e. 80 patients per centre) was randomly selected over the study period (i.e. three months). the questionnaire sought information related to patient's demographic characteristics such as patient's age, sex, educational and occupational levels. information about patient’s waiting time obtained include; time spent waiting to see server, length of queues, causes of long queues and rating of service delivery on time performance. these questions were rated on a five-point likert scale, 5(strongly agree) to 1 (strongly disagree). any ratings involving strongly disagree and disagree were considered as disagreement overall, while rating involving agree and strongly agree was considered as agreement overall for purposes of average ratings. the analysis ignored the undecided responses in order to avoid the problem of central tendency and to gain more effective screening power (sin and tse, 2002). also, the survey asked patients to rate their hospitals and medical personnel (especially the doctors and nurses) on several issues relating to their satisfaction like respect for patient, level of doctors and nurses’ responsiveness, professionalism in handling the patients, trust in services, doctor friendliness and accommodating, quality of service to meet patient’s expectations, etc. for patient satisfaction questions, respondents were asked to indicate their answers on a scale of 1 (poor) to 5 (excellent). for easily analysis, ratings involving good, satisfaction, very good and excellent were good overall. data were analyzed by spss. the in-depth review of literature on waiting time and patient satisfaction confirmed the sufficient validity. this means that the response was not due to chance but resulting to the relationship tested. clark and watson’s (2007) opinion of measuring the internal consistency of the research instrument using cronbach alpha coefficient (1951) recommended at least 70% reliability level. this was used to test the reliability of questionnaires and it resulted to a score of 0.87 (87%). therefore the research instrument is reliable and accepted because the score is higher than the recommended 70%. 3. results and discussion of the 240 questionnaires distributed, a total 200 questionnaires were retrieved but some were partially filled and not suitable for research.. overall, 85 copies of the questionnaires were properly filled which formed the basis of analysis of this paper. this results to a response rate of 35.42%, which falls within acceptance rate of similar past studies. table 1 shows the patients’ socialdemographic characteristics. the majority were female (65%), dominated with patients of 18 to 24 ages (45%), involving more single (59%) than married patient (41%). all the respondents are educated having at least ssce/nce/ond certificate (25%); with 54% b.sc, 15% m.sc./mba while few of the respondents (6%) hold other certificates not captured in the study. this implies that the respondents are educated and 121 understood the purpose and relevance of this study. however, this study did not evaluate the influence of gender, age, marital status, and educational level on patient satisfaction similar to the study conducted by hall and press (1996), believing that variables such as sex, age, marital status, education, gender do not have a strong influence on patient satisfaction. however, studies have shown that demographic variables except gender have profound influence on satisfaction (aragon and gesell, 2003) while soleimanpour, gholipouri salarilak, raoufi, vahidi, rouhi, ghafouri, soleimanpour’s, (2011) demonstrated that those with higher education were less satisfied, but there was no significant relationship between marital status, occupation, gender, work shift and satisfaction level.. table 1 – respondents’ demographic characteristics gender male female total frequency 35 65 85 percentage 35% 65% 100 age group 18-24 25-29 30-34 35-39 40+ frequency 45 16 18 5 5% percentage 45% 16% 18% 5% 15% educational level ssce/nce/ond hnd/hnd m.sc. others frequency 25 54 6 percentage 25% 54% 15% 6% source: field survey, 2012 issues relating to waiting time and quality service delivery delivery of quality medical service is function of various components, of which waiting time is very important factor; formed the focus of the section. six issues relating to waiting time and quality service delivery at the health centres were presented to the respondents to rank in order of seriousness. percentage of the responses was calculated as shown in table 2. the findings reveal that forty percent (40%) of the respondents admitted that they experience waiting time on visits while 27% describe the waiting time as normal and adequate. 52% of patients considered the waiting time as long while the rest 32% were satisfied with the length of the queue. those that considered the waiting time as normal (27%) and satisfied with the length of the queue (32%) may enjoy talking and watching television provided to reduce boredom while waiting. more than half, 44% of respondents claimed satisfactory when service delivery is evaluated on time performance while 30% of patients were not satisfied with level of promptness in service delivery. this finding is similar to omidvari, shahidzadeh, montazeri a, azin, harirchi ,souri ‘s (2008) report in tehran and senti and lemire’s 20011) in midwest that long waiting causes less satisfaction. on the behavior of medical personnel towards the patients, 72.5% of the respondents rated their actions as been friendly and accommodative (i.e customer oriented). this implies that doctors carefully handled the patients, listen to their complaints and created an atmosphere of care and trust. customer oriented service is paramount for quality care because it allows time for friendliness, listening; and respectful, professional care for every patient (finch, 2005). previous studies (senti and lemire, 2011; omidari, et al 2011; gup, et al, 2012; yeddula, 2012) supports this finding that customer oriented service environment enhances satisfaction. overall, majority of patient expressed satisfied with the service delivery in the health centres despite some patients dissatisfied with long waiting. this finding is similar to the outcomes of soleimanpour (2011) and gup, et al’s (2012). 62% of patients rated the service delivery of these medical centres superior than other similar hospitals in the neigbourhood. 122 also 72% claimed their services are reliability. it means that majority of the respondents are not first time visit and have been provided quality services which implies that they will be willing to recommend the health centres to others. table 2 – results on issues relating to waiting time and quality service delivery s/n issues agree (%) disagree (%) a1 health centres waste time in service delivery a2 always long queues on visits a3 service delivery on time performance a4 medical personnel behaviour -friendship and accommodation a5 superior service compared to other health care centres in the neigbourhood a6 service reliable after several visits 40 27 52 32 44 30 72.5 16.5 62 28 72 17 issues relating to hospitals, doctors and patient satisfaction table 3 depicts that the entire medical personnel responsiveness to patients’ requests are extremely satisfactory (89%). also, a considerable number of patients (89%) rated the medical personnel professionalism high in delivery their services. these responses confirmed the evaluation of comparison of patient expectation with actual service delivery. majority of the respondents claimed that their expectations were met (80%). meeting patients’ expectations resulted to satisfaction with service delivery. this finding is in agreement but higher than senti and lemire’s (2012) report which indicated that when realistic expectations are met overall satisfaction scores should improve. the respondents rated the system approach to service delivery as good (87%), while 32 (16%) of them rated the overall approach as excellent. despite satisfactory responses, it amazing to know that more than half, 104(52%) of the respondents had experiences one disappointment or others in service delivery of these health centres. table 3– results on issues relating hospitals and doctors and patient satisfaction rank issues poor (%) good (%) b1 level of medical personnel responsiveness to patients b2 personnel professionalism in handling patients b3 patient expectation with actual service delivery b4 health care system approach to delivering high quality services b5 past disappointment in service delivery 11 11 17 13 yes (%) 48% 89 89 80 87 no (%) 52% perceived causes of long queues table 4 reveals the observed causes for long waiting time in these health centres. these factors are found in most nigerian hospitals, especially university and public funded health centres. in nigeria, university hospitals and general (government) health centres have the high patient’s patronage. reasons have been that university hospitals are endowed with more modern technologies and qualified personnel for effective and efficient medical service delivery while general hospitals is a place of visit for common man. therefore, large number of patients is received by these health centres on a daily basis. it was notice that few numbers of doctors serve a high population of patients at these hospitals. though, this has been a general trend in most standard hospital in nigeria (afolabi and erhun, 2003; thatcher, 2005; umar, et al, 2011). patients jumping queue through the help of some staff was high in general hospital. university health centre and medicare have adopted the use of information technology in their operations. this really helps in managing patient waiting time and facilitating patient flow. but the situation is different in general hospital that still relies on manual operations 123 which results to long search of patient card, physical movement of card from one office to another and patients wandering around from one unit to another. medical practitioners and health institute (institute of medicine) acknowledged that long waiting time results to patient dissatisfaction and had therefore recommended that majority ( not less 90%) of patients should be served within 30 minutes of their scheduled appointment time (o’ malley, fletcher, fletcher and earp, 1993; senti and lemire, 2012 gup, et al, 2012; yeddula, 2012). this recommendation is difficult to achieved in general outpatient department of university hospitals and public hospitals in developed countries talk less of developing country like nigeria who has a ratio of doctor to patient as one per 25,000 against the world health organization (who) target of a doctor to 1000 patients (latonte, labonte, sander, schrecker, 2004). this overcrowding situation accounted for the reason while the some respondents claimed that they had experienced disappointment with service delivery in time past. this is in contrast with the satisfactory responses indicated by majority of respondents on issues relating doctors, hospital and patients (see table 3). our findings revealed that despite the fact that patients experience waiting time (see table 2), high percentage of respondents are satisfied with overall service delivery in these selected hospitals. this claim is consistent with the findings of afolabi and erhun (2003); camacho, et al, (2006); prasanna, bashith and sucharitha (2009) senti and lemire, (2012) merkouris, et al (2013) but in contrast with umar et al’s (2011) findings where majority of patients were dissatisfied with service delivery because of long waiting time. the waiting time before seeing the nurse, doctor, pharmacist, etc., should be made productive by organizing waiting process in line with patient’s perspective by; (i) medically engage the patients by encouraging them to describe their previous medical experience and providing relevant health education on important issues and not allowing them to watching television, chatting, etc. (ii) equality treatment procedure; this reduces preferential treatment. (iii) increase interaction with patients by providing more adequate communication with them. (iv) medical personnel should be more friendly, caring, listen to patient’s complaints and arrive in time and avoid unnecessary delay in service delivery. further research is required to examine other variables of patient satisfaction not included in this study and the concept of patient perception of waiting time in relation to patient satisfaction. this study was conducted at the moderate-sized hospitals in sango-ota, ogun state, nigeria, and hence, the findings may not be generally applicable in other settings not similar to these hospitals. however, despite these barriers, the study depicted how waiting time is an important factor of quality service delivery and patient satisfaction in this setting. our findings agree with other studies in literature that revealed that there is relationship between waiting time and patient satisfaction (camacho, et al, 2006; prasanna, et al, 2009; umar et al, 2011). table 4 – perceived causes of long queues 1. large number of patients 2. late arrival of doctors 3. fewer number of doctor 4. preferential treatment by medical personnel 5. operations not computerized 6. doctor waste time in seeing a patient 124 4. conclusions as we move towards patient-centred service delivery where more emphasize is on managing patients waiting time, time spent with the doctors, nurses, pharmacists, etc., and the entire service delivery process. reduced waiting time, adequate health care, professionalism, responsiveness to patients, friendly, adequate and purposive communication are among some important factors that improve patient satisfaction. this study has shown that a good numbers of the patients were satisfied with the service delivery despite experiencing long waiting time. though, lengthy waiting line is evident in public hospital than the other private hospitals as demonstrated in the study. but this does not affect patient perception of quality care offered. part of the reasons may be because long waiting time is a general occurrence in nigerian hospitals especially publicly funded health centres. efforts should be made by hospital administrators and medical personnel to eliminate unnecessary delay in service delivery and where unavoidable the waiting time should be made productive. also, emphasis should be directed toward training of medical personnel on how to design a productive waiting time process and deliver timely services. this implies that hospitals that manage wait times effectively and efficiently will experience significant improvement in patient satisfaction. references afolabi, o. m. and erhun, o. w. 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(2012). healthcare quality: waiting room issues. m. sc. dissertation, university of nebraska – lincoln. 2 brondoni_corniani_riboldazzi 27 global retailers, market-driven management and innovation silvio m. brondoni, margherita corniani, sabina riboldazzi*1 university of milan-bicocca, italy received: march 1st, 2013 accepted: september 19, 2013 online published: october 10, 2013 abstract the globalization of markets forces large retailers to re-think their long-term development, combining corporate growth with demand satisfaction. in particular, global markets and the state of over-supply push mass retailers to adopt hard competitive policies based on marketdriven management, which emphasize continuous product innovation in order to satisfy temporary demand opportunities (demand bubble). the purpose of this paper is to provide an overview of the main issues concerning market-driven innovation for global retailers. in fact, this subject, to date, is a relatively neglected element of the retailing literature. the paper is based on a review and synthesis of secondary data and published work and proposes to link together the issues concerning global retailing with market-driven innovation, offering an initial classificatory schema of activity areas where global retailers can innovate to compete in global markets. the paper concludes with an agenda for future research in this area. keywords: global retailers; market-driven management; retail innovation; demand bubble; over-supply; competitive customer value. 1. introduction the paper studies the issue of global retailers facing a dramatic growth in competition all over the world. local barriers (such as national borders, linguistic barriers, fiscal laws etc.) are no longer able to protect retailers from the competition of other retailers who move in the world locating their points of sale everywhere. this globalisation concerns not only the establishment of points of sale but also the opportunity to purchase anywhere in the world, reaching important economies of scale. specifically, retailers can establish in the world many different relationships with other companies, in order to produce, buy and distribute products. these relationships can be organised in different ways, concerning the kind of link companies wish to establish: retailers can use the franchising system to open shops in different locations in a short time, or can forge equity alliances to establish long term relationships with local sellers or firms supplying specific services (such as logistics, researches, etc.). 1* this paper is the work of a common research project. however, s.m. brondoni wrote sections 2 and 5; m. corniani wrote sections 1 and 3; s. riboldazzi wrote section 4. 28 whatever the relationship established, most retailers are going global, to reach higher economies of scale by developing their market share. competition is thus growing fast in global markets, even for retailers, who are becoming more and more global companies, with global relationships. to face global competition, the paper aims to consider the market-driven management approach, which suggests that corporations should focus on competitors when making managerial decisions. therefore, companies should be able to focus on competition, that is set specific investments in order to define and monitor competitors and, of course, carry out the right activities to face them. to achieve this goal this paper introduces another issue for global retailing: innovation. innovation is often seen as a “manufacturer’s problem”, specifically concerning new product features, brand or processes, to allow firms to produce and sell with higher contribution margins. other papers have studied innovation as an issue for the marketing channel, but typically, innovation is not a main concern in retailing literature. in this paper we analyse innovation as a matter for retailing corporations and especially for global retailers (i.e. big ones, with huge economic resources, and with high level competitive capabilities) explaining what innovation involves: networking relations with manufacturers, consumers and other partners in order to accomplish the retailing functions; the commercial offer, working on distribution formats; the retailing mix. in all these areas innovation can be created if retailers are able to focus on competitors, willing to create a competitive customer value, i.e. a supply system able to grant customers (actual and potential ones) a value perceived as superior to the value offered by competitors. a specific example of innovation creating a competitive customer value is the demand bubble, which is the aggregation of demand due to a special supply (offering system of product bundle, price, etc.) able to attract at a definite time and place numbers of buyers perceiving the supply as being competitive. the issues are very important for retailers, because in global markets many of them are loosing their competitive capabilities, facing bankruptcy or being sold to other corporations. we think that this situation is mostly due to a lack of a market-driven orientation, as retailers are often more oriented towards short term margins instead of creating global competitive capabilities by learning from competitors and working on a world wide scale. this matter is also very important for local corporations (manufacturers, retailers or other related services providers) to obtain a framework to look at when evaluating their survival and development opportunities. local corporations can grow by entering bigger and global networks, learning from them and contributing to their competitive development. to reach this purpose, neglected in the retailing literature, we have chosen to examine the policies of the major global retailers, using secondary data, available on the main databases, on retailers’ websites and reports as well as in published works. we have then used literature concerning market-driven management and retailing innovation and linked the information by using secondary data resulting from global retailers’ policies. the existent specialized literature we have considered is summarized in the second section of this paper, while third and fourth sections are devoted to presenting the paper contents on innovation and demand bubbles on the one hand, and on the main features of large market-driven retailers on the other hand. 2. global retailers, market-driven management and retail innovation: literature review for several years the concept of market orientation has experienced a resurgence of an interest in academia and in firms, especially during the numerous corporate reorganizations driven by the globalisation of the economy (shapiro, 1988; lambin, 1998; pitt, caruana & berthon, 29 1996; fritz, 1996; deshpande & farley, 1996; han, kim & srivastava, 1998; lambin & chumpitaz, 2000-2001). market-driven management began to establish itself in the late 1980s as an effect of many innovations (flexible production, lean production, just in time, total quality, mass customisation) introduced by toyota and japanese scholars (ohmae, 1982; 1986; 1990; 1994; 1999; 2005; ohno, 1988). however, market-oriented management model began to spread in the west thanks to the work of a group of american scholars (webster jr., 1988; 1992; day, 1990; 1994; 1998; 1999; narver & slater 1990; slater & narver, 1994, 1998; jaworski, kohli & sahay, 2000; best, 2009). all these studies support the conclusion that market orientation is essential to success in a global market (gordini, 2010). market-orientation is generally referred to the basic orientation that governs the relationship of a firm with its market and, more particularly, with its customers. in specific lambin (2002; 2009) defines the concept of market-orientation on one hand, identifying four key players involved in the functioning of the market (customers, distributors, competitors and prescribers), on the other hand underlining the distinction between the mo as a management philosophy (culture), as a tool of strategic thinking (analysis) and as a commercial activity of the company (action). according to day (2000-2001) market-driven organizations know their markets so thoroughly that they are able to keep valuable customers and consistently win in their markets. three elements characterize market-driven companies: an externally oriented culture (based on a superior customer value and the continual quest for new sources of advantage), distinctive capabilities (in market sensing, market relating and anticipatory strategic thinking) and an organizational configuration (that enables the entire organization to continually anticipate and respond to changing customer requirements and market conditions). since the start of the third millennium, manufacturing globalisation (with the delocalisation of manufacturing activities from socially advanced countries to new areas), the opening of new consumer and import-export markets, and finally the digitalisation of communication, have combined to push many markets into a state of over-supply (brondoni, 2005). according to brondoni (2009) global market and the state of over-supply force businesses to adopt a new “competitive market-oriented management philosophy” (market-driven management), indeed a corporate strategy that presupposes direct, continuous benchmarking with competitors, in a context of customer value management. in particular, the state of over-supply and consumption saturation are factors which characterise markets in which global large retailers operate; these factors induce retail companies to continually search for innovation, in order to create competitive customer value and obtain a positive continuous benchmarking with competitors. innovation in retailing is a theme that has been treated in reference to specific areas by many scholars (hollander, 1960; gupta & loulou, 1998; dupuis, 2000; rosenbloom, 2004; cardinali, 2005; kim, cavusgil & calantone, 2006; gundlach, bolumole, eltantawy & frankel, 2006; musso, 2010). major contributions have focused on innovation in retailing as product innovation for distribution companies or as innovation in the supply chain. for example lugli (lugli & pellegrini 2005) underlines that innovation must involve the entire distribution value chain2. thus, retail innovation is connected with marketing channel innovation. 2 the distribution value chain is structured according to content, context and infrastructure. with reference to content, the enterprise can act on the composition of assortment, in particular, on the level of service referring to a specific product, on the splitting of lots, on the product categories an assortment is composed of, on the 30 according to musso (2010), in the context of globalization, innovation in marketing channels becomes a complex, multiorganizational, multidisciplinary activity that requires collaboration and interactions across various entities within the supply chain network. 3. demand bubble and innovation in global retailers the market orientation (brondoni, 2008; 2009; 2012) aims first and foremost to identify a temporary competitive space, a ‘demand vacuum’ to be rendered highly unstable – in terms of sales volumes and customer expectations – as an effect of continual innovative proposals. in other words, the ‘market driven’ management process presupposes that the business first focuses on the competition (market-space) to identify temporary demand opportunities (demand bubble), and then chooses the product characteristics that are closest to demand expectations, in order to prepare contingent (but strong) differential advantages of supply (competitive pricing, before and better than competitors). in particular demand bubbles identify temporary groupings of purchasers, which may be aggregated on the basis of sharing specific characteristics of a given corporate supply. demand bubbles are created and extinguished, starting from a precise, explicitly planned, corporate stimulus which normally takes shape in a corporate supply presented with tangible and intangible features such as to attract the preferences of a group of prospective customers and which is rapidly taken off the market when it is deemed opportune for the bubble to burst (corniani, 2005; 2011; 2012). market-driven management therefore highlights new purchasing behaviour, which emphasises competitive customer value, in which final demand tends not to position itself at the end of the transaction chain, with a marginal, passive position that can be conditioned in its choices by limited marketing investments. on the other hand, demand is in a ‘circular relationship’ with trade and manufacturers, expressing new purchasing models based on nonloyal behavior, which joins the well-known loyalty mechanisms (lambin, 2007). in fact, in intensely competitive global markets, repetitive purchasing stability is often lacking and the presence of non-loyal behaviour is accentuated. in other words, a state of discontinuity that must be controlled by the obsolescence of the supply and continuous product innovation, planned on the basis of customer readiness (monitored with new techniques and instruments such as competitive intelligence, data mining, fidelity cards, etc.), fragmenting existing demand and recomposing it in unstable purchaser groups which react differently to the price but are always very open to information and communications (brondoni, 2009). in particular the proximity relationship between large retailers (table 1) and consumers (most feedback from the market is turned into trade information systems) makes intermediaries active interlocutors in demand, therefore, drivers of innovation in marketing channel processes, needed to formulate offers suitable for increasingly and sophisticated customer expectations (demand bubble). assortment depth with reference to the categories of particular interest for consumers in a definite time and space. with regard to context, innovation may relate to the equipment layout, product layout and display space allocation. with regards to infrastructure, innovation may relate to the degree and modes of involment of consumers and suppliers in the production of the service. 31 table 1 – global ranking of large retailers/wholesalers by revenue (billions of euro) – 2011 company nationality revenue (billions of euro) walmart usa 352 carrefour france 109 tesco uk 84 metro germany 78 aeon japan 77 seven & i japan 75 schwarz group germany 70 kroger usa 64 costco usa 63 auchan france 62 source: adapted from planet retail thus, innovation in global large retailers involves the entire distribution value chain and may concerns: networking relations with manufacturers, consumers and other partners for effective/efficient accomplishment of the retailers functions. one possible classification of the fundamental functions of retailers is the following: logistics, assortment, contact, information, communication, economic-financial and production functions. the commercial offer, or the combination of the attributes (opening hours, pre-selection, comfort, pre-sale, post-sale and during sale services etc.) that determine a given distribution format; this is a secondary innovation which refers to frequent changes in format service elements in order to meet non-loyal, local demand. these innovations are the driver of primary innovation, that is the introduction of a new distribution format. retailing mix and, specifically, assortment (aggregation of products offered in a store), merchandising (product presentation at a sale point), private label (management of private label portfolio), price (definition of commercial margins), communication (communication policies). retailing mix levers are managed and coordinated as a reflection of the continual stimulations exercised by the market (riboldazzi, 2005; 2010a). innovation therefore involves global retailers in a continuous process of growth/development inherent to their activity. growth, in particular, refers to a change in company size; development, however, concerns the relations between the firm and the environment, which usually contemplate a more effective ability to adapt to changing market conditions. while growth allows business to obtain cost competitive advantages (through economies of scale, scope, etc.), development permits them to satisfy a changeable and unstable demand3. large scale and continuous development are therefore necessary conditions that coexist in global retailers, primarily focused on a continuous benchmarking with competitors (marketdriven management). 3 see brondoni (2002, p. 28). the globalization of markets highlights a deep re-thinking of long-term development philosophy by leading large corporations, that tend to reconcile a quantitative approach to growth (supply-driven management) with the goal of satisfying demand (market-driven management). 32 4. features of large market-driven retailers the analysis of main global market-driven retail companies reveals several common characteristics: large size and global development. the study of large retailers underlines an articulated and variable geographical distribution of their "business space" (table 2). retail groups, in particular, have spread and expanded their activities through operations of vertical and horizontal development as well as diversification. horizontal development concerns the acquisition of competitors or other stores to strengthen the company’s competitive position. for exemple carrefour (promodès) acquired many sales points owned by other retailers (www.carrefour.com), including primistères, euromarchè, montlaur, fèlix potion; the french group has recently acquired espírito (portugal), hyparlo (italy), 12 hypernova hypermarkets (owned by ahold), 250 stores tengelmanns (spain), 4 hypermarkets caprabo (spain), 34 hypermarkets atacadao (brazil). similarly walmart (www.walmart.com) since 1962, the year when sam walton opened the first walmart store in rogers has taken over many acquisitions; the most important ones refer to the purchase of 122 woolco stores in canada (1994), asda stores in the uk (1999), d&s sa (majority stake) in chile and massmart in south africa. vertical development refers, instead, to traders’ control of a further stage in the marketing channel. this stage can be positioned “upstream” or “downstream” depending on companies’ traditional activities. table 2 – geographical distribution of the four main retailers/ wholesalers (by revenue) 2011 company countries walmart united states, argentina, brazil, canada, chile, china, costa rica, el salvador, guatemala, honduras, india, japan, mexico, nicaragua , puerto rico,united kingdom. carrefour belgium, cyprus, greece, italy, poland, romania, spain, turkey, argentina, brazil, colombia, china, indonesia, malaysia, singapore, taiwan, india, maghreb, middle east, dominican republic. tesco republic of ireland, poland, hungary, czech republic, slovakia,turkey, south korea, thailand, china, malaysia, japan. metro austria, belgium, denmark, france, italy, luxembourg, netherlands, portugal, spain, sweden, switzerland, united kingdom, bulgaria, croatia, czech republic, greece, hungary, kazakhstan, moldova, poland, romania, russia, serbia, slovakia, turkey,ucraine, china, egypt, india, japan, pakistan, vietnam. source: adapted from walmart annual report 2011, carrefour annual report 2011, tesco annual report 2011, metro annual report 2011 generally large retailers pursue "upstream" vertical integration by controlling functions previously performed by wholesalers or by replacing manufacturers in the production of products (or product lines) present in their assortment. finally diversification develops from an expansion of commercial activities related to new products for new markets and/or technologies. new activities may have links with previous activities (homogeneous or related diversification), or no links with activities developed before diversification (heterogeneous or conglomerate diversification). recent examples of diversification pursued by retailers are the sale of private label drugs (e.g. tesco pharmacy and carrefour parapharmacies), the offer of mobile services (some examples are uno mobile carrefour, tesco mobile, auchan mobile), the sale of fuel 33 (riboldazzi, 2010b; 2011) (there are numerous distributors engaged in this business, among which: wal-mart, carrefour, tesco, auchan, intermarché) and the provision of financial and insurance services (e.g. carrefour financial services, tesco bank) (risso, 2010). tesco, as well as being engaged in the sale of drugs (tesco pharmacy) and fuel (tesco petrol filling stations), also provides insurance, financial and phone services. in the telecommunications market, in particular, the company has developed (in the united kingdom) 194 phone shops with over 2.5 million consumers; while in the financial business tesco bank has more than 6.5 million customers and generates annual revenues (2011) of 264 million pounds (tesco annual report, 2012). management of product/format portfolio related to different store-brands. large retailers generally coordinate and manage different formats in relation to the degree of specialization in the selling technique used, point-of-sale location, price level, turnover and the size of the sale point (table 3). table 3 – walmart, carrefour and metro’s format (by area) walmart u.s.4 discount stores supercenters neighborhood markets sam's clubs 803 2.747 158 596 walmart intenational discount stores supercenters hypermarkets supermarkets other argentina 24 19 brazil 45 65 157 167 canada 233 84 chile 110 93 47 2 china 167 104 8 costa rica 127 6 25 12 el salvador 50 2 25 guatemala 113 7 28 16 honduras 39 1 7 6 india 1 japan 101 257 1 mexico 246 169 202 852 nicaragua 48 7 puerto rico 7 8 30 11 uk 29 261 57 24 carrefour convenience store cash&carry hypermarkets supermarkets europe 5072 150 688 2685 latin america 98 355 150 asia 2 361 17 metro galleria kaufhuf metro cash&carry media-saturn real westerneurope 140 367 733 316 eastern europe 268 153 110 asia/africa 93 7 source: adapted from walmart annual report 2010, carrefour annual report 2011, metro annual report 2011 4 alabama, alaska, arizona, arkansas, california, colorado, connecticut, delaware, florida, georgia, hawaii, idaho, illinois, indiana, iowa, kansas, kentucky, louisiana, maine, maryland, massachusetts, michigan, minnesota, mississippi, missouri, montana, nebraska, nevada, new hampshire, new mexico, new york, north carolina, north dakota, ohio, oklahoma, oregon, pennsylvania, rhode island, south carolina, south dakota, tennessee, texas, utah, vermont, virginia, washington, west virginia, wisconsin, wyoming. 34 supermarkets, hypermarkets, convenience stores, discount stores, specialty stores, with specific commercial offers, united by the same brand-name or characterized by specific storebrands, oversee different physical commercial spaces, to maintain a certain activity portfolio balance (in terms of growth and profitability) at corporate level. thus, retail companies extend their competition boundaries by enhancing a corporate brand equity for the company development as a whole and by adopting brand extension (extension of a brand in different product classes) and brand portfolio policies to accommodate needs in the demand with specific brands (brondoni, 2009). table 4 shows the example of rewe group (germany); the company developed different store brands referred to particular commercial offers (formats) for specific countries. table 4 – rewe group’s store brands. national full range stores rewe, toom markt, toom getrankemarkt, vielinden bio supermarkt, temma, kaufpark. international full range stores billa, merkur, adeg, bipa national and internat. discount stores penny market, pennymarkt, xxl. national specialist stores toom, b1 discount baumark, promarkt, klee. business to business rewe food service, fegroselgros cash & carry, transgourmet, transgourmet sea food, prodega cash&carry, growa cash+carry, howeg, c-groo. other fursie, kressner, rothermel, glocken, wilhelm brandenburg, iki, akzenta. travel and tourism its, jahn reisen, tjaereborg, its billa reisen, its billa travel, its coop travel, der tour, meier’s weltreisen, asac reisen, derpart travel service, derpart der partner fur ihre reise, atlas reisen, der reisenburo, fcm travel solution, rsg, dr. holiday, clever tours.com, club calimera, primasol, lti hotels. source: adapted from rewe annual report 2010. activation of competitive strategic alliances (equity, non-equity alliances). many operations such as joint ventures, co-production, r&d partnerships, outsourcing, cooperative marketing, franchising, etc. are activated and coordinated in order to limit competition, reduce the over-supply or exploit skills, capabilities and competitive advantages of specific partners. in fact big retailers develop different types of alliances (with suppliers, competitors or other partners) to set up new business, improve commercial services or to exercise distribution functions effectively/efficiently, and especially primary functions (transport, storage, quantitative adaptation5, qualitative adaptation6), secondary functions (pre-sale7, 5 quantitative adaptation refers to the difference between quantities produced by manufacturers and quantities purchased by consumers. 6 the role of intermediaries is to create assortment that enables customers to buy a wide variety of products in a single operation thus helping to reduce the time and effort required to find the products they need. 7 pre-sale services include all the activities aimed at: supplying sufficient information and choosing the point of sales, coordinating the process of orders and bookings acceptance, developing projects related to the use of goods purchased. services relating to access can be classified as: point of sale hours, parking and home delivery. 35 during sale8, post-sale9 services) and other activities (e.g. finance and information functions)10. for example carrefour manages 6.189 stores with franchise agreements or partners (carrefour annual report 2011). over the years the group has started numerous equity and non equity alliances. to develop its activities in the balkans, e.g., the company has recently announced (carrefour press release 2010) the activation of a joint venture with marinopoulos; the new company, franchised under the carrefour banner, will be 60% owned by marinopoulous and 40% owned by carrefour marinopoulos; carrefour and marinopoulos operate with hypermarkets, supermarkets and convenience stores in greece, cyprus, bulgaria, albania, bosnia, croatia, montenegro, serbia and slovenia. besides this in order to develop its range of financial products, the group has announced (carrefour press release 2011) the activation of a joint venture with itau unibanco, the largest private bank in brazil with 3,900 branches and 30,000 atm services. management of a wide range of private label products. most large retailers stock a wide range of private labels located in different positions on the scale price (from premium price to first price). store brand, store sub brand, generic brand, first price brand, corporate brand (myers, 1967; brosselin, 1979; gnecchi, 2002) fill retailers’ shelves and reduce the competitive space and profitability of local manufacturers; as a result of this situation producers are forced to work with retail companies. in fact private label producers may be: large companies or global networks that produce the same goods under their own brands and under private labels; small and medium sized companies, specialising in the production of goods with the retailer’s trademark; retailers and wholesalers (members of a central purchasing organization) that have their own factories and produce goods with specific brands for different trade companies. new technology and online sales. the use of new technologies by retailer, as well as improving the efficiency of marketing channel processes, has allowed to generate innovation in the commercial offer and consequently improvement of customers relations. barcodes, pos-scanner, self-scanning, self-checkout11, personal shopping assistant12, electronic shelf labels13, automatic eft payment systems14, rfid15 and virtual 8 services during sale can be identify as: atmosphere, availability of equipment for the disabled and children, presence of support services (such as bars, telephones, restaurants), staff courtesy and professionalism, diversification of methods of payment etc. 9 post-sale services may be: product guarantees, setting up of a structure for interaction with customers in order to spot ongoing changes in the needs to be satisfied. 10 finance function refers to commercial credit, while the informative function regards the management of important information flows in the marketing channel. 11 point-of-sale scanners record goods leaving a store with an optical reader that reads the bar code on the products. self-scanning technology refers to portable scanners (suitable for reading bar codes) that customers can use while shopping. self-checkouts refer to the use of automated cash-out points where the customer performs the same operations normally carried out by a cashier. 12 personal shopping assistant is a small gps computer that customers can use as a guide while they are in a large store. 13 an electronic shelf label, also known by the acronym esl, is a system used by retailers for displaying product pricing on shelves. a communication network allows the price display to be automatically updated whenever a product price is changed. 14 electronic fund transfer payment systems allow the transfer of money without the movement of currency. this structure is the basis of eft payment systems by debit or credit cards. 15 a tag is applied to every product containing information about the product itself; by going through the automatic devices placed at the exit from the production warehouse, the entrance to and exit from the 36 supermarkets16, for example, enrich the commercial offer and contribute to value creation for both consumer and retail companies (riboldazzi, 2005). the development of internet and web-based technologies, has also helped retailers to add the traditional sale with online sale, in which the match between supply and demand is achieved in a virtual space. most major trade groups develop integrated distribution policies (click-and-mortar) by combining benefits from the exploitation of defined commercial physical space (to oversee meeting demand through local spaces) with the opportunities resulting from the non existent spatial and/or temporal constraints in online distribution. walmart, for example, invests considerably in the development of its global ecommerce division; as well as managing platforms walmart.com and asda.com (serving 97% of online consumers in the uk) the company is now also developing ecommerce in brazilian and chinese territory (walmart annual report 2011). 5. conclusions and implications in this paper we have explained that with globalisation, over-supply has become a structural factor of development, forcing companies to come to terms with: irregular growth rates of consumption, unstable demand, and above all, changing consumption potential. the deep-rooted changes in purchasing habits (of both households and individuals) produce new spending behaviour, which highlights: the drastic increase in consumer disloyalty, with peaks of 60-70% of brand switching; the booming of non-loyal purchasing (and the consequent search for cheaper retail formats and products); the postponement of non-essential purchases; the product switching; and finally, a reduction in quantities purchased. indeed, when in mass markets consumers’ income decreases, customers become more selective on purchases and outlets, brand switching and non-loyal purchasing increase (encouraged above all by private labels and hard promotions), many clients abandon richer products, and purchased quantities are reduced. thus, crisis in consumption forces companies to adopt hard competitive policies, based on market-driven management, which favours competitive pricing and fidelity in consuming (which is more flexible and less expensive than purchasing loyalty). over-supply and global markets therefore impose new competition rules, which emphasise retailers offers with strong market-driven policies, where innovation is an important factor to achieve unstable customer aggregations (demand bubble) and the brand is a ‘system of responsibility’ in manufacturer-retailer-consumer relations within global marketing channels. the implications of this paper are twofold: distribution centre and the entrance to and exit from the point of sale, this tag allows the automatic updating of the entity of stocks for each individual reference and its relevant movement, thus reducing administrative errors. by also allowing simultaneous registration of the tags of all the products placed in a shopping trolley, rfid (radio frequency identification) becomes a source of benefit for the consumer and the firm, thanks to the consistent quantity of information obtainable even beyond the cash point barrier. 16 we refer to panels backlit (which replicate the normal supermarket shelves) combined with qr codes (quick response) which, after being photographed with a smart phone, allow consumers to shop online. 37 the scientific one: we have linked global retailers and market-driven management with innovation. this link is new in literature, where studies are concentrated on more operational aspects of retailing and less on strategic ones. the implication is the need to look at global retailers as important actors in the global competition, where retail companies play a strategic role in setting relationships with their suppliers and their clients in order to develop consumption through specific types of innovation; the operational one: retailing managers are involved in making decisions about products, prices, places, etc. daily, but they lack a framework which can help them move in the right direction. in this sense, the market-driven management perspective becomes a way to help them face global competition, creating a framework for investments and activities. in this sense the creation of demand bubbles and the focus on competitive customer value, also by private label offerings, are two examples of how global retailers can play an innovative role in the market and in their competitive environment. future developments can take many directions, some of which can be summarized as follows: it will be important to find easy and synthetic metrics to help managers choose how to invest in retail innovation. for example: how many resources must be devoted to private labels, how many must be used to help manufacturers’ brands to grow and gain higher levels in brand equity and in market share? to reach this operational purpose we need metrics able to connect the degree of market-driven innovation with retailers’ performance. then, from a scientific point of view but, of course, with important managerial implications, it will be interesting to study the alliance systems that global retailers are setting to face competition, to have more insights into big players’ policies and to explain how local players (retailers and manufacturers) can find a place in creating value in global competition. this aspect can be specifically studied in two directions: analysing alliances and relationships that global retailers are developing within their traditional supply chain (i.e. with local retailers, manufacturers for supplying manufacturers brand and for private label offerings); 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(1992). the changing role of marketing in the corporation. journal of marketing, 56(4), 1-17. 2 _16-09_ akturan why consumers love brands? received: august 1, 2015 accepted: the aim of this research is to explore the consumer entries of consumer statements about their beloved brands were analyzed via discourse analysis. as a result, it was found that brand love is different from interpersonal love. there is brand related factors (functional congruity, satisfaction, brand trust, brand passion, sensory experiences) as well as consumer related factors experience) affect the development of love relationship with brands keywords: brand love, love expressions, consumer characteristics, brand characteristics, thematic analysis. 1. introduction brands help define consumers' lives and play a (albert, 2013). as a new territory for differentiation and loyalty, creating deep emotional connection between brands and consumers became crucial. and that shift in the consumer brand relationship raised inter lovemarks: the future beyond brands ubiquitous and commoditized in manufacturing, distribution, service, price, and studies on the love relationship between consumers and brands in marketing literature but also in managerial applications may develop a love strong bon like and friendship-like (fournier, & yao, 1997). there are studies on the conceptualization (ahuvia, 1993; albert et al. 2008 2012; albert & valette-florence, 2010; rossiter, 2012 analyzed the outcomes of brand love and found that brand love is associated with word of mouth (wom), brand loyalty (carroll & ahuv al., 2005), increased willingness to pay a price premium (thomson of brand failures (bauer et al. albert & merunka, 2013), commitment, and trust (bergkvist & bech merunka, 2013). this research aims to define the roots of brand love and answer the question of why people love brands. based on 750 entries of consumer statements ab research proposes a higher-end love relationship model. secondly, this research put forwards international journal of economic behavior, vol why consumers love brands? ulun akturan galatasaray university, turkey accepted: november 27, 2015 online published: abstract the aim of this research is to explore the consumer-brand love relationship. by doing so, 750 entries of consumer statements about their beloved brands were analyzed via discourse as a result, it was found that brand love is different from interpersonal love. there (functional congruity, satisfaction, brand trust, brand passion, ) as well as consumer related factors (self-congruity, and pe ) affect the development of love relationship with brands. brand love, love expressions, consumer characteristics, brand characteristics, brands help define consumers' lives and play a central role in people's consumption behavior (albert, 2013). as a new territory for differentiation and loyalty, creating deep emotional connection between brands and consumers became crucial. and that shift in the consumer brand relationship raised interest and research on brand love. among practitioners, the book lovemarks: the future beyond brands by roberts (2004) drew attention that brands become because of continuous improvements across quality dimensions ibution, service, price, and promotion. love relationship between consumers and brands are commonplace marketing literature but also in managerial applications. research has revealed that there may develop a love strong bonds between consumer and brands such as marriage like (fournier, & yao, 1997). there are studies on the conceptualization . 2008) and measurement (carroll & ahuvia, 2006 florence, 2010; rossiter, 2012). there are only a few studies analyzed the outcomes of brand love and found that brand love is associated with rand loyalty (carroll & ahuvia 2006; fournier 1998; thomson 2005), increased willingness to pay a price premium (thomson et al., 2005), et al., 2009), brand identification (bergkvist & bech albert & merunka, 2013), commitment, and trust (bergkvist & bech-larsen 2010 this research aims to define the roots of brand love and answer the question of why people love brands. based on 750 entries of consumer statements about their lovemarks, t end love relationship model. secondly, this research put forwards international journal of economic behavior, vol 6, n. 1, pp. 21-30 21 why consumers love brands? ulun akturan galatasaray university, turkey online published: june 22, 2016 brand love relationship. by doing so, 750 entries of consumer statements about their beloved brands were analyzed via discourse as a result, it was found that brand love is different from interpersonal love. there (functional congruity, satisfaction, brand trust, brand passion, congruity, and personalized brand love, love expressions, consumer characteristics, brand characteristics, consumption behavior (albert, 2013). as a new territory for differentiation and loyalty, creating deep emotional connection between brands and consumers became crucial. and that shift in the consumerest and research on brand love. among practitioners, the book drew attention that brands become ontinuous improvements across quality dimensions are commonplace not only has revealed that there ds between consumer and brands such as marriage-like, lovelike (fournier, & yao, 1997). there are studies on the conceptualization ahuvia, 2006; batra et al., there are only a few studies analyzed the outcomes of brand love and found that brand love is associated with positive ia 2006; fournier 1998; thomson et et al., 2005), forgiveness brand identification (bergkvist & bech-larsen 2010; larsen 2010; albert & this research aims to define the roots of brand love and answer the question of why out their lovemarks, this end love relationship model. secondly, this research put forwards 30, 2016 22 the possible antecedents brand love. and finally, this study extends the literature by responding albert &merunka’s (2013) further research concern on the roots of brand love. the following section provides a literature review on the concept of brand love and the reasoning of research questions. next, the methodology is explained and the results of analysis are discussed along with the theoretical and managerial implications. the further research considerations are presented last. 2. literature review brand love is defined as “the degree of passionate emotional attachment that a person has for a particular trade name” (caroll & ahuvia, 2006, p. 5). consumers develop an emotional connection with the brands that is beyond brand loyalty. love is a predominant concept since it was the second most commonly listed emotion, superseded only by happiness, when asked to list feelings that were experienced for an emotionally attached object (schultz et al., 1989). our sense of who we are is strongly influenced by the people, and things that we love (ahuvia, 2005). theorists attempted to link the brand love with the interpersonal love based on sternberg’s (1986) triangular theory of love. sternberg's (1986) defines fundamental components of love as (1) intimacy, (2) passion, and (3) decision/commitment. shimp & madden (1988) adapted sternberg’s (1986) triangular theory of love and defined eight types of consumer-object relations: nonliking, liking, infatuation, functionalism, inhibited desire, utilitarianism, succumbed desire, and loyalty. ahuvia (1993), whang et al. (2004) concluded that there were similarities between interpersonal love and brand love. however, albert et al. (2008) argue that love is a complex phenomenon, and choosing any particular theory of interpersonal relationships may be theoretically constraining brand love concept. they defined seven first-order dimensions of brand love (duration, idealization, intimacy, pleasure, dream, memories, unicity) that constitute two second-order dimensions (passion and affection) (albert et al. 2008). in addition to that, batra et al. (2012) highlighted that consumers’ love for a brand should have been differentiated from interpersonal love and they revealed that brand love was constituted by seven dimensions: perceived functional quality; self-related cognitions; positive affect; negative affect; satisfaction; attitude strength; and loyalty. rossiter (2012) provided the c-oar-se method to measure brand love and distinguishing it from brand liking. on the other hand, there are several studies that explored consumer-brand relationship constructs as antecedents and consequences of brand love. the results demonstrate relationships between brand love and sense of community (bergkvist & bech-larsen 2010) brand trust, and brand identification (albert & merunka, 2013; bergkvist and bech-larsen 2010) as antecedents, and brand commitment, (albert & merunka, 2013) positive wom (albert & merunka, 2013; batra et al., 2012; carroll & ahuvia 2006; fournier 1998; thomson et al., 2005), propensity to pay a higher price (albert & merunka, 2013; thomson et al., 2005); resistance to negative information (batra et al., 2012), brand loyalty (batra et al., 2012; bergkvist and bech-larsen 2010), and active engagement (bergkvist and bech-larsen 2010) as consequences.� previous studies used convenience sampling, and collected data via in-dept interviews or self-administered questionnaires. love is a complex emotion and measuring love via selfadministered questionnaires may not cover all the aspect of brand love. in that point, qualitative research and in-depth interviews may generate much richer data. already, the studies used in-depth interviews concluded that brand love is different from interpersonal love. the aim of this research is to explore the roots of brand love by answering the questions of; (1) why do the consumers love brands? (2) are there brand-specific features? (3) are there consumer-specific features? (4) how does brand love develop? by doing so, unlike the other studies, this research relies upon the self brand and their love declarations. 3. methodology 3.1. sampling in the study, as a research methodology, participant observation. ). netnography is defined as “a new qualitative research methodology that adapts ethnographic research techniques to study cult that are emerging through computer stand-alone method of tracking 2002). it provides valuable contributions for the ma the ethnographic approach, first of all, cyber ethnography is a insights about the virtual communities. because the virtual communities have a cultural composition, netnographic resear needs and wants (ward, 1999; catterall circumstances due to its rich qualitative content and the open (kozinets, 2002). the most important decision of netnography is the suitable online communities in cultural entrée stage. which virtual community to choose. these are as follows (kozinets, 2002): • the chosen virtual community should have a research question. • the traffic in the community should be substantial and the number of postings should be high. • the virtual community should have larger numbers of discrete message posters. • it should contain detailed and rich data. • the member contact related with the research subject should be interactive. on the basis of these criterias lovemarks.com is established by saatchi&saatchi of consumers’ lovemark stories brands (apple, google, starbucks, coca cola, toyota and nike) were downloaded on 5 february 2015, and totally 750 ent only they are from different product categories, but also they are on the list of the most valuable brands, have global operations, and have higher postings on the website. 3.2 data analysis the data was analyzed via thematic analysis. thematic analysis analytic method to identify, analyze, and report patterns (themes) within a data set (braun and clarke, 2006). thematic analysis search to the description of the phenomenon ( involves the identification of themes through “careful reading and re (rice & ezzy, 1999, p. 258). it is a form of pattern re emerging themes become the categories for analysis. and thick details. it also interprets various aspects of the research topic (boyatzis, 1998). an specific features? (4) how does brand love develop? by doing so, unlike the other studies, this research relies upon the self-expressions of consumers, their stories with the brand and their love declarations. in the study, as a research methodology, in order to collect data netnography ). netnography is defined as “a new qualitative research methodology that adapts ethnographic research techniques to study cultures and communities that are emerging through computer-mediated communications” (kozinets, 1998: 366). it is a of tracking marketing-related behavior of virtual communities (kozinets, 2002). it provides valuable contributions for the marketing and consumer behavior. as part of the ethnographic approach, first of all, cyber ethnography is a method well suited to gaining insights about the virtual communities. because the virtual communities have a cultural nographic research provides a deeper understanding of behavior, habits, needs and wants (ward, 1999; catterall & maclaran, 2001). also it is adaptable to a variety of circumstances due to its rich qualitative content and the open-endedness o the most important decision of netnography is the identification of the in cultural entrée stage. there are five basic criteria in deciding which virtual community to choose. these are as follows (kozinets, 2002): irtual community should have a focused segment related the traffic in the community should be substantial and the number of postings the virtual community should have larger numbers of discrete message posters. it should contain detailed and rich data. the member contact related with the research subject should be interactive. basis of these criterias lovemarks.com website is chosen as subject to research. is established by saatchi&saatchi and includes the conversations and shares f consumers’ lovemark stories. in the study, the consumers’ statements and stories about six brands (apple, google, starbucks, coca cola, toyota and nike) were downloaded on 5 february 2015, and totally 750 entries were analyzed. these brands are chosen because not only they are from different product categories, but also they are on the list of the most valuable brands, have global operations, and have higher postings on the the data was analyzed via thematic analysis. thematic analysis is a widely used qualitative analytic method to identify, analyze, and report patterns (themes) within a data set (braun and thematic analysis searches for themes, which are emerged to the description of the phenomenon (fereday & muir-cochrane, 2008 involves the identification of themes through “careful reading and re-reading of the data” (rice & ezzy, 1999, p. 258). it is a form of pattern recognition within the data, where emerging themes become the categories for analysis. it helps to describe the data set in rich and thick details. it also interprets various aspects of the research topic (boyatzis, 1998). an 23 specific features? (4) how does brand love develop? by doing so, unlike the other expressions of consumers, their stories with the netnography is used via non). netnography is defined as “a new qualitative research ures and communities mediated communications” (kozinets, 1998: 366). it is a related behavior of virtual communities (kozinets, rketing and consumer behavior. as part of method well suited to gaining insights about the virtual communities. because the virtual communities have a cultural ch provides a deeper understanding of behavior, habits, maclaran, 2001). also it is adaptable to a variety of endedness of its findings identification of the there are five basic criteria in deciding which virtual community to choose. these are as follows (kozinets, 2002): focused segment related with the the traffic in the community should be substantial and the number of postings the virtual community should have larger numbers of discrete message posters. the member contact related with the research subject should be interactive. is chosen as subject to research. and includes the conversations and shares . in the study, the consumers’ statements and stories about six brands (apple, google, starbucks, coca cola, toyota and nike) were downloaded on 5-8 ries were analyzed. these brands are chosen because not only they are from different product categories, but also they are on the list of the most valuable brands, have global operations, and have higher postings on the lovemarks.com a widely used qualitative analytic method to identify, analyze, and report patterns (themes) within a data set (braun and as being important , 2008). the process reading of the data” cognition within the data, where it helps to describe the data set in rich and thick details. it also interprets various aspects of the research topic (boyatzis, 1998). an 24 inductive approach is implemented in coding. inductive approach is data-driven and includes “a process of coding the data without trying to fit it into a pre-existing coding frame, or the researcher’s analytic preconceptions (braun & clarke, 2006, p. 12). hierarchical coding was used in order to reach high-order themes. in hierarchical organization of codes, with groups of similar codes clustered together to produce more general higher-order codes. hierarchical coding allows the researcher to analyze texts at varying levels of specificity (king, 2004). themes are defined as units derived from patterns such as “conversation topics, vocabulary, recurring activities, meanings, feelings, or folk sayings and proverbs” (taylor & bogdan, 1989, p.131). themes that emerge from the informants' stories are pieced together to form a comprehensive picture of their collective experience. the "coherence of ideas rests with the analyst who has rigorously studied how different ideas or components fit together in a meaningful way when linked together" (leininger, 1985, p. 60). 4. research findings 4.1. brand-specific features a brand is formed by different functions, concepts, and characteristics that are named as brand assets from the consumers' perspective (park et al., 2013). an emotional bond develops if a brand helps to achieve one’s goals, in other words, the instrumental role of brands are important in the emerging process of personal connection and emotional bond between brands and consumers (park et al., 2006). this findings of this research also supports the previous literature on that brand love is not an unconditional love, and in that sense, it differs from interpersonal love. in this study, five brand-specific features are defined as affecting brand love: (1) functional congruity, (2) satisfaction, (3) brand trust, (4) brand passion and (5) sensory experiences. functional congruity: functional congruity is defined as “the match between the consumer’s beliefs about brand utilitarian attributes (performance) and the consumer’s referent attributes” (sirgy & johar, 1999 p.252). the referent attributes are used as criteria to evaluate the actual performance of the brand. in this study, love statements in relation with six different brands highlighted that, consumers impressed by the functional features of the brands. these brands are described as high quality, make life easier, comfortable, taste great, user-friendly, functions well, run smoothly, long-lasting, in sum, best and great. park et al. (2013) state that attachment occurs if and when a brand can serve the consumers’ needs effectively through reliable functional performance. since the consumers see these brands as being beyond their expectations, it was proposed that (p1) functional congruity positively affects brand love. satisfaction: satisfaction is a major outcome of marketing activities and serves to link purchase and consumption with post-purchase phenomena such as attitude change, repurchases, and brand loyalty (churchill & surprenant, 1982). it is conceptualized within the context of relationship marketing rather than transactional marketing (sheth & parvatiyar, 1994; hennig-thurau & klee, 1997). consumers declared that they are satisfied with their beloved brands: my macbook pro featuring my imac, just unbeatable! google is simply the best search engine i ever used. the feeling when you drink an ice, cold coke from that traditional curvy glass bottle on a steaming hot day is one of those things you never forget or fail to appreciate. my whole body relaxes as that caramel-like sweetness hits my tongue and is followed by that wonderfully pleasant burn as it hits the back of my throat and is finally welcomed by my stomach as it quenches my thirst. that my friends, is satisfaction. therefore second proposition is stated that brand trust: brand trust is composed of affective perceptions about the brand (elliott yannopoulou, 2007) as well as cognitive beliefs (delgado brand trust beliefs include expectations of brand reliability, consistency, competence, and/or predictability of performance. the emotional elements leading to brand trust include expectations of brand integrity, honest delgado-ballester et al., 2003). in general, the consumers think those brands are reliable, and trustworthy, and they are never disappointed by them. my first car was a pontiac firebird and it even had the nerve to do so at a drive through atm on payday friday. i ditched it and my father gave me the old beatup toyota minivan that was older than the pontiac with no air conditioning. in florida a car with no air is like a sauna multiplied by an oven. that toyota ran, rarely broke down and was an absolute godsend. it was efficient on gas and it was just such a great car. when i saved up enough i got a new car... a toyota tundra. built to be great cars and they seldom disappoint. nike is a very high quality sports br with nike and never want to use another brand. if you truy nike, you will not be disappointed. 3 words that can describe this product are classy, elegant and highly disappoint you, but apple will never let you down. i recommend apple over any other product so that, it was stated that (p3) b brand passion: brand passion is an intense feeling of consumers toward the brand (bauer et al., 2007; thomson et al presence of the brand in the consumer's mind and the idealization of the brand (albert 2008). within that context, it is a psychological construct that comprised of excitatio infatuation, and obsession for a brand (albert statements displayed that those brands became a part of their life; they could not think how they can live without them, because without them, they feel incomplete, oh my god, this computer [macbook air] is a piece of art. i can't think of using something else. i feel that it's soooo sexy and soooo attractive. the way you hold everything in soo attractive. i can't live without starbucks green tea latte. it is my all time favourite beverage! i can't find anything better than starbucks. i'm in love!. when you buy coffee from starbucks, you are not only buying an ordinary beverage but also experiencing the passion, loyalty, and personality of the brand. google is the most important thing in my life. i can't live without it. google means everything to me. i can`t live without coke… i don`t have the words to describe the emotion of drinking a coke… cold! i have beautiful memories when i was part of coke`s creative team at mccann ike sweetness hits my tongue and is followed by that wonderfully pleasant burn as it hits the back of my throat and is finally welcomed by my stomach as it quenches my thirst. that my friends, is satisfaction. therefore second proposition is stated that (p2) satisfaction positively affects brand love. brand trust is composed of affective perceptions about the brand (elliott yannopoulou, 2007) as well as cognitive beliefs (delgado-ballester et al. de expectations of brand reliability, consistency, competence, and/or predictability of performance. the emotional elements leading to brand trust include expectations of brand integrity, honesty, and/or benevolence (becerra & ., 2003). in general, the consumers think those brands are reliable, and trustworthy, and they are never disappointed by them. my first car was a pontiac firebird used. that thing broke down whenever it had a chance e to do so at a drive through atm on payday friday. i ditched it and my father gave me the old beatup toyota minivan that was older than the pontiac with no air conditioning. in florida a car with no air is like a sauna multiplied by an oven. that toyota an, rarely broke down and was an absolute godsend. it was efficient on gas and it was just such a great car. when i saved up enough i got a new car... a toyota tundra. built to be great cars and they seldom disappoint. nike is a very high quality sports brand which is also quite prestigious. i have fallen in love with nike and never want to use another brand. if you truy nike, you will not be 3 words that can describe this product are classy, elegant and highly-qualified. love can ou, but apple will never let you down. i recommend apple over any other (p3) brand trust positively affects brand love. brand passion is an intense feeling of consumers toward the brand (bauer et al., 2005). brand passion encompasses two components: the presence of the brand in the consumer's mind and the idealization of the brand (albert 2008). within that context, it is a psychological construct that comprised of excitatio infatuation, and obsession for a brand (albert et al., 2013). in this study, consumers’ statements displayed that those brands became a part of their life; they could not think how they can live without them, because without them, they feel incomplete, and anxious. oh my god, this computer [macbook air] is a piece of art. i can't think of using something else. i feel that it's soooo sexy and soooo attractive. the way you hold everything in i can't live without starbucks green tea latte. it is my all time favourite beverage! i can't find anything better than starbucks. i'm in love!. when you buy coffee from starbucks, you are not only buying an ordinary beverage but also ion, loyalty, and personality of the brand. google is the most important thing in my life. i can't live without it. google means i can`t live without coke… i don`t have the words to describe the emotion of drinking a autiful memories when i was part of coke`s creative team at mccann 25 ike sweetness hits my tongue and is followed by that wonderfully pleasant burn as it hits the back of my throat and is finally welcomed by my stomach as it atisfaction positively affects brand love. brand trust is composed of affective perceptions about the brand (elliott & et al., 2003). cognitive de expectations of brand reliability, consistency, competence, and/or predictability of performance. the emotional elements leading to brand trust include korgaonkar, 2011; ., 2003). in general, the consumers think those brands are reliable, and used. that thing broke down whenever it had a chance e to do so at a drive through atm on payday friday. i ditched it and my father gave me the old beatup toyota minivan that was older than the pontiac with no air conditioning. in florida a car with no air is like a sauna multiplied by an oven. that toyota an, rarely broke down and was an absolute godsend. it was efficient on gas and it was just such a great car. when i saved up enough i got a new car... a toyota tundra. built to be and which is also quite prestigious. i have fallen in love with nike and never want to use another brand. if you truy nike, you will not be qualified. love can ou, but apple will never let you down. i recommend apple over any other brand passion is an intense feeling of consumers toward the brand (bauer ., 2005). brand passion encompasses two components: the presence of the brand in the consumer's mind and the idealization of the brand (albert et al., 2008). within that context, it is a psychological construct that comprised of excitation, ., 2013). in this study, consumers’ statements displayed that those brands became a part of their life; they could not think how and anxious. oh my god, this computer [macbook air] is a piece of art. i can't think of using something else. i feel that it's soooo sexy and soooo attractive. the way you hold everything in it is i can't live without starbucks green tea latte. it is my all time favourite beverage! i can't find when you buy coffee from starbucks, you are not only buying an ordinary beverage but also google is the most important thing in my life. i can't live without it. google means i can`t live without coke… i don`t have the words to describe the emotion of drinking a autiful memories when i was part of coke`s creative team at mccann26 erickson chile. i think constantly about having a coke… all the people in the world just think about having a coke. therefore, it was proposed that (p4) brand passion positively affects brand love. sensory experiences: any combination of sensory experiences (i.e. visual, auditory, gustatory, tactile, olfactory, thermal, equilabratory, and/or kinesthetic) can deliver pleasure and alter mood (park et al., 2013). consumer-brand engagement is derived from hedonic elements as multi-sensory contact, astonishment, amusement and aesthetic pleasure (hirschman & holbrook 1982). consumers explain their love relationship is developed on the multi-sensory experiences and pleasure. the 2005 camry le especially spells driving pleasure behind wheels, leather upholstery, sleek dashboard and comfy interior et al gives you a breathless experience as you waltz through a blaze of air. what a piece of machine! cozy, classy and calming are the things i am looking for in a coffee place. starbucks has it all! it is the place i want to be; it is my comfort zone. the smell of coffee relaxes and inspires me every time. starbucks is the place i go to for a 5-minute vacation from a hectic day. .....managing and working with windows was what i did back then, and to come home and sit in front of my mac was a pure pleasure, and it still is.... hence, it was suggested that (p5) sensory experiences positively affect brand love. 4.2. consumer-related factors in this study, two main consumer-related characteristics are defined as affecting brand love relationship: self-congruity and personalized experiences. self-congruity: self-concept is the sum of characteristics, traits, and memberships that cognitively represent an individual in memory (greenwald & pratkanis, 1984). an attachment object becomes connected to the self when it is included as part of the consumer’s selfconcept (park et al., 2013). previous researches demonstrate that individuals use products to create and communicate their self�concepts (belk, 1988; wallendorf & arnould, 1988). self congruity is a psychological process in which the consumer focuses on the brand user image and compares this image to his/her self-concept. nike is not just a sports brand, nike is a life-style. to me, nike means personal achievement and self-improvement. .....i have tried many shoes but i think nike is the best. i feel very cool everytime i wear nike shoes. ....i'm a proud owner of a macbook pro and i can only say that i had never fallen in love with a computer. therefore, it was suggested that (p6) self-congruity positively affects brand love. personalized experience is derived from three resources: parental influence, usage duration, and trying once. consumers, especially for toyota, coca cola and apple, grown up by seeing their parents use them. that evokes past experiences, and memories. moreover, some of the consumers stated they use those brand for a long time, like a marriage, those brands became a part of their everyday life. and they claim that once you try, you get addicted. apple has been in my home for over 20 years. when macs first came out, my mom had o and i still remember the lady's voice that would shout random comments. ....the day i owned a mac of my own, i felt like i could take over the world. coca cola has been a permanent companion in my life. i remember when i was a small child and lived in ukraine i used to go to the coast of black sea every summer. that's where my dad bought me the first bottle of coke. i think about and still remember the sensation of a new, delicious taste when i had my first sip of coke. after that, no matter where i go world coke is always there, like a good friend from who you know what to expect. my first nike shoe was the white and lazer blue air max 90, the following year i was walking on air with my black and infrared jordan 6. fast forward to 2014, a quarte century later, here i am still kicking the same old, yet new release retro jordan and air max. what can i say, those exciting childhood memories of opening still sticks with me to this day so that, it was proposed that 5. conclusions the objective of this study was to explore the antecedents and consequences of brand love. 750 entries of consumer statements about their lovemarks (apple, starbucks, coca cola, nike, toyota and google) were analyzed via inductive thematic analysis and a brand love relationship model was proposed. the antecedents of brand love are clustered under two main groups: brand and consumer-related factors. brand brand trust, brand passion and sensory experiences, brand love is affected by the like some forms of interpersonal love features (batra et al., 2012). consistent with the findings of batra statements not a single consumer made an unconditional love claim. those loved brands are described as being the “best” and “great”. consumers perceive congruence between their performance specifications and brands’ performances. therefore functional congruity is proposed as affecting brand love. satisfaction is another feature that the brands should provide. satis context of disconfirmation experience, where dis expectations. consumers declare obviously their satisfaction. carroll & ahuvia (2006) defined brand love “as the degree of passionate for a particular trade name”. moreover, t of a feeling of satisfaction relationship with these brands, and they claim they will never change that brand indicates brand loyalty. brands also should be trustworthy relational marketing because trust is involved in highly valued relationships 2013). consumer express that those brands “never let them down” or “never disappoint them”. brand love is in the air if there is fall “[...] truly, madly, deeply in love with products a they are passionate about them; they get a quasi brands became a part of their everyday life. and they claim that once you try, you get apple has been in my home for over 20 years. when macs first came out, my mom had o and i still remember the lady's voice that would shout random comments. ....the day i owned a mac of my own, i felt like i could take over the world. coca cola has been a permanent companion in my life. i remember when i was a small child ukraine i used to go to the coast of black sea every summer. that's where my dad bought me the first bottle of coke. i think about and still remember the sensation of a new, delicious taste when i had my first sip of coke. after that, no matter where i go world coke is always there, like a good friend from who you know what to expect. my first nike shoe was the white and lazer blue air max 90, the following year i was walking on air with my black and infrared jordan 6. fast forward to 2014, a quarte century later, here i am still kicking the same old, yet new release retro jordan and air max. what can i say, those exciting childhood memories of opening-up a fresh new nike box still sticks with me to this day so that, it was proposed that (p7) personalized experiences positively affect brand love. objective of this study was to explore the antecedents and consequences of brand love. 750 entries of consumer statements about their lovemarks (apple, starbucks, coca cola, and google) were analyzed via inductive thematic analysis and a brand love relationship model was proposed. the antecedents of brand love are clustered under two main groups: brand related factors. brand –related factors are functional congruity, satisfaction, and sensory experiences, and positively affect brand love. brand love is affected by the functional congruity. brand love is not an unconditional love forms of interpersonal love. instead, loved brands were praised for having best ., 2012). consistent with the findings of batra et al statements not a single consumer made an unconditional love claim. those loved brands are “best” and “great”. consumers perceive congruence between their performance specifications and brands’ performances. therefore functional congruity is proposed as affecting brand love. is another feature that the brands should provide. satisfaction ion experience, where disconfirmation is related to the person's initial consumers declare obviously their satisfaction. carroll & ahuvia (2006) as the degree of passionate emotional attachment a satisfied consumer has moreover, the duration of the relationship suggests the existence of a feeling of satisfaction (albert et al., 2008). consumers mention their long rands, and they claim they will never change that brand trustworthy. trust is an important antecedent o keting because trust is involved in highly valued relationships consumer express that those brands “never let them down” or “never disappoint brand love is in the air if there is passion. brown (1998, p. 794) suggests consumers do fall “[...] truly, madly, deeply in love with products and services. they have to have them; they are passionate about them; they get a quasi-erotic charge from examining, exhibit 27 brands became a part of their everyday life. and they claim that once you try, you get apple has been in my home for over 20 years. when macs first came out, my mom had one. and i still remember the lady's voice that would shout random comments. ....the day i owned coca cola has been a permanent companion in my life. i remember when i was a small child ukraine i used to go to the coast of black sea every summer. that's where my dad bought me the first bottle of coke. i think about and still remember the sensation of a new, delicious taste when i had my first sip of coke. after that, no matter where i go in the world coke is always there, like a good friend from who you know what to expect. my first nike shoe was the white and lazer blue air max 90, the following year i was walking on air with my black and infrared jordan 6. fast forward to 2014, a quartercentury later, here i am still kicking the same old, yet new release retro jordan and air up a fresh new nike box nalized experiences positively affect brand love. objective of this study was to explore the antecedents and consequences of brand love. 750 entries of consumer statements about their lovemarks (apple, starbucks, coca cola, and google) were analyzed via inductive thematic analysis and a brand love the antecedents of brand love are clustered under two main groups: brand-related factors functional congruity, satisfaction, positively affect brand love. brand love is not an unconditional love sed for having best et al., (2012), in the statements not a single consumer made an unconditional love claim. those loved brands are “best” and “great”. consumers perceive congruence between their performance specifications and brands’ performances. therefore functional congruity is faction is defined in the confirmation is related to the person's initial consumers declare obviously their satisfaction. carroll & ahuvia (2006) emotional attachment a satisfied consumer has he duration of the relationship suggests the existence ., 2008). consumers mention their long-lasting rands, and they claim they will never change that brandthat also trust is an important antecedent of commitment in keting because trust is involved in highly valued relationships (albert et al., consumer express that those brands “never let them down” or “never disappoint brown (1998, p. 794) suggests consumers do nd services. they have to have them; erotic charge from examining, exhibiting and 28 expending money on them”. in consumer behavior literature, brand passion is conceptualized as a part of brand love (batra et al., 2012; albert et al., 2008; thomson et al., 2005). the analysis in the study put forward that consumers not only feel love towards brands but passion also. they stated that they cannot live without that brand. consumers mention those brands as “him/her”, and use “my” to declare possession, and express their lifetime attachment. those brands are not just brands, but their soul mates. and lastly, brands should build sensory experiences. people do not desire products but satisfying experiences (holbrook, 1994). albert et al., (2008) put forward that love is linked to positive emotions, including pleasure. this study also confirms that brand love is derived from multi-sensory experiences and pleasure. the love relationship between consumers and brands is also affected by the consumerspecific factors, such as self-congruity and personalized experiences. brands help consumers to attain selfand social-oriented goals (fournier, 1998), and that derives strong attachment between the brand and the consumer (grisaffe & nguyen, 2011). in other words, consumers purchase products not only for the utilitarian benefits but also for self-expressive benefits (park et al., 1986). in this study the analysis displayed that consumers perceive beloved brands are cool and prestigious, and they express that they feel confident, stylish, high class, prestigious, and sophisticated. they also stated that they are proud owners. in the love statements it is also seen that consumers have personalized experiences. those brands are also used by their parents and make them remember their childhood (especially for apple, toyota and coca cola). in addition to that, consumers themselves have some memories in relation with those brands. they are using them for a long time and they describe them as a life partner with whom they shared good times and get through bad times. as a consequence, this study generates a higher-order brand love relationship model based on the consumers’ statements about their beloved brands and contributes to the literature by defining brand and consumer-related roots of brand love. this study has several limitations. the main limitation of the study is that the findings rely upon the love statements written by consumers online in relation with six brands. for further research, including other brands and product categories could enable to make comparisons and it is believed that would provide thick and deeper insights on brand love. moreover, in the study the propositions stated in relation with the inductive thematic analysis and should be tested quantitatively for further generalizability. acknowledgments the author thanks to galatasaray university scientific research projects commission for the support provided (research project no. 13.102.003) references 1. ahuvia, a.c. 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(2004). falling in love with a product: the structure of a romantic consumer–product relationship. advances in consumer research , 31, 320–327. 4 _15-10_ raimi international journal of responsible investment (ri): an alternative funding option for roads-bridges management in nigeria under the public received: may 26, 2014 tolling is an age long revenue collection system institutionalised accumulating funds required for roads and bridges construction, maintenance and management. in spite of the merits of tolling as a major source of revenue in nigeria, it was abruptly abrogated by the government few years ago beca governance, endemic corruption and lack of probity. the purpose of this paper is to make a case for responsible investment as an alternative funding mechanism for roads management (rbm) in nigeria under a publ paper adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the numerical and non-numerical data were crit by tables and figures. the first finding indicates there are enormous potentials in tolls collection from privately funded roads and bridges for responsible investors in nigeria under the ppp framework. the second finding identifies eight (8) ppp typologies that could be explored by investors under government’s new tolling policy. the paper concludes that the success of any tolls collection systems depend largely on effectiveness of governance, probity and accountability, which are core elements of responsible investment in the contemporary times. keywords: responsible investment; public nigeria. international journal of economic behavior, vol 5, n. 1, pp international journal of economic behavior, 5, n. 1, pp. 3-14, 201 responsible investment (ri): an alternative funding option for bridges management in nigeria under the public-private partnership framework lukman raimi leicester business school, de montfort university adeniyi olubunmi fadipe yaba college of technology, yaba lagos, nigeria morufu oladimeji shokunbi yaba college of technology, yaba lagos, nigeria accepted: august 27, 2014 online published: abstract tolling is an age long revenue collection system institutionalised by public authorities for accumulating funds required for roads and bridges construction, maintenance and management. in spite of the merits of tolling as a major source of revenue in nigeria, it was abruptly abrogated by the government few years ago because of reasons linked to ineffective governance, endemic corruption and lack of probity. the purpose of this paper is to make a case for responsible investment as an alternative funding mechanism for roads management (rbm) in nigeria under a public-private partnership (ppp) framework. the paper adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the numerical data were critically analysed using content analysis enriched by tables and figures. the first finding indicates there are enormous potentials in tolls collection from privately funded roads and bridges for responsible investors in nigeria under second finding identifies eight (8) ppp typologies that could be explored by investors under government’s new tolling policy. the paper concludes that the success of any tolls collection systems depend largely on effectiveness of governance, probity ccountability, which are core elements of responsible investment in the contemporary responsible investment; public-private partnership; roads-bridges managemen international journal of economic behavior, vol 5, n. 1, pp. 43-57 43 14, 201 responsible investment (ri): an alternative funding option for bridges management in nigeria private partnership framework lukman raimi de montfort university, uk adeniyi olubunmi fadipe technology, yaba lagos, nigeria morufu oladimeji shokunbi yaba college of technology, yaba lagos, nigeria online published: april 10, 2015 by public authorities for accumulating funds required for roads and bridges construction, maintenance and management. in spite of the merits of tolling as a major source of revenue in nigeria, it was use of reasons linked to ineffective governance, endemic corruption and lack of probity. the purpose of this paper is to make a case for responsible investment as an alternative funding mechanism for roads-bridges private partnership (ppp) framework. the paper adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the ically analysed using content analysis enriched by tables and figures. the first finding indicates there are enormous potentials in tolls collection from privately funded roads and bridges for responsible investors in nigeria under second finding identifies eight (8) ppp typologies that could be explored by investors under government’s new tolling policy. the paper concludes that the success of any tolls collection systems depend largely on effectiveness of governance, probity ccountability, which are core elements of responsible investment in the contemporary bridges management; 57, 2015 44 1. introduction roads and bridges are key infrastructural facilities required for an efficient transport system, and they are good measurements of regional economic development (chi and waugaman, 2010; federal ministry of works, 2013). also, it has been observed that communities and geographical areas surrounded by roads and bridges experienced fast regional, industrial, environmental and residential development than areas lacking these infrastructural facilities (parasibu, 2005). in view of the importance of roads and bridges to nation-building and urbanisation, immediately after independence, the federal government of nigeria gave high priority to the construction of roads and bridges in the nation’s economic development plans and blueprints. the commitment to road development in nigeria is manifest in the first and second national development plans, which made provision for construction of feeder roads and bridge key priorities to enhance effective transportation of people and goods (salawu et al., 2006). furthermore, the third and fourth national development plans earmarked substantial budget for the construction of more roads in the rural and urban communities as well as jetties for riverine communities for smooth movement of people and agricultural produce across the country (akhuemonkhan et al., 2012; olowookere, 2012; raimi et al., 2014). the construction of roads and highways was also a major project of the babangida’s administration, which established the directorate of food, roads and rural infrastructure (dfrri) as a scheme that brought relief to farmers through infrastructural development which boosted agricultural production in nigeria (iwuchukwu and igbokwe, 2012; raimi et al., 2014). in the same vein, the 7-point agenda of the yar’adua administration underscored transport sector development with emphasis on road as a major priority (dung-gwom, 2010; dode, 2010). the present administration of goodluck ebele jonathan has equally made roads development and rehabilitation an important segment of its transformation agenda; the regime is credited with rehabilitation of a number of roads and bridges across the country (transformation watch, 2013). the total road network in nigeria is estimated at about 200,000km, which are owned and managed by the three levels of governments disproportionately. the federal government controls 17% of the road networks (over 34,000km), the thirty-six (36) states owns and controls 16%; while the local governments own and control 67% of the entire road networks (yuguda, 2013). the need for a sustainable management of nigerian roads and highways led to the erection of traditional barrier-type tollgates for tolls collection; the proceeds therefrom are reinvested for further construction of new roads/bridges and maintenance of existing ones (leba, 2010; madunagu, 2012 and ugeh, 2013). operation of traditional barrier-type tollgates for maintenance of roads in nigeria worked effectively at inception, but the tolling system in nigeria was rendered ineffective by public servants as a result of corruption, revenue leakages and unmet maintenance of the tolled roads and bridges. consequently, it was cancelled in 2004 by the regime of president olusegun obasanjo under the guise of proving a palliative measure for cushioning the burden of 5% increment in the pump price of petroleum products introduced by the government (leba, 2010). in the recent times however, dwindling fortunes of the federal government and the deteriorating conditions of roads and bridges nationwide, necessitated the proposed reintroduction of tolls by the policymakers as a realistic funding option for fixing roads and highways sustainably. as at 2010 fiscal year, the sum of n1 trillion was estimated as costs required to fix roads nationwide (leba, 2010). in the same vein, the cost of construction of federal roads and bridges from 2010 to 2013 fiscal years was estimated at n32 trillion international journal of (us$2214.4 billion); and by design, the federal government, state & local governments and private-sector investors were respectively (ugeh, 2013). this funding option was viewed by policymakers as unsustainable in the face of several projects competing for government’s attention. another reason for rethinking tolling success recorded by the lagos state government on its private collection and management of roads along ajah axis and the growing acceptance of public private partnership (ppp) model as contemporary times (madunagu, 2012). unlike the traditional tolling system managed by the government, the proposed new tolling system under public designed to provide the country with a sustainable strategy for managing its network of roads and bridges for the benefit of all stakeholders (njoku and adegboye, 2013). in a bid to convince nigerians further on the desirability of tolli ppp experiment, the federal ministry of works (fmw) developed a policy document entitled: ‘green paper: federal roads and bridges tolling policy for nigeria’. (federal ministry of works, 2013). the green paper provides justificatio a viable private sector intervention designed to fund sustainably the nation’s roads and bridges. the private sector investors judging by their antecedents are believed possess the exposure, technology and professional comp recover cost of construction, rehabilitation, financing, maintenance and operation of tolled roads and highways (ugeh, 2013; njoku and adegboye, 2013). from the above overview, the purpose of this paper investment (ri) as an alternative funding option for roads under the public-private partnership framework. in specific terms, the paper unveils the socio-economic merits of tolling for roa putting in proper perspective the various ppp options opened to the responsible investors under the newly proposed tolling policy. the two main research questions that this paper seeks to ask are: rq1: are there socio-economic merits behind the reintroduction of tolling for roads bridges management in nigeria? rq2: what are the tolling options available to responsible investors under the ppp frameworks? the entire paper has a total of f rationale across the ages. part ii focuses on conceptual issues and review of literature from scholarly works responsible investment, ppp framework and tolling research method and analyses the socio-economic merits of tolling under the ppp framework and the models of tolling available to responsible investors under ppp framework. part iv c implication for further research, conclusion and recommendations 2. conceptual issues and review of literature 2.1. responsible investment responsible investment (ri) or social responsible investment (sri) has emerged in the global business environment as another investment definitions in the management literature, but could simply be defined as international journal of economic behavior, 5, n. 1, pp. 3-14, 201 (us$2214.4 billion); and by design, the federal government, state & local governments and sector investors were to contribute n10 trillion, n9 trillion and n13 trillion respectively (ugeh, 2013). this funding option was viewed by policymakers as unsustainable in the face of several projects competing for government’s attention. another reason for rethinking tolling in nigeria is not unconnected with the monumental success recorded by the lagos state government on its private-sector managed tolls collection and management of roads along ajah axis and the growing acceptance of public private partnership (ppp) model as a viable strategy for infrastructural management in the contemporary times (madunagu, 2012). unlike the traditional tolling system managed by the government, the proposed new tolling system under public-private partnership (ppp) is country with a sustainable strategy for managing its network of roads and bridges for the benefit of all stakeholders government, businesses and communities (njoku and adegboye, 2013). in a bid to convince nigerians further on the desirability of tolling and leveraging on the ppp experiment, the federal ministry of works (fmw) developed a policy document entitled: ‘green paper: federal roads and bridges tolling policy for nigeria’. (federal ministry of works, 2013). the green paper provides justification for reintroduction of tolls as a viable private sector intervention designed to fund sustainably the nation’s roads and bridges. the private sector investors judging by their antecedents are believed possess the exposure, technology and professional competence to generate sufficient revenue from tolls to recover cost of construction, rehabilitation, financing, maintenance and operation of tolled roads and highways (ugeh, 2013; njoku and adegboye, 2013). from the above overview, the purpose of this paper is to explore prospect of responsible investment (ri) as an alternative funding option for roads-bridges management in nigeria private partnership framework. in specific terms, the paper unveils the economic merits of tolling for roads-bridges management in nigeria with a view to putting in proper perspective the various ppp options opened to the responsible investors under the newly proposed tolling policy. the two main research questions that this paper economic merits behind the reintroduction of tolling for roads bridges management in nigeria? what are the tolling options available to responsible investors under the ppp entire paper has a total of four (4) parts. part i provides a highlight on tolling and its part ii focuses on conceptual issues and review of literature from scholarly works responsible investment, ppp framework and tolling. research method and analyses the numeric and non-numeric data from which findings on the economic merits of tolling under the ppp framework and the models of tolling available to responsible investors under ppp framework. part iv concludes with s summary of research, conclusion and recommendations. conceptual issues and review of literature responsible investment (ri) or social responsible investment (sri) has emerged in the global business environment as another investment strategy. ri attracts a number of definitions in the management literature, but could simply be defined as 45 14, 201 (us$2214.4 billion); and by design, the federal government, state & local governments and to contribute n10 trillion, n9 trillion and n13 trillion respectively (ugeh, 2013). this funding option was viewed by policymakers as unsustainable in nigeria is not unconnected with the monumental sector managed tolls collection and management of roads along ajah axis and the growing acceptance of public a viable strategy for infrastructural management in the contemporary times (madunagu, 2012). unlike the traditional tolling system managed by the private partnership (ppp) is country with a sustainable strategy for managing its network of roads government, businesses and communities ng and leveraging on the ppp experiment, the federal ministry of works (fmw) developed a policy document entitled: ‘green paper: federal roads and bridges tolling policy for nigeria’. (federal n for reintroduction of tolls as a viable private sector intervention designed to fund sustainably the nation’s roads and bridges. the private sector investors judging by their antecedents are believed possess the etence to generate sufficient revenue from tolls to recover cost of construction, rehabilitation, financing, maintenance and operation of tolled is to explore prospect of responsible bridges management in nigeria private partnership framework. in specific terms, the paper unveils the bridges management in nigeria with a view to putting in proper perspective the various ppp options opened to the responsible investors under the newly proposed tolling policy. the two main research questions that this paper economic merits behind the reintroduction of tolling for roadswhat are the tolling options available to responsible investors under the ppp i provides a highlight on tolling and its part ii focuses on conceptual issues and review of literature from . part iii states the numeric data from which findings on the economic merits of tolling under the ppp framework and the models of tolling available oncludes with s summary of responsible investment (ri) or social responsible investment (sri) has emerged in the strategy. ri attracts a number of definitions in the management literature, but could simply be defined as “an investment 46 process that seeks to achieve social and environmental objectives alongside financial objectives” (mercer investment consulting, 2007:10). in other words, ri is a deliberate and conscious decisions by the investing public or ethical investors to put their investments (usually pension or other life earnings) into corporations that demonstrate commitment to responsible business practices, or those whose products and services are socially, humanly and environmentally friendly such as investing in renewable energy sector, public utilities, shunning problematic corporations such ammunition manufacturing firms, alcoholics and tobacco as well as rogue multinational corporations.. from another lenses, ri represents an investment focus of “integrating environmental, social and governance (esg) factors into … investment processes [which is believed would] help to improve risk-adjusted financial return” (lake, 2007:3). however, karch (2007) notes that ri transcends ethical issue with regards to investment; it includes efficiency in managing investment. efficiency when linked to ri entails sustainability, security and improvement of investment strategies deployed for fund management. ri gain global acceptance with international institutions like ilo, un, oecd et cetera. in particular, the united nations principles for responsible investment (2007:81) state that member countries and corporations “believe that environmental, social, and corporate governance (esg) issues can affect the performance of investment portfolios” as well as the choice of investment decisions. put differently, the scope of ri covers ethics, environment, governance, social aspects, economics, labour rights, international and national norms (goy, 2013). the thrust of ri is the avoidance of investments that the members of the public are averse to, or deemed ethically unacceptable and socially irresponsible (boersch, 2010; goy, 2013). it could therefore be concluded that ri matches investments with ethical values and long-term impact in the business environment. empirical survey reveals that ri is driven more by social wellness and welfare which are expectations greatly influenced by public pressure than expectation of higher returns or lower risk (boersch, 2010). on the strength of this definition, the deteriorating conditions of nigerian roads and bridges qualify for responsible investment. 2.2. public-private partnership the public-private-partnership (ppp) model finds theoretical groundings in the theory of privatization. the first basis of ppp is to promote greater allocative and productive efficiency. the second basis is to strengthen the role of the private sector to play greater role in the economy. the third rationale of ppp framework is to improve government revenue base or financial health leveraging on private sector funding. the fourth basis is to enable the public authority directs its scarce resources to other important areas of governance competing for attention (sheshinski and lópez-calva, 2003:2). several scholars argued that when publicly owned enterprises (poes) are fully or partially privatized in the forms of ppp, concessioning, joint-venture et cetera, they tend to manifest operational efficiency, greater profitability and improved access to capital for investment purposes. such privatized enterprises have also recorded increased output at lower cost overtime; they have also been able to create more employment opportunities for people and generation of greater revenue for government’s treasury (megginson and netter, 2001; kareem, 2010; raimi et al., 2013). besides, privatisation leads to reduction in public spending when viewed against the experience of the united kingdom where privatisation of electricity resulted in a permanent five (5) percent annual reduction in the cost of providing electricity service (newbery and pollitt 1997:269). in addition, it has also been confirmed that privatisation, whether full or partial leads to an increase in profitability of enterprises as well as increase in productivity of such enterprises (sheshinski and lópez-calva, 2003). international journal of the sustainable economic benefits roads-bridges management in nigeria. in the nigeria transport sector spanned over 14 years; it was effectively applied to revam nation’s ports under the concessioning agreement (kruk, 2008; raimi et al. 2013). nigeria’s former minister of transport, private sector because of dwindling government revenue and experti specifically, the former minister canvassed support for ppp because “maintenance of… transport infrastructure and services usually require huge financial outlay. government alone cannot provide all the resources required….it is economica expedient to encourage private sector participation in the key areas that are hitherto commonly regarded as social services. this is also in consonance with contemporary practice all over the world, of shifting emphasis from gov (agbakoba, 2001:6). official data as shown in table 1 and 2 provide further justification for the views above. in table 1, the share of construction expenditure among other expenditure heads under economic services from 2000 recurrent expenditure on construction (gdp) from 1961-2011 shows that funding roads solely by the government is unsustainable and require private-sector cooperation indicated that from 2011 to 2012, the sum of n120 billion was expended on roads development and rehabilitation 2.3. toll/tolling tolling is an age long revenue collection s construction and maintenance for over 2,700 years (gilliet, 1990). toll collection appeared in the works of aristotle as a common revenue base in nations like india and times, england introduced tolls on roads in the 14 recouping the costs of construction and maintenance of highway ( from revenue source for government, the public (madunagu, 2012). et al., 2006); and has since then become acceptable user fees which guarantee stable and sustainable streams of revenue for the maintenance of road and highways (forkenbrock, 2004). table 1 – federal government recurrent expenditure on economic services function/year 2000 agriculture 6,335.78 16,325.60 construction 4,991.09 17,914.96 transport & communication 3,034.68 8,041.30 other services 14,230.37 22,025.16 total 28,591.93 64,307.02 source: federal republic of nigeria official gazettes, cbn (2010) international journal of economic behavior, 5, n. 1, pp. 3-14, 201 e economic benefits of ppp necessitated the call for its adoption in the bridges management in nigeria. it is instructive to note that application of ppp model in the nigeria transport sector spanned over 14 years; it was effectively applied to revam nation’s ports under the concessioning agreement (kruk, 2008; raimi et al. 2013). nigeria’s former minister of transport, underscored the need for collaborative relationship with the private sector because of dwindling government revenue and expertise (chikwe, 2000). specifically, the former minister canvassed support for ppp because “maintenance of… transport infrastructure and services usually require huge financial outlay. government alone cannot provide all the resources required….it is economically prudent and financially expedient to encourage private sector participation in the key areas that are hitherto commonly regarded as social services. this is also in consonance with contemporary practice all over the world, of shifting emphasis from government driven to private driven economy” official data as shown in table 1 and 2 provide further justification for the views above. in table 1, the share of construction expenditure among other expenditure heads under s from 2000-2010 has been rising overtime. furthermore, the recurrent expenditure on construction in table 2 vis-à-vis the nation’s gross domestic product shows that funding roads solely by the government is unsustainable sector cooperation (chikwe, 2000; cbn, 2011). another official report indicated that from 2011 to 2012, the sum of n120 billion was expended on roads development and rehabilitation in nigeria (ibya, 2013). revenue collection system (toll) adopted by many civilizations for roads construction and maintenance for over 2,700 years (gilliet, 1990). toll collection appeared in the works of aristotle as a common practice in the classical era for boosting the revenue base in nations like india and roman empire (munroe, et al., 2006). in the modern times, england introduced tolls on roads in the 14th century as a form of tax for the purpose of f construction and maintenance of highway (bernstein, 2010). from revenue source for government, tolling provides avenue for job creation for members of adunagu, 2012). tolls started in lancaster, united states in the 1790s (munroe, l., 2006); and has since then become acceptable user fees which guarantee stable and sustainable streams of revenue for the maintenance of road and highways (forkenbrock, federal government recurrent expenditure on economic services 2005 2006 2007 2008 economic services 16,325.60 17,900.00 32,500.00 65,400.00 22,440.00 17,914.96 20,100.00 71,300.00 94,500.00 80,630.00 8,041.30 9,800.00 32,200.00 67,400.00 90,030.00 22,025.16 31,900.00 43,100.00 86,500.00 124,100.00 64,307.02 67,801.78 83,518.19 313,800.00 317,200.00 source: federal republic of nigeria official gazettes, cbn (2010) 47 14, 201 necessitated the call for its adoption in the it is instructive to note that application of ppp model in the nigeria transport sector spanned over 14 years; it was effectively applied to revamp that nation’s ports under the concessioning agreement (kruk, 2008; raimi et al. 2013). nigeria’s underscored the need for collaborative relationship with the se (chikwe, 2000). specifically, the former minister canvassed support for ppp because “maintenance of… transport infrastructure and services usually require huge financial outlay. government alone lly prudent and financially expedient to encourage private sector participation in the key areas that are hitherto commonly regarded as social services. this is also in consonance with contemporary practice ernment driven to private driven economy” official data as shown in table 1 and 2 provide further justification for the views above. in table 1, the share of construction expenditure among other expenditure heads under 2010 has been rising overtime. furthermore, the rising vis the nation’s gross domestic product shows that funding roads solely by the government is unsustainable another official report indicated that from 2011 to 2012, the sum of n120 billion was expended on roads civilizations for roads construction and maintenance for over 2,700 years (gilliet, 1990). toll collection had long practice in the classical era for boosting the roman empire (munroe, et al., 2006). in the modern century as a form of tax for the purpose of bernstein, 2010). apart enue for job creation for members of tolls started in lancaster, united states in the 1790s (munroe, l., 2006); and has since then become acceptable user fees which guarantee stable and sustainable streams of revenue for the maintenance of road and highways (forkenbrock, federal government recurrent expenditure on economic services 2009 2010 22,440.00 29,560.00 80,630.00 138,050.00 90,030.00 178,700.00 124,100.00 238,680.00 317,200.00 584,990.00 48 table 2 – federal government recurrent expenditure on construction year construction n million gdp n million 1961 0.59 2,361.20 1965 25.29 3,110.00 1970 14.28 5,205.10 1975 31.97 20,957.00 1980 46.03 49,632.30 1985 151.11 70,633.20 1990 643.40 271,908.00 1995 1,699.10 1,934,831.00 2000 4,991.09 4,727,523.00 2001 7,202.04 5,374.335.00 2002 7,452.14 6,232.244.00 2003 16,951.37 6,061.700.00 2004 14,897.01 11,411,067.00 2005 17,914.96 15,610,882.00 2006 20,100.00 18,564,595.00 2007 71,300.00 20,657.317.00 2008 94,500.00 24,296,329.00 2009 80,630.00 24,794,238.00 2010 138,050.00 29,205,782.00 2011 195,900.00 33,994,612.00 sources: federal republic of nigeria official gazettes, cbn (1961-2011) ] the roads on which tolls are collected are called toll roads, turnpikes, tollbooths, tollhouses and tollways (gilliet, 1990; jenkinson and taylor, 2010). toll is conceived as a medium for recouping the cost of building of roads and provides sustainable means for managing the roads, as well as avenue for job creation for the citizenry ((madunagu, 2012). besides, tolls is preferred irrespective of country because they have lower evasion rate compared to income taxes; it is relatively cost effective for government and payers; tolls ensure privacy of payers and its implementation process is easy and convenient for all stakeholders (peters et al., 2006). forkenbrock (2004) argued that tolls have become acceptable user fees which guarantee stable and sustainable streams of revenue for maintenance of road and highway system. as notable as the policy of tolling is for national development, roth (1998) noted that it suffers a lot of criticisms. one, it requires vehicle owners to slow down, thereby wasting the time of vehicle owners and building up operating costs of vehicles. two, it is at times uneconomical because the cost of tolls collection could be as much as one-third of revenues because of the problem of probity and revenue theft. three, where toll-free roads coexist with tolled roads, the latter becomes useless as people utilise the free toll roads. tolled roads with the aid of electronic sensors track for monitoring the movement of cars constitute infringement on the freedom and privacy of road users. in spite of all the criticisms levelled against tolling, it still offers governments across the world a convenient template for recouping and generating further funding for roads, bridges and other transport infrastructural projects. toll collection systems are many and diverse in the transport literature. the major typologies of tolls collection systems include: (a) manual toll collection (b) mechanical coin collection (c) traditional barrier electronic toll collection, (d) slow speed electronic toll international journal of collection (e) high speed electronic toll kramer, 2005; peters et al., 2006). explanations of the distinctions between typologies are discussed hereunder. a) manual toll collection system (mtcs): cash or coin by human beings at designated tollgates or booths. it is the commonest toll system across developing countries and few industrialized nations. the major disadvantages of the manual tolling system are the requirement for vehicles to be at complete halt to make payments; the slow processing time; huge wage bills of human collectors; monitoring cash to avoid revenue leakages; and the impact of pollution from deceleration and reacceleration of vehicles b) mechanical coin collection system (mccs): collection system refers to the collection of tolls at tollbooths using automated counting machine programmed to accepts highway authority the automated machines collect tolls faster than human toll collectors and are able to process tolls at faster rate than the humans. the main setback of this system is that it to fully decelerate and require drivers to insert coins or tokens before speeding off. c) traditional barrier electronic toll collection system (tbecs): tolling system that allows collection of tolls at tollboot lift gate that allows passage of vehicles after meanwhile, its major disadvantage is that the cost of administration is high because it requires complete halt for processing of ch d) slow speed electronic toll collection system (ssetcs): system in use in several industrialized nations. this system allows collection of tolls at speed that is less than the normal road speed of collection system, a data reader is mounted at strategic area at tollgates which process electronic collection of tolls while the vehicles slow down as low as 5 to 15 miles per hour speed after which they are allowed to leave the toll facility. it has a higher processing speed than the traditional barrier electronic toll collection system. the ssetcs attends to as much as 1200 vehicles per hour. e) high speed electronic toll collection system (hsetcs): electronic tolling system which allows collection of tolls at full highway speed without stopping by the tollbooths. for the tollbooths, but toll collection readers are mounted on processing of tolls at full highway speeds. this is the best toll collection system in several industrialized nations because of convenience for drivers, cost effectiveness of toll collection, minimal labour cost and capability to process at least 2200 vehicles per hour. 2.4. relationships between tolling, ri and ppp the relationship between tolling, ri and ppp is complementary. in the face of dwindling public funding of roads and bridges, other viable funding options by figure 1. for individuals who favour ethical investment that would improve quality of life of the citizens in developing nations with infrastructural deficit, the option of ri is very attractive. however, for investors who see development with good return on investment, the option of ppp finds relevance. international journal of economic behavior, 5, n. 1, pp. 3-14, 201 high speed electronic toll collection (peters and kramer, 2003; et al., 2006). explanations of the distinctions between typologies are discussed hereunder. manual toll collection system (mtcs): this refers to the collection of tolls manually in cash or coin by human beings at designated tollgates or booths. it is the commonest toll system across developing countries and few industrialized nations. the major disadvantages stem are the requirement for vehicles to be at complete halt to make payments; the slow processing time; huge wage bills of human collectors; to avoid revenue leakages; the generally slow speed, high compliance cost; act of pollution from deceleration and reacceleration of vehicles mechanical coin collection system (mccs): unlike the first type, the mechanical coin system refers to the collection of tolls at tollbooths using automated counting accepts highway authority-specific tokens or exact coin transactions the automated machines collect tolls faster than human toll collectors and are able to process tolls at faster rate than the humans. the main setback of this system is that it to fully decelerate and require drivers to insert coins or tokens before speeding off. traditional barrier electronic toll collection system (tbecs): this refers to an electronic tolling system that allows collection of tolls at tollbooths through an electronically operated lift gate that allows passage of vehicles after the users’ accounts have been charged. meanwhile, its major disadvantage is that the cost of administration is high because it requires complete halt for processing of charges to forestall mistakes. slow speed electronic toll collection system (ssetcs): this is an electronic tolling system in use in several industrialized nations. this system allows collection of tolls at speed that is less than the normal road speed of vehicles. for the operation of slow speed electronic collection system, a data reader is mounted at strategic area at tollgates which process electronic collection of tolls while the vehicles slow down as low as 5 to 15 miles per hour y are allowed to leave the toll facility. it has a higher processing speed than the traditional barrier electronic toll collection system. the ssetcs attends to as much high speed electronic toll collection system (hsetcs): this is another variant of electronic tolling system which allows collection of tolls at full highway speed without stopping by the tollbooths. for the high speed electronic collection system, there are no tollbooths, but toll collection readers are mounted on erected gantries which facilitate processing of tolls at full highway speeds. this is the best toll collection system in several industrialized nations because of convenience for drivers, cost effectiveness of toll collection, bility to process at least 2200 vehicles per hour. relationships between tolling, ri and ppp the relationship between tolling, ri and ppp is complementary. in the face of dwindling public funding of roads and bridges, other viable funding options are ri and ppp . for individuals who favour ethical investment that would improve quality of life of the citizens in developing nations with infrastructural deficit, the option of ri is very attractive. however, for investors who seek joint venture businesses in infrastructural development with good return on investment, the option of ppp finds relevance. 49 14, 201 and kramer, 2003; peters and et al., 2006). explanations of the distinctions between the various toll this refers to the collection of tolls manually in cash or coin by human beings at designated tollgates or booths. it is the commonest toll system across developing countries and few industrialized nations. the major disadvantages stem are the requirement for vehicles to be at complete halt to make payments; the slow processing time; huge wage bills of human collectors; the cost of the generally slow speed, high compliance cost; act of pollution from deceleration and reacceleration of vehicles. unlike the first type, the mechanical coin system refers to the collection of tolls at tollbooths using automated counting specific tokens or exact coin transactions. the automated machines collect tolls faster than human toll collectors and are able to process tolls at faster rate than the humans. the main setback of this system is that it requires vehicles to fully decelerate and require drivers to insert coins or tokens before speeding off. this refers to an electronic electronically operated the users’ accounts have been charged. meanwhile, its major disadvantage is that the cost of administration is high because it requires this is an electronic tolling system in use in several industrialized nations. this system allows collection of tolls at speed slow speed electronic collection system, a data reader is mounted at strategic area at tollgates which process electronic collection of tolls while the vehicles slow down as low as 5 to 15 miles per hour y are allowed to leave the toll facility. it has a higher processing speed than the traditional barrier electronic toll collection system. the ssetcs attends to as much is another variant of electronic tolling system which allows collection of tolls at full highway speed without high speed electronic collection system, there are no erected gantries which facilitate processing of tolls at full highway speeds. this is the best toll collection system in several industrialized nations because of convenience for drivers, cost effectiveness of toll collection, bility to process at least 2200 vehicles per hour. the relationship between tolling, ri and ppp is complementary. in the face of dwindling are ri and ppp as depicted . for individuals who favour ethical investment that would improve quality of life of the citizens in developing nations with infrastructural deficit, the option of ri is very k joint venture businesses in infrastructural development with good return on investment, the option of ppp finds relevance. 50 figure 1 – the relationship between tolling, ri and ppp source: authors 3. methods & materials this research adopts a qualitative research method, adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the non-numerical data were critically analysed using content analysis enriched by tables and figures on the basis of which insightful findings on the subject were established. 3.1. results/findings and discussion the summary of findings arisi discussed below. 3.2. socio-economic merits of tolling for roads sustainability with regards to nigeria, the new tolling system has greater socio foremost, it shall be based on ppp framework, designed as a joint venture partnership between federal government and private sector individuals. secondly, reintr certain roads and bridges in nigeria is believed would create massive jobs for nigerians (madunagu, 2012). besides, it is believed in policy circles that tolling policy under the ppp model has the inherent potential of attracting forei responsible investors into the country thereby creating massive investment opportunities as well as acting as catalyst for the growth of the private sector (ugeh, 2013). for prospective local and foreign investors, tables 3, for responsible investment under the ppp model across nigeria. analysts note that tolling is a pragmatic means of boosting government revenue required for developing, building, managing and maintain 2013). secondly, it is stated that, when road projects are financed through tolls collection it would serve as viable strategy for recouping the cost of the road projects over a period of time (munroe et al., 2006). considering the fact that tolls are invested on roads development, its collection facilitates better mobility of vehicles as well as provides reliable finance for transportation investment (chi and waugaman, 2010). ri the relationship between tolling, ri and ppp methods & materials this research adopts a qualitative research method, relying on inductive approach. adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the numerical data were critically analysed using content analysis enriched by tables and figures on the basis of which insightful findings on the subject were established. results/findings and discussion the summary of findings arising from the analysis of the numeric and non economic merits of tolling for roads sustainability with regards to nigeria, the new tolling system has greater socio-economic benefits. first and foremost, it shall be based on ppp framework, designed as a joint venture partnership between federal government and private sector individuals. secondly, reintroduction of tolls on certain roads and bridges in nigeria is believed would create massive jobs for nigerians adunagu, 2012). besides, it is believed in policy circles that tolling policy under the ppp model has the inherent potential of attracting foreign direct investment (fdi) from responsible investors into the country thereby creating massive investment opportunities as well as acting as catalyst for the growth of the private sector (ugeh, 2013). for prospective local and foreign investors, tables 3, 4 and 5 provide highlight on roads and bridges available for responsible investment under the ppp model across nigeria. analysts note that tolling is a pragmatic means of boosting government revenue required for developing, building, managing and maintaining roads and bridges (njoku and adegboye, 2013). secondly, it is stated that, when road projects are financed through tolls collection it would serve as viable strategy for recouping the cost of the road projects over a period of time ). considering the fact that tolls are invested on roads development, its collection facilitates better mobility of vehicles as well as provides reliable finance for transportation investment (chi and waugaman, 2010). ppp tolling relying on inductive approach. the paper adopts a discursive approach, relying on government policy documents, journal articles, online resources, working papers and reports on tolling best practices. the numerical and numerical data were critically analysed using content analysis enriched by tables and figures on the basis of which insightful findings on the subject were established. ng from the analysis of the numeric and non-numeric data are economic benefits. first and foremost, it shall be based on ppp framework, designed as a joint venture partnership between oduction of tolls on certain roads and bridges in nigeria is believed would create massive jobs for nigerians adunagu, 2012). besides, it is believed in policy circles that tolling policy under the ppp gn direct investment (fdi) from responsible investors into the country thereby creating massive investment opportunities as well as acting as catalyst for the growth of the private sector (ugeh, 2013). for prospective 4 and 5 provide highlight on roads and bridges available analysts note that tolling is a pragmatic means of boosting government revenue required ing roads and bridges (njoku and adegboye, 2013). secondly, it is stated that, when road projects are financed through tolls collection it would serve as viable strategy for recouping the cost of the road projects over a period of time ). considering the fact that tolls are invested on roads development, its collection facilitates better mobility of vehicles as well as provides reliable finance for tolling international journal of table 3 – ongoing ppp highway projects sn roads/bridges 1 reconstruction & expansion of lagos ibadan expressway 2 guto – bagana bridge across benue river ppp projects under procurement 1 construction of 2nd niger bridge at asaba onitsha 2 access road to murtala mohammed int airport (mmia) road, ikeja 3 construction of bridge over river niger at nupeko, niger state source: federal ministry of work in yuguda (2013:22) table 4 – proposed ppp highway projects with ongoing feasibility/viability studies sn roads/bridges 1 bodo-bonny road to link bodo to the island of bonny in rivers state 2 dualizat. of ilorin-jebba 3 dualization of keffi-akwanga makurdi road 4 dualization of lokoja-ajaokuta enugu (9th mile) road 5 dualization of akwanga 6 dualization of enugu ( 9 – makurdi road 7 dualization of owerri – 8 phase i : 2nd lagos outer ring road: tin can island – igando lagos/otta road and lagos/ibadan expressway 9 phase ii : 2nd lagos outer ring road i) lekki-epe expressway linking existing lekki-epe expressway/ deep sea port ii) 5th mainland bridge 10 golden triangle (economic) highways source: federal ministry of work in yuguda (2013 international journal of economic behavior, 5, n. 1, pp. 3-14, 201 ppp highway projects roads/bridges distance reconstruction & expansion of lagos – 126km newly awarded on epc basis. o & m concession awarded. bagana bridge across benue river 1.35km bridge & 65km road concession is being reviewed & will be awarded. ppp projects under procurement niger bridge at asaba 2km newly awarded access road to murtala mohammed intern. airport (mmia) road, ikeja, lagos 2.8km award of concession in progress construction of bridge over river niger at 950m obc development phase in progress. source: federal ministry of work in yuguda (2013:22) ppp highway projects with ongoing feasibility/viability studies roads/bridges distance bonny road to link bodo to the island of bonny in rivers state 39 km outline business cases (obc) studies in progress jebba-mokwa-kaduna rd 597 km obc ready akwanga-lafia215 km obc ready ajaokuta-ogbulafo 238 km obc is being carried out dualization of akwanga-jos road 145 km obc is being carried out dualization of enugu ( 9th mile ) – otukpo 261 km obc is being carried out. – aba road 60 km obc is being carried out. lagos outer ring road: tin can lagos/otta road and lagos/ibadan expressway 74 km obc is ready lagos outer ring road epe expressway linking existing epe expressway/proposed lekki 25 km road: 20 km bridge: 5k m consultancy for feasibility studies ongoing golden triangle (economic) highways various (5000km) consultants will be appointed to carry out feasibility studies source: federal ministry of work in yuguda (2013;27) 51 14, 201 remarks newly awarded on epc basis. o & m concession to be awarded. concession is being reviewed & will be awarded. newly awarded award of concession in progress obc development phase in progress. ppp highway projects with ongoing feasibility/viability studies remarks outline business cases studies in progress obc ready obc ready obc is being carried out obc is being carried out obc is being carried out. obc is being carried out. obc is ready consultancy for feasibility studies ongoing consultants will be appointed to carry out feasibility studies for best actualization 52 table 5 – proposed ppp highway projects with outline business cases (obc) sn roads/bridges distance remarks 1 enugu – port harcourt dual carriageway 210km outline business cases (obc) development in progress. 2 lagos – iseyin – kishi – kaiama road 414km obc development in progress. 3 kiama – bahama – kaoje – gwambu – fokku – sokoto road 631km obc development in progress 4 construction of bridge over river benue at buruku, benue state 1km obc development in progress 5 construction of bridge over river benue at ibi along shendam wukari road 880m obc development in progress source: federal ministry of work in yuguda (2013:23) 3.3. tolling and ppp models the prevalent ppp models that responsible investors could adopt which has records of success across the globe with reasonable level of success include: build-and-transfer (bt), buildlease-transfer (blt), lease-operate-transfer (lot), build-operate-and-transfer (bot), build-own-operate-transfer (boot), build-own-operate (boo), build-operate-sharetransfer (bost) and build-own-operate-share-transfer (boost) (agbakoba, 2001; infrastructure development department, 2009; raimi et al., 2013). in-depth explanation of each of the ten models is presented below (figure 2). a) build-and-transfer (bt): this is a contractual arrangement where the public-private partners (as an entity) undertakes the financing and construction of roads and bridges as the case may be, and after its completion turns it over to the government, which pays the private sector investors based on mutually agreed timeline. bt allows the investors to retrieve the total investments expended on roads and bridges, plus a reasonable rate of return to compensate them for their efforts. b) build-lease-and-transfer (blt): this is a ppp arrangement whereby the public authority authorizes private sector investors to finance and construct roads and bridges and upon their completion, the government grant a lease arrangement for fixed period after which ownership of the roads and bridges are automatically transferred back to the government. c) lease-operate-transfer (lot): this is another ppp arrangement where existing road and bridges are handed over to qualified private sector operators for a determined period as leased facility. the investors run the roads recouping their returns on investments as tolls. the financial returns on the roads to the government later on would be in the form of rents or royalties. at the expiration of the lot agreement, the tolled roads are returned to the government. d) build operate and transfer (bot): this is a ppp arrangement where the private sector investors undertake the construction and financing of roads, operation and maintenance thereof on the basis of a contractual agreement with the government authority. the private sector investors then operate the roads over a specified period during which they international journal of are allowed to charge appropriate tolls the costs of investment with reasonable returns from the project. e) build-own-operate-and-transfer (boot): private sector investors undertake operation and maintenance over a specified the facility is finally transferred, at no cost to the government. during the period the private investors technically tolls for recouping the costs of investment, operational maintenance of profit. f) build-own-and-operate (boo): sector investors are authorized maintain roads or bridges of construction and maintenance. in this model of ppp, the private sectors own and operate the infrastructure with making tr g) build-operate-share-transfer (bost): government authorizes private investors to finance, construct, operate and maintain, share the revenue collected from roads government at the end of the contractual period. the bost agreement like other model allows the private sector investors to recover their total costs of investment plus reasonable returns thereon h) build-own-operate-share private sector investors are share a part of the revenue the roads infrastructure at th sector investor leeway to recover its total investment, operating and maintenance costs plus a reasonable return thereon by collecting tolls. figure 2 –eight ppp models source: authors. bos international journal of economic behavior, 5, n. 1, pp. 3-14, 201 appropriate tolls as stipulated in the contract to ena investment with reasonable returns from the project. transfer (boot): this is another ppp arrangement undertake as usual the tasks of roads construction, financing, peration and maintenance over a specified period of time. at the period of expiration, the facility is finally transferred, at no cost to the government. during the private investors technically owns the roads and operate the roads recouping the costs of investment, operational maintenance and operate (boo): this is a contractual arrangement whereby a privat authorized by government to finance, construct, own, operate and from which the they are allowed to charge tolls in order to costs of construction and maintenance. in this model of ppp, the private sectors own and operate the infrastructure with making transfer to government. transfer (bost): this is a contractual arrangement where public government authorizes private investors to finance, construct, operate and maintain, share from roads as tolls with government and transfer the roads to government at the end of the contractual period. the bost agreement like other model allows the private sector investors to recover their total costs of investment plus reasonable returns thereon. share-transfer (boost): in this type of ppp arrangement, the s are authorized to finance, construct, own, operate and maintain, share a part of the revenue collected on tolled roads with government and then transfer infrastructure at the end of the agreed period. the boost model allows private sector investor leeway to recover its total investment, operating and maintenance costs rn thereon by collecting tolls. models bt blt lot bot boot boo bost boost 53 14, 201 as stipulated in the contract to enable them recover arrangement, where the construction, financing, . at the period of expiration, the facility is finally transferred, at no cost to the government. during the contractual the roads and operate the roads charging and desirable margin this is a contractual arrangement whereby a private to finance, construct, own, operate and they are allowed to charge tolls in order to costs of construction and maintenance. in this model of ppp, the private sectors own and this is a contractual arrangement where public government authorizes private investors to finance, construct, operate and maintain, share and transfer the roads to government at the end of the contractual period. the bost agreement like other model allows the private sector investors to recover their total costs of investment plus in this type of ppp arrangement, the authorized to finance, construct, own, operate and maintain, with government and then transfer e end of the agreed period. the boost model allows private sector investor leeway to recover its total investment, operating and maintenance costs 54 4. conclusions, policy recommendations and implications for further research the conclusions from this study are largely based on the qualitative analysis and assessment of the numerical and non-numerical data. the findings indicate that private sector tolling (especially the electronic tolls collection system) has the potential of providing the needed sustainable funding for roads construction, maintenance and management in nigeria in the face of dwindling public funding for roads. secondly, it has been proven that tolling is a viable measure for stimulating massive employment for the citizens. besides, tolled roads have the potentials of accelerating urbanisation, fast regional, industrial, environmental and residential development. in order to optimize the benefits of tolling as discussed earlier, the following recommendations are suggested. i. the private sector tolling agreement on roads/bridges built on ppp agreement should be based on infrastructure concession regulatory commission act (2005), unido guidelines for infrastructure development on build operate transfer (bot) projects (1996) and other international protocols on ppp and ir. the global best practices for ppp and ri must be followed because there are scandals that followed previous privatisation and concessioning agreements in nigeria. ii. for tolling investment to be genuinely responsible, it is suggested that investments should be based on core principles and best practices as contained in the european commission guidelines for successful public-private partnerships, 2003; european commission green paper on public-private partnerships and community law on public contracts and concessions, 2004. iii. the federal government should create an enabling and competitive business environment for attracting responsible investors (locally and internationally). this suggestion is hinged on the presumption that political stability, security and respect for rule of law are critical factors that influences investment decision at individual, corporate and governmental levels. iv. both the political leadership and the implementers of nigeria’s tolling policy should avoid the mistake of the past especially ports concessioning, privatization policy and other government development policies. v. the federal ministry of works should set up an effective monitoring and evaluation process for implementing the tolling policy programme in nigeria. in other word, due process must be followed at every stage of the implementation of the ppp framework. vi. government and its agencies should study the implications of tolling on the residential communities, ordinary people and the host communities to avert the crisis experience of ajah tolls in lagos state, which has a pending court case. the next stage of this research is to subject the qualitative findings to empirical testing. for this to be achieved a survey especially the use of structured questionnaires is required for eliciting the opinions of end-users and policymakers on the proposed reintroduction of tolling in nigeria under the ppp framework. the present findings and the outcomes of the proposed empirical study shall be compared on the basis of 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for example, ‘face’ represents the interpersonal relationship between the individual and groups in asian society. on the other hand, from a europea may represent stronger personal self and assertion. in this paper the contributing factors to ‘face concept’ of bangladeshi female consumers in their pre, actual and post-purchase behaviour of cosmetics products compa consumers. a structured questionnaire survey was conducted among female bengali consumers in the capital city of dhaka in bangladesh and female british consumers in southwest london in the united kingdom. concept and its impact on decision making process of female consumers in the uk and the bangladesh by using factor analysis. five factors were extracted from factor analysis: ‘thoughts in cosmetics’, ‘brand link to social recognition and prestig authority in society’, ‘group conformity’ and ‘personal process of the five factors that the extracted components were not exactly the same for both bangladesh and the united kingdom keywords: national culture; consumer behaviour; face concept; collectivistic/ individualistic culture; group conformity; decision 1. introduction in cross-cultural research, concept of face has been studied largely in east asian context. however there has been very little study relating to ‘face’ and consumption behaviour in international journal of economic behavior, vol prevalence of ‘face concept’ among south asian consumers a comparative study of unfolding the facets in decision making process of buying beauty products shahina pervin dublin city university, ireland accepted: november 27, 2015 online published: abstract the focus of this paper is to explore the level of importance of the term ‘face concept’, transfer in their purchase decision of beauty products. the author differences in the consumption behaviour of highly collectivists bangladeshi consumers’ compare to the highly individualistic uk consumers. concept of face is acknowledged every culture. however, the term ‘face’ is characterised differently according to one’s cultural setting; for example, ‘face’ represents the interpersonal relationship between the individual and groups in asian society. on the other hand, from a europea may represent stronger personal self and assertion. in this paper the author the contributing factors to ‘face concept’ of bangladeshi female consumers in their pre, purchase behaviour of cosmetics products compared to the british female consumers. a structured questionnaire survey was conducted among female bengali consumers in the capital city of dhaka in bangladesh and female british consumers in southwest london in the united kingdom. the research has compared the degr concept and its impact on decision making process of female consumers in the uk and the bangladesh by using factor analysis. five factors were extracted from factor analysis: ‘thoughts in cosmetics’, ‘brand link to social recognition and prestige’, ‘skin colour link to authority in society’, ‘group conformity’ and ‘personal-self’. it was noticed in the labelling process of the five factors that the extracted components were not exactly the same for both bangladesh and the united kingdom. national culture; consumer behaviour; face concept; collectivistic/ individualistic culture; group conformity; decision-making process; cosmetics purchase cultural research, concept of face has been studied largely in east asian context. however there has been very little study relating to ‘face’ and consumption behaviour in international journal of economic behavior, vol 6, n. 1, pp. 59-71 59 prevalence of ‘face concept’ among south asian consumers. a comparative study of unfolding the facets in decision making process of buying beauty products shahina pervin dublin city university, ireland online published: june 22, 2016 the focus of this paper is to explore the level of importance of the term ‘face concept’, transfer in their purchase decision of beauty products. the author intends to study differences in the consumption behaviour of highly collectivists bangladeshi consumers’ compare to the highly individualistic uk consumers. concept of face is acknowledged in every culture. however, the term ‘face’ is characterised differently according to one’s cultural setting; for example, ‘face’ represents the interpersonal relationship between the individual and groups in asian society. on the other hand, from a european perspective face the author tends to identify the contributing factors to ‘face concept’ of bangladeshi female consumers in their pre, red to the british female consumers. a structured questionnaire survey was conducted among female bengali consumers in the capital city of dhaka in bangladesh and female british consumers in compared the degree of face concept and its impact on decision making process of female consumers in the uk and the bangladesh by using factor analysis. five factors were extracted from factor analysis: e’, ‘skin colour link to self’. it was noticed in the labelling process of the five factors that the extracted components were not exactly the same for both national culture; consumer behaviour; face concept; collectivistic/ making process; cosmetics purchase. cultural research, concept of face has been studied largely in east asian context. however there has been very little study relating to ‘face’ and consumption behaviour in 71, 2016 60 south asian context. although the concept of face is acknowledged in every culture, the term ‘face’ is characterised differently according to one’s cultural setting; for example, in asian society ‘face’ represents the interpersonal relationship between the individual and groups. in china ‘lien’ (moral integrity) and ‘mien-tsu’ (prestige and reputation based on personal effort) are the depictions of face (yau, 1994). there have been several studies addressing face and face-related issues (brown and levingstone, 1987; holtgraves, 1997; kim 1994; leung and chan et al., 2003; schutte and ciarlante, 1998) on negotiation, decision-making and conflict management; however how face influences consumption remains unclear, and its conceptualisation requires further clarification and investigation (li and su, 2007). the concept of face is also important in western society, in the conduct of inter-personal relationships and in cultural development, but perhaps is less obvious and more subtle, appearing to be not important when actually it is (hofstede, 2001). this paper seeks to identify how ‘concept of face’ influences the attitudes of consumers towards the purchase of cosmetics in a cross-country environment. this paper intends to explore the following two objectives: 1. to investigate the nature and influence of ‘concept of face’ among bangladeshi consumers in their purchase decision of buying beauty products. 2. to identify the key factors underpinning the precedence of ‘concept of face’ in consumption behavior between east (bangladesh) and the west (uk, amongst the white british woment). 2. literature review the aim of this literature review is to investigate the cultural elements and to identify the key factors impacting consumers’ preference to choose and purchase beauty products at different stages of their buying decision. bangladesh considers to be one of the 20 markets of the future that will offer the most opportunities for consumer goods companies globally. the country is one of the fastest growing and most promising economies in asia-pacific (euromonitor international, 2012). euromonitor 2012 also reported that, growing disposable income and an expanding urban middle class also bolstered sales of non-essential items. as a result, categories such as beauty and personal care products (cagr 15% over 2009-2013), home care (cagr 12%) and tissue and hygiene (cagr 20%) also performed strongly. this research intends to outline the underlying factors in decision making process of buying cosmetics from a cross-cultural point of view. 2.1. dimensions of culture geert hofstede's cultural dimensions are widely used in international cross-cultural studies, the dimensions model is based on quantitative research and provides scores for 75 countries. hofstede’s (1984, p. 78) cultural dimensions approach is characterised as a national culture in terms of its average pattern of beliefs and values. consequently, countries are divided on the basis of their scores on the five dimensions into cultural areas, and in some cases it is possible to find historical reasons for the cultural differentiation between the areas. hofstede’s (1980, 1984) cultural dimensions model differentiates cultures according to: • power distance (pdi) • individualism/ collectivism (idv) • uncertainty avoidance (uai) • masculinity/ femininity, and (mas) • long term orientation versus short term o • indulgence versus restaint (ind) although hofstede initially proposed the four main cultural dimensions, he later has added another two dimensions, long term vs short term orientation, initially known as confusian dynamism, that describes the time horizon and attach greater importance to the future. the second one is called indulgence versus restaint (ind), the extent to which member of a society try to control their desires and impulses. to briefly define, power distance is the societal acceptance of hierarchy; uncertainty is the cultural tolerance of ambiguity; individualism inter-dependence; and masculinity is the culture's desire for sex fodness and speece, 1993). since this phenomenal beginning, hofstede (1982; 1983a, b, c; 1984a, b, c; 1985; 1987) and others (e.g., mooij, 2003; england, 1983; hortum and muller, 1989; jensen, white, and singh, 1990; kim, park, and suzuki, 1986) have validated and expounded on his initial insights. although hofstede (1980, 1984) proposes five cultural dimensions, the researchers intend to focus on three dimensions, individualism versus collectivism (idv), power and uncertainty avoidance (uai), to identify the relevance of cultural dimensions to consumer purchase behaviour in a cross dimensions of national culture provide excellent variables that can b cross-cultural consumer behaviour. mooij further suggested that together with national wealth hofstede’s cultural dimensions can explain more than half of the differences in consumption and consumer behavior. 2.2. individualism/collectiv the individualism and collectivism dimension at the culture level relates to how one values the individuals relative to the group (gregory and munch, 1996). hofstede (2001, p.210) states: “the relationship between the individual and the collectiv only a matter of ways of living together, it is intimately linked with societal norms (in the sense of value systems of major groups of the population)”. “i” consciousness is central, which art conversely, in a collectivistic society, the “we” term incorporates the identity and harmony with in-group members, and that it is important not to lose ‘face’ (mooij, 2003, p.34). 2.3. power distance index (p according to hofstede (2001), power distance is the extent to which less powerful members of the society accept and expect that power is distributed unequally. hofstede argues that this inequality is usually formalised in boss was derived from the country’s mean score or percentage on three survey questions (hofstede, 2001), which related to the perceptions of subordinates, fear of disagreeing with the superior and of the superior’s actual decision styles that subordinates preferred in their bosses. from the survey it has been found that the ‘power distance norm’ as a value system is held by the majority of a country’s middle class group. hofstede (2001) argues demographic country indicators and consideration of historical factors leads to a suggested casual chain for the origins of national differences. long term orientation versus short term orientation (lto) indulgence versus restaint (ind) although hofstede initially proposed the four main cultural dimensions, he later has added another two dimensions, long term vs short term orientation, initially known as dynamism, that describes the time horizon and attach greater importance to the future. the second one is called indulgence versus restaint (ind), the extent to which member of a society try to control their desires and impulses. define, power distance is the societal acceptance of hierarchy; uncertainty is the cultural tolerance of ambiguity; individualism-collectivism is the societal predilection for dependence; and masculinity is the culture's desire for sex-role different since this phenomenal beginning, hofstede (1982; 1983a, b, c; 1984a, b, c; 1985; 1987) and others (e.g., mooij, 2003; england, 1983; hortum and muller, 1989; jensen, white, and singh, 1990; kim, park, and suzuki, 1990; lebas and weigenstein, 1986) have validated and expounded on his initial insights. although hofstede (1980, 1984) proposes five cultural dimensions, the researchers intend to focus on three dimensions, individualism versus collectivism (idv), power and uncertainty avoidance (uai), to identify the relevance of cultural dimensions to consumer purchase behaviour in a cross-national environment. mooij (2003) stated that dimensions of national culture provide excellent variables that can be employed to analyse cultural consumer behaviour. mooij further suggested that together with national wealth hofstede’s cultural dimensions can explain more than half of the differences in consumption individualism/collectivism (idv) the individualism and collectivism dimension at the culture level relates to how one values the individuals relative to the group (gregory and munch, 1996). hofstede (2001, p.210) “the relationship between the individual and the collectivity in human society is not only a matter of ways of living together, it is intimately linked with societal norms (in the sense of value systems of major groups of the population)”. in an individualistic culture, the “i” consciousness is central, which articulates private opinion and self conversely, in a collectivistic society, the “we” term incorporates the identity and harmony group members, and that it is important not to lose ‘face’ (mooij, 2003, p.34). power distance index (pdi) according to hofstede (2001), power distance is the extent to which less powerful members of the society accept and expect that power is distributed unequally. hofstede argues that this inequality is usually formalised in boss-subordinate relationships. the power distance index was derived from the country’s mean score or percentage on three survey questions (hofstede, 2001), which related to the perceptions of subordinates, fear of disagreeing with the superior and of the superior’s actual decision-making style, and with the decision styles that subordinates preferred in their bosses. from the survey it has been found that the ‘power distance norm’ as a value system is held by the majority of a country’s middle class group. hofstede (2001) argues that the correlation of the pdi with geographic, economic and demographic country indicators and consideration of historical factors leads to a suggested casual chain for the origins of national differences. 61 although hofstede initially proposed the four main cultural dimensions, he later has added another two dimensions, long term vs short term orientation, initially known as dynamism, that describes the time horizon and attach greater importance to the future. the second one is called indulgence versus restaint (ind), the extent to which define, power distance is the societal acceptance of hierarchy; uncertainty is collectivism is the societal predilection for role differentiation (milner, since this phenomenal beginning, hofstede (1982; 1983a, b, c; 1984a, b, c; 1985; 1987) and others (e.g., mooij, 2003; england, 1983; hortum and muller, 1990; lebas and weigenstein, although hofstede (1980, 1984) proposes five cultural dimensions, the researchers intend to focus on three dimensions, individualism versus collectivism (idv), power distance (pdi) and uncertainty avoidance (uai), to identify the relevance of cultural dimensions to national environment. mooij (2003) stated that e employed to analyse cultural consumer behaviour. mooij further suggested that together with national wealth hofstede’s cultural dimensions can explain more than half of the differences in consumption the individualism and collectivism dimension at the culture level relates to how one values the individuals relative to the group (gregory and munch, 1996). hofstede (2001, p.210) ity in human society is not only a matter of ways of living together, it is intimately linked with societal norms (in the in an individualistic culture, the iculates private opinion and self-actualisation. conversely, in a collectivistic society, the “we” term incorporates the identity and harmony group members, and that it is important not to lose ‘face’ (mooij, 2003, p.34). according to hofstede (2001), power distance is the extent to which less powerful members of the society accept and expect that power is distributed unequally. hofstede argues that this . the power distance index was derived from the country’s mean score or percentage on three survey questions (hofstede, 2001), which related to the perceptions of subordinates, fear of disagreeing with ing style, and with the decision-making styles that subordinates preferred in their bosses. from the survey it has been found that the ‘power distance norm’ as a value system is held by the majority of a country’s middle class that the correlation of the pdi with geographic, economic and demographic country indicators and consideration of historical factors leads to a suggested 62 2.4. uncertainty avoidance index (uai) hofstede identifies the degree of uncertainty avoidance in different social contexts. as uncertainty is a basic fact of human life we try to cope with it through the rules of technology, law and religion (hofstede, 2001). uncertainty avoidance is “the extent to which members of a culture feel threatened by uncertain and or unknown situations” (p. 161). hofstede (2001) suggests that uncertainty avoidance should not be confused with risk avoidance (p. 161). in strong uncertainty avoidance cultures people believe that rules and formalities shape living patterns. on the other hand weak uncertainty avoidance cultures feel that there should be as few rules as possible (hofstede, 2001). 3. evaluation of hofstede’s cultural dimensions although hofstede’s cultural dimensions have been criticised on methodological issues and conceptual matters, his work has been applied extensively in the field of business culture. some social scientists (e.g., sampson, 1997; smith 1978; waterman, 1981) have disagreed on if individualism or collectivism is a desirable characteristics of humans, however they have talked past one another as they referred to very different things with terms such as ‘individualism’ and collectivism (hui and triandis, 1986). research efforts based on comparisons between cultural groups at the country level should consider the limitations associated with extending culture-level correlations to individual-level behaviour. hofstede's culture-level measurements are based on the sums of individual characteristics and may have limitations when extended to individual behaviour (e.g., beliefs, evaluations and intentions). many refer to this phenomenon as an ecological fallacy (gregory and munch 1996). beyond these shortcomings, however, hofstede’s research on work-related values in a cross-cultural context does seem applicable to consumptive behaviour in a cross-cultural context (milner, fodness and speece, 1993). schwartz (1996) suggests that in order to better understand how differences between individuals' beliefs, evaluations and intentions are related to individual differences in value priorities, that researchers examine the individual-level value types that underlie the individualism-collectivism construct. 4. consumer behaviour and culture according to zaltman (1983, p.5), “consumer behaviours are acts, processes, and social relationships exhibited by individuals, groups, and organisations in the obtainment, use and consequent experience of products, services and other resources”. “the behaviour that consumers display in searching for, purchasing, using evaluating and disposing of products and services that they expect will satisfy their needs” (schiffman and kanuk, 2004, p. 8). usunier and lee (2005) explain consumer behaviour theory from a variety of perspectives concerning cultural consumer behaviour theory such as a global perspective, an imported perspective, an ethnic consumption perspective and a cultural meaning perspective. bodley (1994) states that culture involves at least three components: what people think, what they do, and the material products they produce. hofstede (1980, p.19) defines culture as the interactive aggregate of common characteristics that influence a group’s response to its environment. hofstede (2005) also describes culture as the collective mental programming that distinguishes the member of one group or category of people from others. usunier (2000) explains the impacts of cultural differences on selected aspects of perception, motivation, learning and memory, age, self-concept and group influences, social class, sex roles, attitude changes, decision making, and purchase and post purchase behaviour. despite the multiplicity of cultures in asia, there are many characteristics that are more or less common across many asian cultures (schutte and ciarlante, 1998). 4.1. fundamental diversity between bengalis and the british schutte and ciarlante (1998) argue that in order to describe asian consumer behaviour accurately we must follow two premises: first, consumer behaviour culture and second, asian culture is distinctly different from western culture. therefore, essential to establish the basic societal and cultural background in which behaviour takes place in order to bring to light the diff bangladesh. from the study of cultural dimensions it is clear that bangladesh belongs to the culture-type that is described as collectivistic whereas the uk belongs to the culture described as individualistic. bangladesh also falls in the category of high pdi and high uai society; on the other hand uk is characterized as low pdi and low uai society. hofstede’s dimensions’ raw scores (figure 1) confirm the differences in culture between bangladesh and the united kingdom. figure-1: differences in culture between bangladesh and the uk (hofstede, 2014) 4.2. the concept of face in bengali culture face represents as an important role in the way a culture pursue its values which can be varied according to different country perspective. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and the conformity to society’s traditional values. in the terms “gain face” or “facethe community and is reliable, dependable and safe to build up a relationship with. on the other hand losing face is referred to as an act of aggre chinese individuals who are collectivistic in nature are mindful about the need to maintain a high degree of moral control, at least publicly, and carefully assess the possible effects of their actions on others before embarking upon a ciarlante, 1998). it has been argued that people in collectivistic cultures are conscious about not losing face; rather they endeavour to gain face for the family through the accumulation of wealth, prestige, status power and fundamental diversity between bengalis and the british schutte and ciarlante (1998) argue that in order to describe asian consumer behaviour accurately we must follow two premises: first, consumer behaviour is strongly influenced by culture and second, asian culture is distinctly different from western culture. therefore, essential to establish the basic societal and cultural background in which behaviour takes place in order to bring to light the differences in consumer behaviour between the uk and bangladesh. from the study of cultural dimensions it is clear that bangladesh belongs to the type that is described as collectivistic whereas the uk belongs to the culture listic. bangladesh also falls in the category of high pdi and high uai society; on the other hand uk is characterized as low pdi and low uai society. hofstede’s dimensions’ raw scores (figure 1) confirm the differences in culture between e united kingdom. 1: differences in culture between bangladesh and the uk (hofstede, 2014) the concept of face in bengali culture face represents as an important role in the way a culture pursue its values which can be varied different country perspective. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and the conformity to society’s traditional values. in -saving” indicate that someone has good social reputation within the community and is reliable, dependable and safe to build up a relationship with. on the other hand losing face is referred to as an act of aggression (yau, 1994). chinese individuals who are collectivistic in nature are mindful about the need to maintain a high degree of moral control, at least publicly, and carefully assess the possible effects of their actions on others before embarking upon a course of action (schutte and ciarlante, 1998). it has been argued that people in collectivistic cultures are conscious about not losing face; rather they endeavour to gain face for the family through the accumulation of wealth, prestige, status power and so on (schutte and ciarlante, 1998). 63 schutte and ciarlante (1998) argue that in order to describe asian consumer behaviour is strongly influenced by culture and second, asian culture is distinctly different from western culture. therefore, it is essential to establish the basic societal and cultural background in which behaviour takes erences in consumer behaviour between the uk and bangladesh. from the study of cultural dimensions it is clear that bangladesh belongs to the type that is described as collectivistic whereas the uk belongs to the culture-type listic. bangladesh also falls in the category of high pdi and high uai society; on the other hand uk is characterized as low pdi and low uai society. hofstede’s dimensions’ raw scores (figure 1) confirm the differences in culture between 1: differences in culture between bangladesh and the uk (hofstede, 2014) face represents as an important role in the way a culture pursue its values which can be varied different country perspective. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and the conformity to society’s traditional values. in asian culture saving” indicate that someone has good social reputation within the community and is reliable, dependable and safe to build up a relationship with. on the chinese individuals who are collectivistic in nature are mindful about the need to maintain a high degree of moral control, at least publicly, and carefully assess the possible course of action (schutte and ciarlante, 1998). it has been argued that people in collectivistic cultures are conscious about not losing face; rather they endeavour to gain face for the family through the accumulation of 64 the concept of face is relatively similar among the asian cultures in terms of family relationship, status priority, and conformity etc. as a part of asia, bangladesh shares the concept of face in the way as do china, india, thailand, and indonesia among others, however, to what extent, may vary. in bengali society ‘mukh’ (face) represents a social mirror in which a person can be observed by his or her performance, relationships and the acceptance within society, as well as level of conformity, and is able to earn admiration as a result. for a collectivistic society, to gain face ‘mukh rakha’, or to lose face ‘mukh harano’ form the essence of life for bengalis because of the control the community has over the individuals. to gain face in bengali culture can be characterised by being honest and educated, and of high rank or social class which consequently provides power and authority in society. loss of face symbolises embarrassment, and shame in bengali society. as a collectivistic society, it is imperative for bengalis to project the right image as being classy, up-market and prestigious by securing the term ‘face-saving’ where bengalis rank high in a power distance society. according to hofstede (1984), in high power distance societies, differences in power are expected to translate into visible differences in status. in contrast, the existing concept of face in bengali culture is likely to be absent in british culture because of its individualistic nature. just as the collectivistic nature of the culture makes bengalis attached to the family and conform to group decisions which is ignored in british culture, preservation of face and loss of face are related to the perception of the individual self in britain. as chiappini and harris (1997) state: “in an individualistic culture individuals are free to choose the image they project to others”. thus the gain of face is not influenced by the desire of society or conformity; rather it is very much independent and controlled by individual aspirations. according to hofstede (1984), in high power distance societies, differences in power are expected to translate into visible differences in status. from the literature review it was established that there are several key factors linked to the ‘concept of face’ in asian culture, such as the status priority and the acquisition of branded goods, kinship and family relationship, attitudes to skin colour, and concept of self. most importantly, the extent of the authority of these factors on the decision making process is dependent on how a society practices its cultural values. for example, in a collectivistic culture with a high power distance society the need for achievement and affiliation is the basis of power. as a collectivistic culture the high level of interdependence among bengali individuals corresponds with lesser personal attachment to material objects and a greater attachment to human beings. indeed the conspicuous consumption may seem to clash with traditional characteristics of asian culture such as pragmatism, collectivism and modesty in self-presentation; however, the explanation lies in the fact that the luxury products symbolise status and face-giving in the asian culture (schutte and ciarlante, 1998). 5. research methodology as mentioned earlier, this paper seeks to identify how ‘concept of face’ influences the attitudes of consumers towards the purchase of cosmetics in a cross-country environment. a questionnaire survey method was selected for data collection. a two country comparison was performed in order to acquire a comprehensive understanding of the perceptions of concept of face. over 300 questionnaires were posted in bangladesh using personal contacts and viral messaging. approximately 1,500 were posted in the uk by using royal mail service. from bangladesh, 150 fully completed questionnaires were returned and 142 from the uk, providing a total viable sample of 292 questionnaires. 5.1. sampling in order to determine a valid sampling frame or a mailing list, the royal mail uk’s address management software was used to select the target population in the hampshire area. in bangladesh a valid postal address book was used to select the target audience mailing list contains millions of addresses, systematic sampling was considered applicable in order to avoid extra costs and time in comparison to simple random sampling. 5.2. research hypothesis a research hypothesis was formulated to test that, influenced by the concept of face variables and scales were constructed to test the hypothesis. 5.3. measurement and scaling procedure according to malhotra (1999) scal objects are located. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and the conformity to society’s traditional values. the 18 statements of face were asked in the questionnaire survey. in order to meet research objective, which aim to explore the perceptions of face concept and its influences on the decision making process of buying cosmetics, the variables and scales were constructed using with 5 (1= strongly agree, 2=agree, 3= neither agree nor disagree, 4= disagree and 5 =strongly disagree). the attitudes towards face concept were simplified and reduced int variables by the factor analysis technique. 5.4. factor analysis there are two primary functions of factor analysis the data and the second is simply to reduce the number of variables. factor analysis procedures attempt to retain as much of the information as possible and make the remaining variables meaningful and easy to work with (field, 2009).according to hamilton (1992), factor analysis provides a basis for combining variables, (p.263). bryman and describe that factor analysis is primarily concerned with “describing the variation or variance which is shared by the scores of people on three or more variables” (p.327). hair et al. (2010) suggest that, in order to examine the underlying variables and determine if the information can be condensed or summarised in smaller set of factors or components, a factor analysis can be utilised (p.233). a factor analysis explains underlying meanings and the correlation among a set of variables (malhotra and birks, 2009). 5.5. kaiser-meyer-olkin measure of sampling adequacy (kmo) the alternative and in fact most popular method of examining the correlation is the meyer-olkin measure of sampling adequacy ( can be calculated for individual and multiple variables and represents the ratio of the squared correlation between variables (field, 2009). the kmo statistics vary between 0 to 1. a value of 0 indicates that the sum of the partial correlation is large relative to the sum of correlation, indicating distribution in the pattern of correlations (thus, the factor analysis is likely to be inappropriate). a value close to 1 indicates that patterns of correlation are rela and so factor analysis yields distinct and reliable factors (kaiser, 1974). hutcheson and sofroniou (1999) recommend accepting that values of kmo greater than 0.5 are barely acceptable, values between 0.5 and 0.7are mediocre, values between values between 0.8 and 0.9 are great and values above 0.9 are excellent. in order to determine a valid sampling frame or a mailing list, the royal mail uk’s address management software was used to select the target population in the hampshire area. in bangladesh a valid postal address book was used to select the target audience mailing list contains millions of addresses, systematic sampling was considered applicable in order to avoid extra costs and time in comparison to simple random sampling. a research hypothesis was formulated to test that, ‘female bengali consumers are more influenced by the concept of face-saving than their female counterparts in the uk. variables and scales were constructed to test the hypothesis. measurement and scaling procedure according to malhotra (1999) scaling involves creating a continuum on which measured objects are located. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and rmity to society’s traditional values. the 18 statements of face were asked in the in order to meet research objective, which aim to explore the perceptions of face concept and its influences on the decision making process of buying cosmetics, the variables and scales were constructed using with 5-scale likert measurement (1= strongly agree, 2=agree, 3= neither agree nor disagree, 4= disagree and 5 =strongly the attitudes towards face concept were simplified and reduced int variables by the factor analysis technique. there are two primary functions of factor analysis – one is to identify underlying constructs in the data and the second is simply to reduce the number of variables. factor analysis procedures attempt to retain as much of the information as possible and make the remaining variables meaningful and easy to work with (field, 2009).according to hamilton (1992), factor analysis provides a basis for combining variables, (p.263). bryman and describe that factor analysis is primarily concerned with “describing the variation or variance which is shared by the scores of people on three or more variables” (p.327). hair et al. (2010) suggest that, in order to examine the underlying pattern or relationship for a large number of variables and determine if the information can be condensed or summarised in smaller set of factors or components, a factor analysis can be utilised (p.233). a factor analysis explains he correlation among a set of variables (malhotra and birks, 2009). olkin measure of sampling adequacy (kmo) the alternative and in fact most popular method of examining the correlation is the olkin measure of sampling adequacy (kmo), developed by kaiser in 1970. the kmo can be calculated for individual and multiple variables and represents the ratio of the squared correlation between variables (field, 2009). the kmo statistics vary between 0 to 1. a value sum of the partial correlation is large relative to the sum of correlation, indicating distribution in the pattern of correlations (thus, the factor analysis is likely to be inappropriate). a value close to 1 indicates that patterns of correlation are rela and so factor analysis yields distinct and reliable factors (kaiser, 1974). hutcheson and sofroniou (1999) recommend accepting that values of kmo greater than 0.5 are barely acceptable, values between 0.5 and 0.7are mediocre, values between 0.7 and 0.8 are good, values between 0.8 and 0.9 are great and values above 0.9 are excellent. 65 in order to determine a valid sampling frame or a mailing list, the royal mail uk’s address management software was used to select the target population in the hampshire area. in bangladesh a valid postal address book was used to select the target audience. as the mailing list contains millions of addresses, systematic sampling was considered applicable in order to avoid extra costs and time in comparison to simple random sampling. female bengali consumers are more saving than their female counterparts in the uk. several ing involves creating a continuum on which measured objects are located. in a collectivistic society face is regarded as the medium of expression of respect, moral integrity, personal image, wealth, social status, prestige, level of education and rmity to society’s traditional values. the 18 statements of face were asked in the in order to meet research objective, which aim to explore the perceptions of face concept and its influences on the decision making process of buying scale likert measurement (1= strongly agree, 2=agree, 3= neither agree nor disagree, 4= disagree and 5 =strongly the attitudes towards face concept were simplified and reduced into composite one is to identify underlying constructs in the data and the second is simply to reduce the number of variables. factor analysis procedures attempt to retain as much of the information as possible and make the remaining variables meaningful and easy to work with (field, 2009).according to hamilton (1992), factor analysis provides a basis for combining variables, (p.263). bryman and cramer (2005) describe that factor analysis is primarily concerned with “describing the variation or variance which is shared by the scores of people on three or more variables” (p.327). hair et al. (2010) pattern or relationship for a large number of variables and determine if the information can be condensed or summarised in smaller set of factors or components, a factor analysis can be utilised (p.233). a factor analysis explains he correlation among a set of variables (malhotra and birks, 2009). the alternative and in fact most popular method of examining the correlation is the kaiserkmo), developed by kaiser in 1970. the kmo can be calculated for individual and multiple variables and represents the ratio of the squared correlation between variables (field, 2009). the kmo statistics vary between 0 to 1. a value sum of the partial correlation is large relative to the sum of correlation, indicating distribution in the pattern of correlations (thus, the factor analysis is likely to be inappropriate). a value close to 1 indicates that patterns of correlation are relatively compact and so factor analysis yields distinct and reliable factors (kaiser, 1974). hutcheson and sofroniou (1999) recommend accepting that values of kmo greater than 0.5 are barely 0.7 and 0.8 are good, 66 table 1 – kmo and bartlett’s test on the statement of attitudes kmo and bartlett's testa,b bangladesh a uk b kaiser-meyer-olkin measure of sampling adequacy. .743 .772 bartlett's test of sphericity approx. chi-square 1503.950 .947.876 df 153 153 sig. .000 .000 a. only cases for which nationality = bangladeshi are used in the analysis phase. b. only cases for which nationality = british are used in the analysis phase. a principal component analysis (pca) was conducted on the 18 items with varimax. table-1 shows that the overall value of kmo for the set of 18 variables was .743 for bangladesh and .772 for the uk which shows that the correlation is quite large and verifies the sampling adequacy for the analysis. the approximate chi-square test was 1503 (bangladesh) with degrees of freedom of 153, which is significant at the level of .05 levels. bartlett’s test sphericity for bangladesh is x² (153) = 1503 and for uk x² (153) =.948. a significant test tells us that r matrix (correlation matrix) is not an identity matrix and therefore there are some relationships between variables. the result for bartlett’s test of sphericity for both countries was highly significant, p<.001, and therefore factor analysis is appropriate on the set of variables. 5.6. reliability: the cronbach’s reliability coefficient alphas for the bangladesh sample fall between .776 and .888 (table-2); on the other hand, those for the uk sample are between .721 and .858 (table3). the reliability tests of both samples suggest that the reliability is adequate and acceptable. a 5-point likert scale was developed to measure the constructs in all five factors (1= strongly agree, 2=agree, 3= neither agree nor disagree, 4= disagree, 5=strongly disagree). 5.7. selection of rotation procedure by using the rotation, the relationship between the variables becomes much clearer and the interpretability of factors can be improved through rotation. rotation maximises the loading of each variable on one of the extracted factors whilst minimising the loading on all other factors (field, 2009). 5.8. naming the factor loadings variables with higher loadings are considered more important and have greater influence on the name or label selected to represent a factor (hair et al., 2010). the ability to assign some meaning to the factors, or to interpret the nature of the variables becomes an extremely important consideration in determining the number of factors to extract (hair et al., 2010). the process of naming the factors involves substantive interpretation of the pattern of factor loadings for variables, including their signs. hair et al. (2010) suggested that before interpretation, a minimum acceptable level of significance for factor loading must be selected. the factor solution was derived from component analysis with varimax rotation. the cut off point was set somewhat low factor loadings ±.5 or above in order to illustrate the factor interpretation process with as many significant loadings as possible. 5.9. rotated component matrix from table 2 below we can see that five discrete factors have emerged from the set of variables and each one has an underlying meaning concerning the attitudes towards face concept. factor 1 represents that there are four components that have high factor l (shown in bold type), factor 2 represents five components, factors 3 and 4 represent three components and factor 5 represents two components. in order to name the factors it is necessary to recognise the significant loadings; and the variables with influence to a greater extent the name or label selected to represent a factor (hair et al., 2010). table 2 – rotated component matrix for bangladesh by five factor solution components chosingcos thoughtincos importcos unsuitpurofcos brandsocialrecog brandsoph brandfashion importref importref brandpersonsat fairskin fairskin fairskin groupconfo groupconfo groupconfo personalself personalself reliability measurement (cronbach’s coefficient) variance% 29.708% extraction method: principal component analysis. rotation method: varimax with kaiser normalisation. a. rotation converged in 7 iterations. b. only cases for which nationality = bangladeshi are used in the analysis phase 5.10. rotated component matrix the table-3 below represents the rotated components matrix for the united kingdom by four factor solution. five factors have b sample size of 142 (usable questions) is shown in table 3. the factor loadings greater than ±.50 were considered statistically significant. rotated component matrix bangladesh from table 2 below we can see that five discrete factors have emerged from the set of variables and each one has an underlying meaning concerning the attitudes towards face concept. factor 1 represents that there are four components that have high factor l (shown in bold type), factor 2 represents five components, factors 3 and 4 represent three components and factor 5 represents two components. in order to name the factors it is necessary to recognise the significant loadings; and the variables with influence to a greater extent the name or label selected to represent a factor (hair et al., 2010). rotated component matrix for bangladesh by five factor solution rotated component matrixa,b component 1 2 3 4 .875 .841 .801 .791 .773 .724 .659 .645 .634 .952 .943 .628 .845 .839 .693 .888 .776 .841 .792 29.708% 16.355% 10.007% 7.866% extraction method: principal component analysis. rotation method: varimax with kaiser normalisation. iterations. b. only cases for which nationality = bangladeshi are used in the analysis phase 5.10. rotated component matrix – uk 3 below represents the rotated components matrix for the united kingdom by four factor solution. five factors have been extracted from the 18 statements of attitudes. the sample size of 142 (usable questions) is shown in table 3. the factor loadings greater than ±.50 were considered statistically significant. from table 3 it can be seen that for factor 1 67 from table 2 below we can see that five discrete factors have emerged from the set of variables and each one has an underlying meaning concerning the attitudes towards face concept. factor 1 represents that there are four components that have high factor loadings (shown in bold type), factor 2 represents five components, factors 3 and 4 represent three components and factor 5 represents two components. in order to name the factors it is necessary to recognise the significant loadings; and the variables with higher loadings influence to a greater extent the name or label selected to represent a factor (hair et al., 2010). rotated component matrix for bangladesh by five factor solution mean for individual item 5 1.69 1.80 1.92 1.79 2.34 2.19 2.14 2.97 2.93 1.70 2.27 2.32 2.40 2.31 2.43 2.29 .801 1.61 .769 1.57 .832 6.726% extraction method: principal component analysis. rotation method: varimax with kaiser normalisation. 3 below represents the rotated components matrix for the united kingdom by four een extracted from the 18 statements of attitudes. the sample size of 142 (usable questions) is shown in table 3. the factor loadings greater than from table 3 it can be seen that for factor 1 68 there are four components with high factor loadings; for factor 2 three components, for factor 3 four components, and two components for both factors 4 and 5. table 3 – rotated component matrix for uk by five factor solution components rotated component matrixa,b component mean for individual item 1 2 3 4 5 brandpersonsat .828 3.14 brandsocialrecog .797 3.66 brandsoph .674 3.36 brandfashion) .624 2.14 unsuitpurofcos 2.54 tannedskin .878 3.93 tannedskin .866 3.56 tannedskin .709 3.98 groupconfo 4.19 groupconfo .859 4.30 importref .757 4.09 groupconfo .718 4.38 importref .602 4.27 thoughtincos .846 3.08 chosingcos .789 3.33 importcos 3.61 personalself .915 1.93 personalself .904 1.87 reliability measurement (cronbach’s alpha) .858 .833 .811 .721 .852 variance % 33.440% 13.265% 9.763% 7.349% 5.789% table 4 – the labels of five extracted factors within the two countries countries city factor 1 factor 2 factor 3 factor 4 factor 5 bangladesh dhaka thoughts in cosmetics purchase brand link to social recognition and prestige skin colour link to authority in society group conformity personal-self united kingdom hampshire brand link to personal satisfaction skin colour link to authority in society group conformity thoughts in cosmetics personal-self in table 4 above there are five factors related to face consumption: thoughts in cosmetics, brand link to social recognition and prestige, skin colour link to authority in society, group conformity and personal-self, which have been identifed for both bangladesh and the uk. for bangladesh, factor 1 represents ‘thoughts in cosmetics’ whereas for the uk it represents ‘brand link to status’. factor 2 whereas ‘skin colour link to authority’ emerged as the second factor for the uk. ‘skin colour link to authority’ was the third factor for bangladesh, while for the uk ‘group conformity’ was the third factor. ‘group conformity’ appeared as the fourth factor for bangladesh while for the uk ‘thoughts in cosmetics’ emerged. factor 5, ‘personal countries. it has been argued that female bengali consumers are more influenced face than their female counterparts in the uk. on the factor ‘process of thoughts in cosmetics’ bengalis females scored m=1.801, whereas british females scored m=3.354, which represents a significant difference, t= 7.8394, recognition’, indicates that bengali females m=1.376 more strongly relate brands to their social face (i.e., social recognition, sense of being sophisticated and fashionable and social recognition of the choice of purchase which therefore represents a significant difference. the third factor, ‘skin colour link to authority in society’, represents that bengali consumers (m= 2.320) are more likely to consider fair or lighter skin as associated with prestige and authority in society than the way british consumers negatively associates (m= 3.882) tanned skin with prestige and authority in society, t=7.6032, p<.001. the fourth factor ‘group conformity’ indicates that the purcha decision of female bengali females (m= 2.355) are strongly influenced by the family members’ and peers’ opinions whereas british females (m=4.310) are strongly opposed to the group conformity influence in their purchase decision which shows a significan t=9.2609, p< 0.001, between the two groups. on the fifth factor, ‘personal (m=1.855) scored low which indicates that there is no significance difference, (t=1.5924, p>.05, ns) between the two nations in terms of the influence of personal decision. 6. results of hypothesis testing the results in table 5 represent all four factors (apart from ‘personal among both nationalities) showed significant differences therefore, based on this evidence, the first hypothesis influenced by the concept of face accepted. table-5: results of hypothesis testi construct 1. process/thoughts in cosmetics 2. brand link to social recognition 3. skin colour link to authority 4. group conformity 5. personal self ‘brand link to status’. factor 2 for bangladesh emerged as ‘brand link to social recognition’ whereas ‘skin colour link to authority’ emerged as the second factor for the uk. ‘skin colour link to authority’ was the third factor for bangladesh, while for the uk ‘group conformity’ third factor. ‘group conformity’ appeared as the fourth factor for bangladesh while for the uk ‘thoughts in cosmetics’ emerged. factor 5, ‘personal-self’ has emerged for both it has been argued that female bengali consumers are more influenced face than their female counterparts in the uk. on the factor ‘process of thoughts in cosmetics’ bengalis females scored m=1.801, whereas british females scored m=3.354, which represents a significant difference, t= 7.8394, p<.001. the second factor, ‘brand link to social recognition’, indicates that bengali females m=1.376 more strongly relate brands to their social face (i.e., social recognition, sense of being sophisticated and fashionable and social recognition of the choice of purchase) than british females m=3.394, (t=11.2539, which therefore represents a significant difference. the third factor, ‘skin colour link to authority in society’, represents that bengali consumers (m= 2.320) are more likely to r skin as associated with prestige and authority in society than the way british consumers negatively associates (m= 3.882) tanned skin with prestige and authority in society, t=7.6032, p<.001. the fourth factor ‘group conformity’ indicates that the purcha decision of female bengali females (m= 2.355) are strongly influenced by the family members’ and peers’ opinions whereas british females (m=4.310) are strongly opposed to the group conformity influence in their purchase decision which shows a significan < 0.001, between the two groups. on the fifth factor, ‘personal-self’, both bengali (m=1.610) and british females (m=1.855) scored low which indicates that there is no significance difference, (t=1.5924, nations in terms of the influence of personal results of hypothesis testing the results in table 5 represent all four factors (apart from ‘personal-self’ which scored high among both nationalities) showed significant differences between bangladesh and the uk. therefore, based on this evidence, the first hypothesis ‘female bengali consumers are more influenced by the concept of face-saving than their female counterparts in the uk’ 5: results of hypothesis testing bangladesh (n=150) (mean) united kingdom (n=142) (mean) t value 1.801 3.254 7.8394 1.376 3.398 11.2539 2.320 3.882 7.6032 2.345 4.410 9.2609 1.610 1.855 1.5924 69 for bangladesh emerged as ‘brand link to social recognition’ whereas ‘skin colour link to authority’ emerged as the second factor for the uk. ‘skin colour link to authority’ was the third factor for bangladesh, while for the uk ‘group conformity’ third factor. ‘group conformity’ appeared as the fourth factor for bangladesh while self’ has emerged for both it has been argued that female bengali consumers are more influenced by the concept of face than their female counterparts in the uk. on the factor ‘process of thoughts in cosmetics’ bengalis females scored m=1.801, whereas british females scored m=3.354, which represents ond factor, ‘brand link to social recognition’, indicates that bengali females m=1.376 more strongly relate brands to their social face (i.e., social recognition, sense of being sophisticated and fashionable and social ) than british females m=3.394, (t=11.2539, p< 0.001) which therefore represents a significant difference. the third factor, ‘skin colour link to authority in society’, represents that bengali consumers (m= 2.320) are more likely to r skin as associated with prestige and authority in society than the way british consumers negatively associates (m= 3.882) tanned skin with prestige and authority in society, t=7.6032, p<.001. the fourth factor ‘group conformity’ indicates that the purchase decision of female bengali females (m= 2.355) are strongly influenced by the family members’ and peers’ opinions whereas british females (m=4.310) are strongly opposed to the group conformity influence in their purchase decision which shows a significant difference self’, both bengali (m=1.610) and british females (m=1.855) scored low which indicates that there is no significance difference, (t=1.5924, nations in terms of the influence of personal-self on purchase self’ which scored high between bangladesh and the uk. ‘female bengali consumers are more saving than their female counterparts in the uk’ is value p value 7.8394 0.000 11.2539 0.000 7.6032 0.000 9.2609 0.000 1.5924 0.112 70 7. conclusion the ‘concept of face’ is an important value in a high collectivistic society in which people’s thinking process, shopping behaviour, brand perceptions and overall lifestyle are strongly connected with the notions of having respect for others, gaining face in society by achievement and power, greater importance of considering the opinions of important referent others (iros) and judging the ‘self’ through iros which are tremendously involved in the process of controlling people’s behaviour in society. international and multinational companies with an intention to enter, operate and market their products in bangladeshi market, when endeavouring to understand bengalis’ behaviour from cultural point of view for a sustainable business and to segment their target customers with the right approach, should seriously consider the 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"hofstede's research on cross-cultural w. fred van raaij, gary j. volume 1, provo, ut, consumer behaviour and culture: consequence for global marketing consumer behaviour in asia. macmillan press . london: routledge. 72 9 _16-17_ palmeira received: march 15, 2016 accepted: the aim is to describe customers’ and street retailers’ perceptions related to fast fashion (f/f) retailing. through qualitative and quantitative research, data from são paulo street retailers and curitiba young people, brazil, are collected, using sampling by convenience. likert scales have been used to evaluate f/f perceptions.one of the major differentials of fast fashion (f/f) in brazil could be credit conditions, when retailers provide to their customers the possibility to pay purchases through the use of monthly instalments. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present positive perception of f/f quality, design and price. contribution of this paper is to show some characteristics of fast fashion customer’s behaviour related to the combination of f/f knowing and f/f consumption, using consolidate theories (engel, blackwell, miniard, 2000; kotler and armstrong, 2008) with new concep fast fashion (solomon and rabolt, 2009).the managerial implications for the retail companies are to pay attention in the customer’s behaviour that consumes fashion items, especially fast fashion clothes and accessories, and the timing of collections. keywords: fashion; fast fashion 1. introduction fashion always has its role in people’s life, especially from last century, when the focus of attention in fashion had spread throughout the world and in all social class intensities. fashion has become affordable even in different timing. first, in the royalty and noblesse, then in the richest without noble roots and breed, and finally, in the working class. fashion is part of the culture and it is in the p influenced by customer’s behaviour. it is a vital part of different business, from designers, to manufactures and retailing, just to mention some of the fashion sectors. even though, it seems international journal of economic behavior, vol fast fashion retailing customer and retailer’s perceptions maria cecilia coutinho de arruda hetica treinamento empresarial mirian palmeira federal university of parana accepted: september 8, 2016 online published: abstract the aim is to describe customers’ and street retailers’ perceptions related to fast fashion through qualitative and quantitative research, data from são paulo street g people, brazil, are collected, using sampling by convenience. likert scales have been used to evaluate f/f perceptions.one of the major differentials of fast fashion (f/f) in brazil could be credit conditions, when retailers provide to their e possibility to pay purchases through the use of monthly instalments. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present positive perception of f/f quality, design and price. ution of this paper is to show some characteristics of fast fashion customer’s behaviour related to the combination of f/f knowing and f/f consumption, using consolidate theories (engel, blackwell, miniard, 2000; kotler and armstrong, 2008) with new concep fast fashion (solomon and rabolt, 2009).the managerial implications for the retail companies are to pay attention in the customer’s behaviour that consumes fashion items, especially fast fashion clothes and accessories, and the timing of collections. fast fashion; retailing customers. retailers. fashion always has its role in people’s life, especially from last century, when the focus of attention in fashion had spread throughout the world and in all social class intensities. fashion has become affordable even in different timing. first, in the royalty and noblesse, then in the richest without noble roots and breed, and finally, in the working class. fashion is part of the culture and it is in the people’s culture. fashion influences and it is influenced by customer’s behaviour. it is a vital part of different business, from designers, to manufactures and retailing, just to mention some of the fashion sectors. even though, it seems international journal of economic behavior, vol 6, n. 1, pp. 113-132 113 fast fashion retailing customer and retailer’s perceptions maria cecilia coutinho de arruda hetica treinamento empresarial, brazil mirian palmeira federal university of parana, brazil line published: october 20, 2016 the aim is to describe customers’ and street retailers’ perceptions related to fast fashion through qualitative and quantitative research, data from são paulo street g people, brazil, are collected, using sampling by convenience. likert scales have been used to evaluate f/f perceptions.one of the major differentials of fast fashion (f/f) in brazil could be credit conditions, when retailers provide to their e possibility to pay purchases through the use of monthly instalments. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present positive perception of f/f quality, design and price. a theoretical ution of this paper is to show some characteristics of fast fashion customer’s behaviour related to the combination of f/f knowing and f/f consumption, using consolidate theories (engel, blackwell, miniard, 2000; kotler and armstrong, 2008) with new concepts of fast fashion (solomon and rabolt, 2009).the managerial implications for the retail companies are to pay attention in the customer’s behaviour that consumes fashion items, especially fast fashion clothes and accessories, and the timing of collections. fashion always has its role in people’s life, especially from last century, when the focus of attention in fashion had spread throughout the world and in all social classes in different intensities. fashion has become affordable even in different timing. first, in the royalty and noblesse, then in the richest without noble roots and breed, and finally, in the working class. . fashion influences and it is influenced by customer’s behaviour. it is a vital part of different business, from designers, to manufactures and retailing, just to mention some of the fashion sectors. even though, it seems 132, 2016 114 that the business administration teaching programmes do not give the importance fashion subjects deserve, because it is hard to find the subject in the contents of such programmes. one of the consequences is the shortage of well-developed professionals to work in the fashion fields. with reference to brazil, the new middle class customers with discretionary wealth to be spent in clothes, shoes, handbags, cosmetics and accessories, looks for an environment not necessarily sophisticated and “chic”, but pleasant and organised. one of the major differentials of fast fashion in brazil could be credit conditions, when retailers provide to their customers the possibility to pay purchases through the use of monthly instalments. in brazil there is a quick response to fashion trends, as some companies work in integrated groups, through the strategy of fashion democratisation which enables middle class woman to have access to fashion. this satisfies expectations of low income women that are becoming more demanding and complete. a recent phenomenon is the speed of new fashion collections in the seasons’ ones, when every four weeks are new looks in the shops, facing the traditional spams of fall/winter and spring/summer seasons’ collections, which take four to six months from design development to retailing and to customer’s consumption. as grose (2012) mentioned: it is necessary to “…give people what they want when they want it”. considering that the speedy supply of new mini fashion collections inside a season is known as fast fashion, the aim of this study is to identify the customers and street retailers’ perceptions related to fast fashion retailing. as a result, the study emphasizes how important is the business schools’ role in a way to develop contents linked to fashion and its different categories, such as fast fashion retailing, and prepare future professionals to deal with such different sides of fashion. 2. literature review the subjects of this research are presented in seven groups of contents: fast fashion retailing, customer behaviour and perception, interface between retailer and customer, price-quality relationship, impact of online branding, emotions, and atmosphere. they are of great importance when it comes to helping the business schools to realise the need of developing fast fashion contents in their programmes. fashion retailing (bam, 2012) is a group of companies, part of the fashion supply chain, that goes from the manufacturers to the consumer, offering fashion goods and services, through traditional seasonal spans and/or fast fashion timing, ranging from budget to designer price lines. it is the group of companies that “sell the merchandise to the ultimate consumer” (solomon & rabolt, 2009:7-10). according to solomon and rabolt (2009), there are different price lines in the sector that classify businesses depending on the quality level and price of their goods. the first group is the haute couture or high fashion that is defined as ‘fine sewing’, very high-quality and custom-made. the second group is called prêt-à-porter that includes expensive lines, but is much affordable and casual in style. the third group is the designer one where the professionals develop secondary lines called bridge lines, made of lesser-quality fabric or licensed to another manufacturer. the fourth group includes better goods with lower prices, good quality of a lesser-known brand or name. the fifth group comprises moderate goods with lower prices and quality than better products and sold in department stores and specialty shops. and finally, the sixth group, made up of budget goods with the lowest price-quality approach, usually offered at discount stores or by mass merchandisers. when it comes to timing as the focus of the analyses, there are two groups of fashion retailers, (1) the traditional ones that have a seasonal time span of 3 to 6 months, such as the fall/winter or spring/summer season. the fashion cycle is a little bit of an anachronism. we show the clothes in february and they’re not available until july or august or september. by point, images of the collection have been seen all over the internet and discussed ad nauseum it. […] the solution is to give people what they wan 2012 the other group (2) is made up of fast fashion retailers. used to represent the various strategies that fashion companies use in order to respond commercially to the latest fashion trends”. […] the younger fashion mar design to retail cycle to as little as 4 weeks making the top fashion designers available to the mass market in the same season” ( considered the high-street revolution, because if the from the top designers, then these professionals are prepared to go to the masses (grose, 2012). fast fashion designers (also known as reproducers) work together with a team of buyers and product developers to produc retailer (grose, 2012:17). customer’s behaviour is a group of concepts and theories that covers different approaches of the consuming process. initially the field refers to the “buyer behaviour” (solo rabolt, 2009:26-27), focusing on the interactions between customers and producers at the moment of purchase. afterwards, a customer “is generally thought of a person who identifies a need or desire, makes a purchase, and then dispose of the product consumption process” (solomon and rabolt, 2009:27). the customer’s behaviour is influenced by different factors related to cultural, social, personal and psychological elements (kotler and armstrong, 2008:113 and legal features, as it can be seen in perception starts with a first impression which is the initial step of customer’s recognition process. perception is the process of recognition through the human’s senses (sight, so smell, touch, and taste), according to lindstrom (2005) and schmitt (1999). when an object is exposed to prospects and customers, one or more senses can be activated and the process of recognition begins in the people’s mind. perception, already influ experiences (brakus, schmitt and zarantonello, 2009), prints a mark, an image in their brain, producing positive, neutral or negative judgement related to the exposed object (engel, blackwell and miniard, 2000: 97). perception is rel general evaluation of an alternative” (engel, blackwell and miniard, 2000: 93), being positive, neutral or negative. the attitude influences the behaviour and it formats future process of purchase. when it is cry changed. different readiness stages of customer‘s behaviour (awareness, knowledge, liking, preference, conviction and purchase) can influence one’s pattern of consuming (kotler and armstrong, 2008:363). the first stage of the product or service or organisation that the target audience has about them. the second readiness level is concerning of how much the brand or any other item linked to the company. the third phase is the state of is how the target audience feels about the product, etc. the fourth element is the step that the prospects show preference (or they do not) for the product/s organisation. the fifth component shows if the target audience develops a buying the organisation’s offer. and, finally, the sixth element is related to the fact that the prospects have made the purchase the fashion cycle is a little bit of an anachronism. we show the clothes in february and they’re not available until july or august or september. by point, images of the collection have been seen all over the internet and discussed ad nauseum […] and by the time it reaches the store, people are already tired of it. […] the solution is to give people what they want when they want it (grose, 2012:15). the other group (2) is made up of fast fashion retailers. “fast fashion is the term that is used to represent the various strategies that fashion companies use in order to respond commercially to the latest fashion trends”. […] the younger fashion mar design to retail cycle to as little as 4 weeks making the top fashion designers available to the mass market in the same season” (bruce, moore, & birtwistle, 2004:31-34). fast fashion is street revolution, because if the masses cannot afford the original look from the top designers, then these professionals are prepared to go to the masses (grose, 2012). fast fashion designers (also known as reproducers) work together with a team of buyers and product developers to produces different looks in mini collections for a particular is a group of concepts and theories that covers different approaches of the consuming process. initially the field refers to the “buyer behaviour” (solo 27), focusing on the interactions between customers and producers at the moment of purchase. afterwards, a customer “is generally thought of a person who identifies a need or desire, makes a purchase, and then dispose of the product consumption process” (solomon and rabolt, 2009:27). the customer’s behaviour is influenced by different factors related to cultural, social, personal and psychological elements (kotler and armstrong, 2008:113-125). urdan and urdan (2010:236-238) include economic and legal features, as it can be seen in figure 1. starts with a first impression which is the initial step of customer’s recognition process. perception is the process of recognition through the human’s senses (sight, so smell, touch, and taste), according to lindstrom (2005) and schmitt (1999). when an object is exposed to prospects and customers, one or more senses can be activated and the process of recognition begins in the people’s mind. perception, already influenced by people’s past experiences (brakus, schmitt and zarantonello, 2009), prints a mark, an image in their brain, producing positive, neutral or negative judgement related to the exposed object (engel, blackwell and miniard, 2000: 97). perception is related to the customer attitude which “is the general evaluation of an alternative” (engel, blackwell and miniard, 2000: 93), being positive, neutral or negative. the attitude influences the behaviour and it formats future process of purchase. when it is crystallised in the customer’s mind, it is very hard to be different readiness stages of customer‘s behaviour (awareness, knowledge, liking, preference, conviction and purchase) can influence one’s pattern of consuming (kotler and 3). the first stage of awareness is related to the level of consciousness of the product or service or organisation that the target audience has about them. the second readiness level is concerning of how much knowledge the prospects have about the product the brand or any other item linked to the company. the third phase is the state of is how the target audience feels about the product, etc. the fourth element is the step that the (or they do not) for the product/service/experience/brand or organisation. the fifth component shows if the target audience develops a buying the organisation’s offer. and, finally, the sixth element is related to the fact that the purchase. 115 the fashion cycle is a little bit of an anachronism. we show the clothes in february and they’re not available until july or august or september. by that point, images of the collection have been seen all over the internet and discussed […] and by the time it reaches the store, people are already tired of when they want it (grose, “fast fashion is the term that is used to represent the various strategies that fashion companies use in order to respond commercially to the latest fashion trends”. […] the younger fashion market shrinks the design to retail cycle to as little as 4 weeks making the top fashion designers available to the 34). fast fashion is masses cannot afford the original look from the top designers, then these professionals are prepared to go to the masses (grose, 2012). fast fashion designers (also known as reproducers) work together with a team of es different looks in mini collections for a particular is a group of concepts and theories that covers different approaches of the consuming process. initially the field refers to the “buyer behaviour” (solomon and 27), focusing on the interactions between customers and producers at the moment of purchase. afterwards, a customer “is generally thought of a person who identifies a need or desire, makes a purchase, and then dispose of the product during […] the consumption process” (solomon and rabolt, 2009:27). the customer’s behaviour is influenced by different factors related to cultural, social, personal and psychological elements 238) include economic starts with a first impression which is the initial step of customer’s recognition process. perception is the process of recognition through the human’s senses (sight, sound, smell, touch, and taste), according to lindstrom (2005) and schmitt (1999). when an object is exposed to prospects and customers, one or more senses can be activated and the process of enced by people’s past experiences (brakus, schmitt and zarantonello, 2009), prints a mark, an image in their brain, producing positive, neutral or negative judgement related to the exposed object (engel, ated to the customer attitude which “is the general evaluation of an alternative” (engel, blackwell and miniard, 2000: 93), being positive, neutral or negative. the attitude influences the behaviour and it formats future stallised in the customer’s mind, it is very hard to be different readiness stages of customer‘s behaviour (awareness, knowledge, liking, preference, conviction and purchase) can influence one’s pattern of consuming (kotler and is related to the level of consciousness of the product or service or organisation that the target audience has about them. the second have about the product, the brand or any other item linked to the company. the third phase is the state of liking, which is how the target audience feels about the product, etc. the fourth element is the step that the ervice/experience/brand or organisation. the fifth component shows if the target audience develops a conviction about buying the organisation’s offer. and, finally, the sixth element is related to the fact that the 116 to study the consumer behavior of fast fashion (f/f), the element of knowledge is linked to the phase of purchase, producing a matrix as it can be seen in figure 2: figure 1 – factors that influence customer’s behaviour economic legal country level of development cultural current legislations social products and services availability cultures personal customer protection laws reference groups psychological economic conditions subcultures age and life cycle public organisations format family motivation social classes occupation customer’s behaviour social roles perception life style learning process personality attitudes and beliefs source: adapted from kotler and armstrong (2008) and urdan and urdan (2010). figure 2 – the relationship between fast fashion knowledge and consumption fast fashion knowledge yes no fast fashion yes f/f k+c (1) f/f nk+c (4) consumption no (3) f/f k+nc (2) f/f nk+nc source: adapted from kotler and armstrong, 2008. interface between retailer and customer kinley (2010) developed a research project of useful application, with the purpose of determining whether clothing benefits sought (cbs) affected fit preferences, satisfaction with the fit of ready shopping behaviours of north american women. the four cbs factors used in the study were: fashion forward, sexy, reputation, and individualist. study participants who d benefits preferred to shop in specialty stores and a tighter fit. participants who sought sexy benefits spent the most money on average, for a new pair of pants, preferred a tighter fit, clothing sized by waist dimension, and shoppin specialty stores. participants who desired reputation benefits from clothing shopped in specialty stores. respondents who sought the individualist benefits were more likely to shop via catalogue/internet (kinley, 2010:397). as practical implications, the author stressed that among so many stores, and a highly competitive retail environment, it would be useful for store professionals to target products and to understand that female customers who seek different benefits from their clothing do shop differently. this is an important cue in the relationship between retailers and customers. marzo-navarro et al. (2004) understood that globalization, competition and market saturation have caused a growing interest by firms in developing strategies directed at loyalty among their customers, especially in markets with low growth rates. relationship marketing would be crucial to achieve this goal, as contemplates mutual benefits derived from stable relationship between buyers and sellers. although focused on customers from the service sector, it appeared useful for the present paper, the emphasis on the benefits of the relationship with the contact personnel: customers can reach greater levels of satisfaction and loyalty toward the present case). concerning the support that sales personnel can offer to customers, bruce and daly (2006) raised questions about traditional approaches to sourcing and buying in the complex retail nature of fast fashion of label. the authors found that f which trust is an important factor in the supplier an agreed quality, and integration of key internal activities and processes to facilitate the speed of buying decisions that may be required. price-quality relationship relationship between price and qual they perceive as of higher quality, items with a designer brand or a higher price, when comparing similar pieces of apparel. fowler and clodfelter (2001) developed a study aiming to compare the pricing and quality of identical designer merchandise sold in department stores and manufacturers’ outlet stores. prices in the department store were 31% higher than in the outlet store, the quality was the same in both formats of retail. a more recent study indicate how street stores are positioned when compared to department or outlet stores. impact of online branding branding, and the way in which the online channel is being used to support focus of this research was the top multi interesting for the present paper. the author found that most top “non offer transactions through their web site, offering ex engagement and experience to their customers. while all fashion retailers achieve consistency of visual identity between the online and other channels, their use of the online channel to communicate brand values, and to promo underdeveloped. research into online and multi preferences, satisfaction with the fit of ready-to-wear, label style preferences, and shopping behaviours of north american women. the four cbs factors used in the study were: fashion forward, sexy, reputation, and individualist. study participants who desired fashion forward benefits preferred to shop in specialty stores and a tighter fit. participants who sought sexy benefits spent the most money on average, for a new pair of pants, preferred a tighter fit, clothing sized by waist dimension, and shoppin specialty stores. participants who desired reputation benefits from clothing shopped in specialty stores. respondents who sought the individualist benefits were more likely to shop via catalogue/internet (kinley, 2010:397). , the author stressed that among so many stores, and a highly competitive retail environment, it would be useful for store professionals to target products and to understand that female customers who seek different benefits from their clothing do erently. this is an important cue in the relationship between retailers and customers. navarro et al. (2004) understood that globalization, competition and market saturation have caused a growing interest by firms in developing strategies directed at loyalty among their customers, especially in markets with low growth rates. relationship marketing would be crucial to achieve this goal, as contemplates mutual benefits derived from stable relationship between buyers and sellers. although customers from the service sector, it appeared useful for the present paper, the emphasis on the benefits of the relationship with the contact personnel: customers can reach greater levels of satisfaction and loyalty toward the organisation . concerning the support that sales personnel can offer to customers, bruce and daly (2006) raised questions about traditional approaches to sourcing and buying in the complex retail nature of fast fashion of a supermarket, a department store and a own brand label. the authors found that fast fashion is a combination of global and local suppliers in which trust is an important factor in the supplier-retailer relationship to ensure fast delivery at lity, and integration of key internal activities and processes to facilitate the speed of buying decisions that may be required. when looking for a store, customers believe there is a strong relationship between price and quality, as there is between brand and quality. for this reason they perceive as of higher quality, items with a designer brand or a higher price, when comparing similar pieces of apparel. fowler and clodfelter (2001) developed a study aiming icing and quality of identical designer merchandise sold in department stores and manufacturers’ outlet stores. prices in the department store were 31% higher than in the outlet store, the quality was the same in both formats of retail. a more recent study indicate how street stores are positioned when compared to department or outlet stores. impact of online branding rowley (2009) aimed to contribute to knowledge on online branding, and the way in which the online channel is being used to support focus of this research was the top multi-channel uk fashion retailers, the study resulted interesting for the present paper. the author found that most top “non-value” fashion retailers offer transactions through their web site, offering extended opportunities for brand engagement and experience to their customers. while all fashion retailers achieve consistency of visual identity between the online and other channels, their use of the online channel to communicate brand values, and to promote brand relationships may be academically underdeveloped. research into online and multi-channel branding has a role to play in 117 wear, label style preferences, and the four cbs factors used in the study were: fashion forward, sexy, esired fashion forward benefits preferred to shop in specialty stores and a tighter fit. participants who sought sexy benefits spent the most money on average, for a new pair of pants, preferred a tighter fit, clothing sized by waist dimension, and shopping in specialty stores. participants who desired reputation benefits from clothing shopped in specialty stores. respondents who sought the individualist benefits were more likely to shop via catalogue/internet (kinley, 2010:397). , the author stressed that among so many stores, and a highly competitive retail environment, it would be useful for store professionals to target products and to understand that female customers who seek different benefits from their clothing do erently. this is an important cue in the relationship between retailers and customers. navarro et al. (2004) understood that globalization, competition and market saturation have caused a growing interest by firms in developing strategies directed at creating brand loyalty among their customers, especially in markets with low growth rates. relationship marketing would be crucial to achieve this goal, as contemplates mutual benefits derived from stable relationship between buyers and sellers. although the study customers from the service sector, it appeared useful for the present paper, given the emphasis on the benefits of the relationship with the contact personnel: customers can (the retailer in the . concerning the support that sales personnel can offer to customers, bruce and daly (2006) raised questions about traditional approaches to sourcing and buying in the a supermarket, a department store and a own brand ashion is a combination of global and local suppliers in retailer relationship to ensure fast delivery at lity, and integration of key internal activities and processes to facilitate the when looking for a store, customers believe there is a strong ity, as there is between brand and quality. for this reason they perceive as of higher quality, items with a designer brand or a higher price, when comparing similar pieces of apparel. fowler and clodfelter (2001) developed a study aiming icing and quality of identical designer merchandise sold in department stores and manufacturers’ outlet stores. prices in the department store were 31% higher than in the outlet store, the quality was the same in both formats of retail. a more recent study could indicate how street stores are positioned when compared to department or outlet stores. rowley (2009) aimed to contribute to knowledge on online branding, and the way in which the online channel is being used to support brands. as the channel uk fashion retailers, the study resulted value” fashion retailers tended opportunities for brand engagement and experience to their customers. while all fashion retailers achieve consistency of visual identity between the online and other channels, their use of the online channel to te brand relationships may be academically channel branding has a role to play in 118 supporting this process, which could be useful to understand better and support the interface between fast fashion retailer and customer. emotions moody, kinderman and sinha (2010) found strong relationships between mood and personality factors and clothing style preference. mood was a significant predictor of preference, while personality was moderate. these research findings may lead to practical consequences: personality, emotion and mood were shown to be managed and reflected through clothing with implications for assistance in customer clothing decisions, service training, and strategies for personal shoppers, market segmentation and design. atmosphere parsons (2011) stated that stimuli have a significant effect on fashion customers’ affect for a store. he defined shopper responses to a few main stimuli: music, scent, temperature, lighting and colour. based upon his research, fashion retailers are less differentiated in their use of sensory stimuli than they could be to achieve the responses they expect. according to the author, stagnation from repeated exposure can diminish affect for the store whereas small changes in stimuli levels can revitalise and increase affect. 3. research methodology the methodology includes some aspects (gil, 2002; malhotra, 2001; mattar, 2007, siegel and castellan, 2006, spiegel, 1971 and wonnacott and wonnacott, 1981): the nature of the research and the population and sampling. 3.1 the nature of the research this investigation is a qualitative and a quantitative study (creswell, 1998; gil, 2002). the qualitative analyses are used to assess the retailers’ responses. a structured protocol was applied on the interviews with the fast fashion street retailers to gather data related to the store as the interface between retailer and customer; how is the way customers evaluate physical facilities, or not; if they make comparisons with different kinds of shops, such as street stores, the ones in shopping malls and online shops; and to identify if customers evaluate fashion services, for instance, clothes repair and renting, as well as to find out the environmental factors of a store they consider. due to the format of this article, the qualitative analyses are not presented in the form of quotes. they are summarised the way they are presented in the results section. through the use of comparative analyses, customers’ perceptions concerning fast fashion are also evaluated. the rattam (1998) protocol is used on customers’ information to create social classification (rattam, 1998) based on the level of formal education, income, spatial residential area, size of residence and occupation. the rattam social classification model (rattam, 1998) is based on the idea that formal education level, size of residence, and occupation are more important than income in order to format customer behaviour and to classify the segments as a, b, c, d and e. the protocol was used to identify in which segment the respondents are classified. communication with the respondents was face-toface. the researcher supplied the questionnaires, respondents answered the questions and they returned the document to the researcher as soon as they had filled in the forms. some information were collected about the customers’ characteristics, such as their profile, the customers’ level of knowledge related to fast fashion; their feelings and emotions concerning fast fashion; and the customers’ consumption process of fast fashion. simple statistical analyses have been used to describe street retailers’ and the customers’ characteristics and some cross tabs analyses to produce their responses. some results have been measured on 11-point scales and some 5-point likert-type scales (+2 = strongly agree, for positive statements, and 2007:111; ferguson, 1941). the format of likert scales was adapted from the fishbein multiattribute model scales (e mann-whitney tests were used to organise the data, but they could be applied when working with larger samples (wonnacott and wonnacott, 1981). the data collected have been organised to meet the operational objectives of this article. 3.2 population and sampling the population of the research is made up of merchandise fast fashion clothing and accessories and fast fashion young customers according to ibge (2014a), the brazilian institute of geography and statistics, the population are more than 206 million people. more than 11 million are living in parana. younger residents between 15 to 29 years old are an average of 39% (ibge, 2014b) in parana. according to retailing research (ibge, 2014c), there are more than 150 thousand registered companies that present some revenue. 20 managers and/or owners and sales people of 11 stores in sao paulo city, brazil; and (2) customers’ sample. the customers’ sample contains 30 years old, living in curitiba, parana characteristics. the interviews with the street retailers took place in november 20 customers’ survey was conducted in january 2014. table 1 – interviewed professionals by store and business stores binne 284 store farm french b. hering honora le lis blanc mya haas shoes and handbags riachuelo sephora up delta total source: survey, 2012. although a random sample is technically more represent the characters of the convenience (mattar, 2007), for instance list the population’s members and produce a r resources are limited to use a random sampling process. for positive statements, and -2 = strongly disagree, for negative statements) (mattar, 2007:111; ferguson, 1941). the format of likert scales was adapted from the fishbein multiattribute model scales (engel, blackwell & miniard, 1990). neither the spss nor the whitney tests were used to organise the data, but they could be applied when working with larger samples (wonnacott and wonnacott, 1981). the data collected have been rational objectives of this article. the population of the research is made up of two different groups: street retailers that merchandise fast fashion clothing and accessories and fast fashion young customers (2014a), the brazilian institute of geography and statistics, the population are more than 206 million people. more than 11 million are living in parana. younger residents between 15 to 29 years old are an average of 39% (ibge, 2014b) in to retailing research (ibge, 2014c), there are more than 150 thousand registered companies that present some revenue.the samples are selected by convenience managers and/or owners and sales people of 11 stores in sao paulo city, brazil; and (2) customers’ sample contains 80 brazilian people aged between 18 and old, living in curitiba, parana. tables 1 and 2 show some of the sampling the interviews with the street retailers took place in november 20 customers’ survey was conducted in january 2014. interviewed professionals by store and business business quantity of interviewed f/f street retailers shoes and handbags 1 clothes 1 clothes 1 clothes 2 clothes 2 clothes 2 clothes 2 shoes and handbags 3 clothes 3 cosmetics 2 clothes 1 20 although a random sample is technically more adequate to produce precise results represent the characters of the population, there are reasons to select the sample by convenience (mattar, 2007), for instance, in cases when: (1) there is not available database to list the population’s members and produce a random sample, and (2) the financial and human resources are limited to use a random sampling process. 119 2 = strongly disagree, for negative statements) (mattar, 2007:111; ferguson, 1941). the format of likert scales was adapted from the fishbein ngel, blackwell & miniard, 1990). neither the spss nor the whitney tests were used to organise the data, but they could be applied when working with larger samples (wonnacott and wonnacott, 1981). the data collected have been two different groups: street retailers that merchandise fast fashion clothing and accessories and fast fashion young customers. (2014a), the brazilian institute of geography and statistics, the population are more than 206 million people. more than 11 million are living in parana. younger residents between 15 to 29 years old are an average of 39% (ibge, 2014b) in to retailing research (ibge, 2014c), there are more than 150 thousand samples are selected by convenience: (1) managers and/or owners and sales people of 11 stores in sao paulo city, brazil; and (2) a brazilian people aged between 18 and show some of the sampling the interviews with the street retailers took place in november 2012 and the quantity of interviewed f/f street retailers 20 roduce precise results which population, there are reasons to select the sample by : (1) there is not available database to and (2) the financial and human 120 table 2 sampling characteristics customers gender total % male 43 54 female 37 46 total 80 100 source: survey, 2014. 4. results the information of customers and retailers’ perceptions related to fast fashion retailing is presented in two sections: (1) street retailers’ characteristics and their responses to fast fashion which consolidate the qualitative analyses mentioned in the methodology and (2) customers’ profile and their perception of fast fashion through quantitative analyses. 4.1 street retailers’ characteristics and their responses to fast fashion as it is explained in the methodology, 20 street retailers have been interviewed. they were managers/owners and/or sales people of 11 stores in são paulo city, brazil, in november 2012. eight stores were in the clothing business, two in shoes and handbags and one in cosmetics. this information is shown in table 3. table 3 – interviewed street retailers by store and business stores business interviewed people/position binne shoes and handbags sales person – owner – stock supervisor 284 store clothes store supervisor – manager farm clothes sales person (1) french b. clothes sales people (2) hering clothes sales people (2) honora clothes sales people (2) le lis blanc clothes sales people (2) mya haas shoes and purses sales people (3) riachuelo clothes manager and sales people (3) sephora cosmetics sales people (2) up delta clothes owner/manager – sales person/supervisor source: survey, 2012. following the interview script, the street retailers were asked about the following subjects: 1. stay in the store – how long do customers usually stay in the store? 2. motivation – why do your customers buy: pleasure, modernity, inclination for the new, other reasons? 3. store as interface between retailer and customer: why do customers look for this store? 4. trends in retailing: do customers value physical facilities? 5. street retail stores: how do customers compare the street stores with those in malls or shopping centres? 6. street retail stores: why are they attractive? 7. specialised stores: do customers prefer this kind of store? 8. stores of fashion services: do customers value them? 9. hypermarket with fashion items 10. online retail: is the customer migrating 11. marketing and environmental factors of a store. whose elements the customers value in a store (atmospherics): size; layout; decoration; colours; and internal presentation; windows; lighting; aromas and perfumes; sound; and taste appeal interpreting the data collected in the interviews, the most important aspects verbali related to motivation to go to a street store; marketing and environmental factors of a store. customers usually stay in the store (1) products, but they can stay really longer when they decide to buy, as well as if they have an event (a gala dinner, a ball or a celebration), or if they are interested in new trendy pieces. table 4 shows the differences of timing inside the stores. table 4 – timing in the stores stores binne 284 store farm french b. hering honora le lis blanc mya haas riachuelo sephora up delta source: survey, 2012. concerning motivation (2), price (less expensive than other options of young fashion of the a class niche of customers), quick answer to trends and high product turnover (weekly supply o fashion concept), modernity and inclination for the new. sometimes they look for specific clothes for an event. in other cases, they come for pleasure, just for the fun of trying on something nice or in fashion that they see in the minute gift, to buy basic clothes. lower price and allows them to constantly go in fashion direct contact, strong brand, and pleasant environment stores offer credit conditions, such the use of monthly instalments clothes for a special event or to get something new, as to renew the wardrobe mostly comfort, possibly in fashion and visually attractive. customers look for innovative concept, luxury environment. in a similar aspect, the store can be seen as an interface between retailer and customer (3). when asked the reason customers look for some specific store, professionals say that the stores of fashion services: do customers value them? fashion items: are there many in the region? is the customer migrating to shop online? marketing and environmental factors of a store. whose elements the customers value in a store (atmospherics): size; layout; decoration; colours; atmosphere; external nd internal presentation; windows; lighting; aromas and perfumes; sound; and interpreting the data collected in the interviews, the most important aspects verbali motivation to go to a street store; interface retailer-customer; marketing and environmental factors of a store. stay in the store (1) between 15 to 30 minutes to look around for products, but they can stay really longer when they decide to buy, as well as if they have an gala dinner, a ball or a celebration), or if they are interested in new trendy pieces. the differences of timing inside the stores. timing in the stores how long the customers stay in the stores? 20 minutes 5 – 15 minutes 45 minutes 20 min – 1 or 2 hours 15 minutes 15 minutes 15 – 40 minutes 30 minutes – 2 hours 40 minutes 15 minutes 30 minutes – 3 hours motivation (2), customers buy for many reasons: because of the brand status, price (less expensive than other options of young fashion of the a class niche of customers), quick answer to trends and high product turnover (weekly supply of new products, fast fashion concept), modernity and inclination for the new. sometimes they look for specific clothes for an event. in other cases, they come for pleasure, just for the fun of trying on something nice or in fashion that they see in the shop windows. to look for minute gift, to buy basic clothes. occasionally customers buy at the store because it offers lower price and allows them to constantly go in fashion. to look for quality, good service, and pleasant environment. besides to offer price , such the use of monthly instalments. at times clothes for a special event or to get something new, as to renew the wardrobe comfort, possibly in fashion and visually attractive. customers look for innovative . they buy as novelty, as fashion, as experience. the store can be seen as an interface between retailer and customer hen asked the reason customers look for some specific store, professionals say that the 121 marketing and environmental factors of a store. whose elements the customers value atmosphere; external nd internal presentation; windows; lighting; aromas and perfumes; sound; and interpreting the data collected in the interviews, the most important aspects verbalised are stomer; price and between 15 to 30 minutes to look around for products, but they can stay really longer when they decide to buy, as well as if they have an gala dinner, a ball or a celebration), or if they are interested in new trendy pieces. because of the brand status, price (less expensive than other options of young fashion of the a class niche of customers), f new products, fast fashion concept), modernity and inclination for the new. sometimes they look for specific clothes for an event. in other cases, they come for pleasure, just for the fun of trying on look for a store for a last store because it offers look for quality, good service, offer price and fashion, the at times customers need clothes for a special event or to get something new, as to renew the wardrobe or require comfort, possibly in fashion and visually attractive. customers look for innovative they buy as novelty, as fashion, as experience. the store can be seen as an interface between retailer and customer hen asked the reason customers look for some specific store, professionals say that the 122 store is located close to a business related to their products; therefore people pass by every day and they have a good relationship with the sales people and manager. sales people sometimes play the role of psychologists. there is a strong relationship between staff and customers, which generates friendship and loyalty. sales employees believe that customers look for a store because it can really satisfy their needs better than in the competitors. as many customers are already extremely faithful to the store, sales people and owner (also manager) are careful to satisfy their needs so that they do not quit coming to the store and still keep buying there. the staff understand that it is important to be sincere in many aspects and not only getting customers to buy any piece. it is important to analyse the value of customer services. when sales people are trained to understand customers’ needs, they can offer the best services, to assure that the customers come back once, twice, many times. sales employees often personalise service and they are always updated about the recent trends, so that they can serve customers as personal shoppers. customers also appreciate sales people’s cordiality. sometimes most customers already have a close relationship with the frontline employees in the store where they usually buy. therefore, the sales staffs are always very helpful and willing to serve customers the best way possible. customers also can focus on price and value of the product, for its power and status. sometimes, for some companies, price is extremely competitive because the target is the middle class customers favoured by the economic situation of brazil, from 2004 to 2014. if a store is part of a group that produces, distributes, sells products and services and it can offer credit through its companies, assuring more favourable conditions of logistics and price than the competitors. practices of the strategy of fashion democratisation, i.e, fashion products designed by sophisticated brazilian stylists and sold with very reasonable price to middle class customers, can attract customers for some stores. the perception of product quality makes customers ready to pay more for an item. windows are very important to stores, because people do window shopping in some occasions, they know what it is available in the store and they decide to purchase when they are not in a hurry later on. sometimes customers work or live close to the store and they buy there because it is close. for many customers, retailing is not limited to physical facilities (4). sales people understand that emotion must be stressed as a way to attract and retain customers. they give priority to the meeting point with the customer, as one of easy access. some professionals say that there are customers that go to the store only to chat with the sales people, not necessarily to buy. emotion must be stressed as a way to attract and retain customers. normally customers compare street stores with those in malls or shopping centres (5), concerning safety, easy access, and added glamour to better economic conditions to middle and low income population. some stores emphasize the practicality of street stores. for people in the neighbourhood, the access is easier than in the malls: parking lots are of easier access, faster and free. when customers are willing to buy something specific, it is faster to buy at a street store than in a mall. sometimes street stores sell more than the shops in malls. some shops are more attractive and larger, they are strategically located in places with huge people circulation and their access with the customers is more direct. street retail stores are attractive (6) because they agglomerate many groups of products in the same place. stores offer a mix of clothes, bedding, shoes, cosmetics, jewellery, home appliances, electronic sets, etc. it is important to have prestigious brands around. people like to walk on the streets and buy. street retail stores are in a geographic region where collections and partnerships are launched. when they are asked about some kind of store when they need of quality. it is important to have skills in bui environment for the store, according to each kind of product. customers value fashion services (8) aligned to customers’ expectations and desires. arrangements that customers may need to clothes being bought in the store. researched shop has a space inside the store that offers services of aesthetics and body treatments as shiatsu, massage, manicure, depilation, and comfortable chairs, lcd tv, dvd, wifi and even ipad for customer entertainment. hypermarket (9) of fashion items seem not to exist so much in the type of store has self-service, supported by the purchase by impulse. products are well exposed and have competitive prices when asked about online retail (10) increasing and accelerated path, because customers know what to access and where to find what they need. the use of internet already reaches typical customers of the sales of cosmetics are partners of internet oriented than a channel of brand communication with the customer. it generates considerable amount of sales. some customers go to the store as a program with friends that like to buy what is more frequently used by famous brazilian fashion blogger. in order to reach the target, the stores have invested in these blogs, sending looks and give credits to the brand. serves customers who live in geographic regions far from the physical stores. have e-commerce. one company commerce with a huge american department store chain the website stock is significantly larger and diverse, comparatively. in the stores, sales people help the customers. other companies networks not only to communicate special sales, trends and novelties, but also for the relationship with the customers that are immerse in the internet. finally, customers value some marketing and envi instance, size, lay-out, decoration, colours, atmosphere, external and internal presentation, windows, lighting, aromas and perfumes, sound and taste appeal. 4.2 customers’ profile and their perception of fast fashio as it is explained in the methodology, the final group of respondents is represented by 80 young customers, aged between 18 and 30 years old, 54% masculine and 46% feminine, residents of curitiba, parana, brazil, from classes a, b and c (rattam 1998 income for 58% of male and 40% of female is higher than £ 1,200. their professional ranks are mainly of lower level staff, middle level executives and/or small business owners (74% of males and 78% of female). all respondents are still on the und customers present different responses related to the fast fashion knowledge and their level of f/f consumption, for both genders, as it is visualised in table in the feminine segment, knowledge, present some level of f/f consumption. in the masculine group, all 21 customers know about f/f and they consume f/f items. comparing both groups, 78% (29/37) of the feminine segment consumes f/f products and the masculine s customers of different status of f/f knowledge consumption versus f/f non elements of fast fashion (quality, design and price of f/f items when they are asked about specialised stores (7), professionals state that customers prefer kind of store when they need of quality. it is important to have skills in bui environment for the store, according to each kind of product. customers value fashion services (8). some shops emphasise the need of good service, aligned to customers’ expectations and desires. others offer services of sewing and at customers may need to clothes being bought in the store. a space inside the store that offers services of aesthetics and body treatments as shiatsu, massage, manicure, depilation, and comfortable chairs, lcd tv, dvd, and even ipad for customer entertainment. of fashion items seem not to exist so much in the researched service, supported by the purchase by impulse. products are well exposed and have competitive prices. the stores plan an exhibition according to the customer. online retail (10), retailing professionals see some migration, in an accelerated path, because customers know what to access and where to find se of internet already reaches typical customers of the sales of cosmetics are partners of internet. some stores have viewed e-commerce more cash oriented than a channel of brand communication with the customer. it generates considerable customers go to the store as a program with friends that like to buy what is more frequently used by famous brazilian fashion blogger. in order to reach the invested in these blogs, sending products to the editors looks and give credits to the brand. e-commerce can be competition for street stores, serves customers who live in geographic regions far from the physical stores. one company became a physical store in brazil after a long period of e a huge american department store chain. therefore, one supports the other, as the website stock is significantly larger and diverse, comparatively. in the stores, sales people other companies do not have e-commerce, but uses internet and social networks not only to communicate special sales, trends and novelties, but also for the relationship with the customers that are immerse in the internet. customers value some marketing and environmental factors of a store (11), out, decoration, colours, atmosphere, external and internal presentation, windows, lighting, aromas and perfumes, sound and taste appeal. 4.2 customers’ profile and their perception of fast fashion as it is explained in the methodology, the final group of respondents is represented by 80 young customers, aged between 18 and 30 years old, 54% masculine and 46% feminine, residents of curitiba, parana, brazil, from classes a, b and c (rattam 1998 income for 58% of male and 40% of female is higher than £ 1,200. their professional ranks are mainly of lower level staff, middle level executives and/or small business owners (74% of males and 78% of female). all respondents are still on the undergraduate level of education. present different responses related to the fast fashion knowledge and their level of f/f consumption, for both genders, as it is visualised in table 5. eminine segment, 24 respondents out of 29 (83%), that show some fast fashion knowledge, present some level of f/f consumption. in the masculine group, all 21 customers know about f/f and they consume f/f items. comparing both groups, 78% (29/37) of the feminine segment consumes f/f products and the masculine segment, only 49% (21/43). customers of different status of f/f knowledge versus f/f non-knowledge and f/f f/f non-consumption present different evaluation concerning to the elements of fast fashion (quality, design and price of f/f items), as it is shown in table 6. 123 professionals state that customers prefer kind of store when they need of quality. it is important to have skills in building an emphasise the need of good service, services of sewing and at customers may need to clothes being bought in the store. one of the a space inside the store that offers services of aesthetics and body treatments as shiatsu, massage, manicure, depilation, and comfortable chairs, lcd tv, dvd, researched region. this service, supported by the purchase by impulse. products are well plan an exhibition according to the customer. sionals see some migration, in an accelerated path, because customers know what to access and where to find se of internet already reaches typical customers of the region. direct commerce more cashoriented than a channel of brand communication with the customer. it generates considerable customers go to the store as a program with friends that like to buy what is more frequently used by famous brazilian fashion blogger. in order to reach the to the editors that publish commerce can be competition for street stores, but also serves customers who live in geographic regions far from the physical stores. some stores razil after a long period of e. therefore, one supports the other, as the website stock is significantly larger and diverse, comparatively. in the stores, sales people commerce, but uses internet and social networks not only to communicate special sales, trends and novelties, but also for the ronmental factors of a store (11), for out, decoration, colours, atmosphere, external and internal presentation, as it is explained in the methodology, the final group of respondents is represented by 80 young customers, aged between 18 and 30 years old, 54% masculine and 46% feminine, residents of curitiba, parana, brazil, from classes a, b and c (rattam 1998). the monthly income for 58% of male and 40% of female is higher than £ 1,200. their professional ranks are mainly of lower level staff, middle level executives and/or small business owners (74% of ergraduate level of education. present different responses related to the fast fashion knowledge and their how some fast fashion knowledge, present some level of f/f consumption. in the masculine group, all 21 customers know about f/f and they consume f/f items. comparing both groups, 78% (29/37) of the egment, only 49% (21/43). knowledge and f/f consumption present different evaluation concerning to the ), as it is shown in table 6. 124 table 5 – fast fashion (f/f) knowledge versus level of f/f consumption f/f knowledge masculine (43) feminine (37) customers (80) level of f/f consumption consume not consume consume not consume consume not consume f % f % f % f % f % f % know f/f 21 100 12 55 24 83 4 50 45 90 16 53 not know f/f 0 0 10 45 5 17 4 50 5 10 14 47 total 21 100 22 100 29 100 8 100 50 100 30 100 source: survey, 2014. table 6 – levels of f/f knowledge, levels of f/f consumption and customers’ f/f perception customers’ f/f perception related to: f/f quality f/f design f/f price gender masculine feminine masculine feminine masculine feminine levels f sco res f sco res f sco res f sco res f sco res f sco res f/f knowledge vs f/f consumption 21 6.34 24 6.38 21 8.24 24 7.75 21 5.81 24 5.83 f/f non knowledge vs f/f nonconsumption 10 5.00 4 5.25 10 7.00 4 6.75 10 4.70 4 4.25 f/f knowledge vs f/f nonconsumption 12 5.58 4 4.25 12 7.25 4 7.00 12 5.42 4 4.5 f/f nonknowledge vs f/f consumption 0 0 5 6.20 0 0 5 7.00 0 0 5 6.60 total 43 37 43 37 43 37 source: survey, 2014. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present higher scores related to the perception of f/f characteristics, even if the frequencies are lower in 3 out of 4 levels of f/f knowledge and consumption. as shown in table 7, there are 4 different statements of likert scale to identify how customers evaluate f/f stores, their visual & merchandising, the clothes’ collections and the product displays. table 7 statements of likert scale statements the fast fashion retail stores are more organised than the ones that sell the more traditional fashion. the visual & merchandising is better in fast fashion retail sto the assortment of clothes and accessories is better in fast fashion retail stores. the clothes and accessories displays in the stores. source: survey, 2014. table 8 shows the table that includ information to produce the likert scale, related to the four statements. of f/f knowledge with f/f consumption that show the respondents behaviour are based on the matrix of figure 2. table 8 – customers’ evaluation of f/f elements likert scales customers’ f/f evaluation related to: 1. the fast fashion retail stores are more organized than the ones that sell the more traditional fashion gender masculine feminine levels f scores f scores (1) f/f knowledge vs f/f consumption 21 +0.047 24 -0.333 (2) f/f nonknowledge vs f/f nonconsumption 9 -0.333 4 0.000 (3) f/f knowledge vs f/f nonconsumption 12 -0.667 4 0.000 (4) f/f nonknowledge vs f/f consumption 0 nihil 5 -0.080 source: survey, 2014. the highest score of compliance (agreement segment (+1.500), in the level of f/f non the statement 4 (“the clothes and accessories displays in the point fashion retail stores”), although this results should be analysed very carefully, because the frequency is too small (4). the lowest score is from the mas of f/f knowledge plus f/f non stores are more organized than the ones that sell the more traditional fashion the table 3 produce the likert’s sca statements of likert scale the fast fashion retail stores are more organised than the ones that sell the more traditional the visual & merchandising is better in fast fashion retail stores. the assortment of clothes and accessories is better in fast fashion retail stores. the clothes and accessories displays in the retail point-of-area are better in fast fashion retail shows the table that includes the customers’ evaluation, gender and the information to produce the likert scale, related to the four statements. the combined levels of f/f knowledge with f/f consumption that show the respondents behaviour are based on the customers’ evaluation of f/f elements likert scales organized than the ones 2. the visual & merchandising is better in fast fashion retail stores. 3. the assortment of clothes and accessories is better in fast fashion retail stores masculine feminine masculine feminine scores f scores f scores f scores f scores 0.333 21 +0.762 24 +0.708 21 +0.190 24 +0.125 9 +0.222 4 0.000 9 +0.667 4 +0.250 12 +0.333 4 0.000 12 -0.417 4 -0.125 0.080 0 nihil 5 0.000 0 nihil 5 +0.200 of compliance (agreement versus disagreement) is from the feminine segment (+1.500), in the level of f/f non-knowledge plus f/f non-consumption the statement 4 (“the clothes and accessories displays in the point-of-area are better in fast fashion retail stores”), although this results should be analysed very carefully, because the frequency is too small (4). the lowest score is from the masculine group (of f/f knowledge plus f/f non-consumption linked to the statement 1 (“ stores are more organized than the ones that sell the more traditional fashion produce the likert’s scale that can be visualised in the figure 1 125 the fast fashion retail stores are more organised than the ones that sell the more traditional area are better in fast fashion retail es the customers’ evaluation, gender and the the combined levels of f/f knowledge with f/f consumption that show the respondents behaviour are based on the 3. the assortment of clothes and accessories is better in fast fashion retail stores 4. the clothes and accessories displays in the point-of-area are better in fast fashion retail stores. feminine masculine feminine scores f scores f scores +0.125 21 +0.809 24 +0.917 +0.250 9 +0.222 4 +1.500 0.125 12 +0.833 4 -0.500 +0.200 0 nihil 5 +0.200 is from the feminine consumption concerning to area are better in fast fashion retail stores”), although this results should be analysed very carefully, because the -0.667), in the level “fast fashion retail stores are more organized than the ones that sell the more traditional fashion”). the data of 1. 126 figure 1 – customers’ evaluation of f/f likert scales – graphic source: survey, 2014. customers are influenced and they also influence the people around in the consumption process of fashion, although some of them state that they are by themselves in the decision of what to wear (95% of masculine group and 36% of the feminine segment in table 4) and they do not exchange fashion ideas with other people (33% of masculine and 19% of feminine in table 9). table 9 – f/f clothes and accessories – decision maker who decides which clothes and accessories the customer is going to wear? masculine feminine customers frequency and % f % f % f % the customer, always. 30 70 23 62 53 66 the customer, almost all of the time 11 25 13 35 24 30 somebody else (e.g. mother or girl-friend) 2 5 1 3 3 4 total 43 100 37 100 80 100 source: survey, 2014. friends play a common role as the ones exchange ideas of which clothes and accessories the customer is going to wear (frequency of 19 in masculine group and of 15 in the feminine one, in table 10), as well as who asks for fashion advice to the customers (frequency of 11, masculine and of 8 in feminine group, in table 11). the feminine customers mention their mother as one of the persons they go for help, to exchange ideas (frequency of 17 in table 10) or as the one who asks them for advice (also frequency of 17 in table 11). table 10 – f/f clothes and accessories does the customer exchange ideas of which clothes and acces-sories he/she is going to wear? frequency and % no yes total with whom? (multiple choice) friends mother sister others source: survey, 2014. table 11– f/f clothes and accessories who asks the customer’s advice related of which clothes and accessories the person is going to wear? frequency and % nobody asks for advice somebody asks for advice total who? (multiple choice) mother friends sisters brothers girl friend others source: survey, 2014. there are different patterns of purchase per type of clothes and accessories, as it is listed in table 11. the higher frequencies are in bold numbers. some repeated frequenc purchase are “every two months” and “twice a year” for t year” for shoes and accessories (handbags and belts); and mainly “only on special occasions” for shorts and skirts, knapsacks, boots and sandals. “basics” is the first group of items that is in the preference of both segment of customers, masculine and feminine, with frequency of 139 and 208 (table results, it seems that the feminine segment purchase fast fashion items more than the masculine group (110 and 46), although it seems the latter is showing some level of f/f consumption. f/f clothes and accessories – exchanging fashion information does the customer exchange ideas sories masculine feminine f % f % 14 33 7 19 29 67 30 81 43 100 37 100 19 15 5 17 5 8 20 22 f/f clothes and accessories – customer as fashion advisor who asks the customer’s advice accessories the person is going to masculine feminine f % f % 16 37 7 19 27 63 30 81 43 100 37 100 17 11 8 8 8 5 7 6 6 16 17 there are different patterns of purchase per type of clothes and accessories, as it is listed . the higher frequencies are in bold numbers. some repeated frequenc purchase are “every two months” and “twice a year” for t-shirt, shirt and year” for shoes and accessories (handbags and belts); and mainly “only on special occasions” for shorts and skirts, knapsacks, boots and sandals. “basics” is the first group of items that is in the preference of both segment of customers, masculine and feminine, with frequency of 139 and 208 (table 12, next page). from its lts, it seems that the feminine segment purchase fast fashion items more than the masculine group (110 and 46), although it seems the latter is showing some level of f/f 127 customers f % 21 26 59 74 80 100 34 22 13 42 customers f % 23 29 57 71 80 100 17 19 16 12 12 33 there are different patterns of purchase per type of clothes and accessories, as it is listed . the higher frequencies are in bold numbers. some repeated frequencies of shirt, shirt and jeans; “once a year” for shoes and accessories (handbags and belts); and mainly “only on special occasions” “basics” is the first group of items that is in the preference of both segment of customers, , next page). from its lts, it seems that the feminine segment purchase fast fashion items more than the masculine group (110 and 46), although it seems the latter is showing some level of f/f 128 table 11 – frequency of purchase per type of clothes and accessories clothes or accessories every week every 2 weeks once a month every 2 months twice a year once a year only special occasions other frequency gender m f m f m f m f m f m f m f m f vest 0 0 0 1 0 3 2 6 2 10 10 8 10 1 19 8 t-shirt 1 0 0 0 9 4 16 14 11 4 4 6 0 1 2 8 shirt 1 0 1 1 5 2 13 9 14 8 7 8 1 3 0 6 blouse 1 0 0 0 2 3 8 16 14 10 17 4 1 0 0 4 jeans pair of trousers 1 0 0 0 1 1 17 11 14 14 13 6 1 1 2 4 other type of trousers 1 0 0 0 0 0 6 4 6 9 11 14 14 2 5 8 short 1 0 0 0 0 1 1 2 16 10 20 7 3 4 2 13 saia 0 0 0 2 0 0 0 4 0 3 0 12 0 6 0 10 skirt 0 0 0 2 0 1 0 6 0 8 0 11 0 5 0 4 handbag 0 0 0 0 0 0 0 2 0 6 0 14 0 7 0 8 knapsack 1 0 0 0 0 0 0 0 1 4 10 4 20 10 10 19 belt 1 0 0 0 0 0 2 1 6 0 16 9 15 9 3 16 socks 1 0 1 1 3 2 10 15 14 8 11 6 1 0 2 5 training shoes 1 0 0 0 0 0 7 2 10 10 18 15 2 4 5 6 shoes 1 0 0 0 0 2 5 9 6 8 13 7 13 5 5 6 sandals 0 1 0 0 0 1 1 3 2 10 2 7 7 10 31 5 boots 0 0 0 0 0 0 0 0 2 8 2 17 10 4 29 8 flip-flops 1 0 0 0 0 1 2 5 7 11 20 13 5 3 8 4 source: survey, 2014. those characteristics presented in the previous tables (the roles the customer plays in the consuming process – decision marker or advisor and the frequency of purchase) are part of the fashion customer behaviour. 5. final comments, limitations and future research directions based on the information gathered in the street retailers, fast fashion seems to be mostly focused on customer. the target seems to be primarily young people (age 12-35, according to farm,) with high level of information about fashion (284 store), great visibility with the physical store space and emphasis on the brand. the relationship between retailers and customers is very important, as marzo-navarro (2004) and bruce and daly (2006) pointed out, as contemplates mutual benefits. as analysed by fowler and clodfelter (2001), customers perceive the relationship between price and quality, or brand and quality: higher quality can be accepted with higher price. table 12 – clothes and accessories clothes or accessories fast fashion gender m vest 4 t-shirt shirt 6 blouse 8 jeans 3 other type of trousers 3 short 2 saia 0 skirt 0 handbag 0 knapsack 3 belt 2 socks 2 training shoes 7 shoes 2 sandals 0 boots 2 flip-flops 2 total 46 source: survey, 2014. the major differentials of fast fashion in brazil could be credit conditions. and 2014, brazil has passed through significant shift in the composition of income stratification of the brazilian society. poverty indices reduction allowed a reference to a middle class,’ defined by an enlarged c class. the access to better jobs assures higher wages and discretionary income to the families. high rates do not allow them to invest in real estate or to assume any other long term credit. therefore, the ‘new the retail credit to buy personal goods, electronics, items of relatively low price previously considered ‘luxury’ for this socioeconomic class. although rates are still high, the credit is offered with many instalments, al there is a quick response to fashion trends, as some companies work in integrated groups, through the strategy of fashion democratization which enables middle class woman to have access to fashion, it satisfies expectations of low income women that are becoming more demanding and complete. the impact of online branding is felt as rowley (2009) defined, that is the interface between fast fashion retailer and customer. online channel communicate brand values, while fashion retailers achieve consistency of visual identity. extremely important, when considering the new brazilian middle class customers with discretionary wealth to be spent in clothes, shoes, purses, cosmetics and accessories. very effective were the findings of moody, kinderman and sinha (2010), in the sense of the strong relationship between the mood, emotion and personality factors and clothing preference. concerning atmosphere, the stimuli suggested by parsons (2011) seemed to be clothes and accessories – quantity and classification fast fashion formal wear f m f 4 2 0 0 8 0 1 6 0 14 22 8 14 1 1 3 6 2 1 3 5 4 9 2 8 1 0 0 8 0 5 0 8 0 5 0 4 0 7 3 4 0 0 2 2 7 6 2 1 0 0 7 7 0 0 2 10 0 1 0 11 0 3 2 10 0 1 2 2 1 0 46 110 differentials of fast fashion in brazil could be credit conditions. has passed through significant shift in the composition of income stratification of the brazilian society. poverty indices reduction allowed a reference to a middle class,’ defined by an enlarged c class. the access to better jobs assures higher wages and discretionary income to the families. high rates do not allow them to invest in real estate or to assume any other long term credit. therefore, the ‘new middle class’ takes advantage of the retail credit to buy personal goods, electronics, items of relatively low price previously considered ‘luxury’ for this socioeconomic class. although rates are still high, the credit is offered with many instalments, allowing the purchase of many goods at the same time. there is a quick response to fashion trends, as some companies work in integrated groups, through the strategy of fashion democratization which enables middle class woman to have isfies expectations of low income women that are becoming more the impact of online branding is felt as rowley (2009) defined, that is the interface between fast fashion retailer and customer. online channel communicate , while fashion retailers achieve consistency of visual identity. extremely important, when considering the new brazilian middle class customers with discretionary wealth to be spent in clothes, shoes, purses, cosmetics and accessories. ffective were the findings of moody, kinderman and sinha (2010), in the sense of the strong relationship between the mood, emotion and personality factors and clothing concerning atmosphere, the stimuli suggested by parsons (2011) seemed to be 129 basics m f 10 21 12 14 3 1 11 10 15 18 6 10 14 13 0 2 0 3 0 8 7 13 8 10 14 20 8 13 6 12 4 7 6 12 9 21 139 208 differentials of fast fashion in brazil could be credit conditions. between 2004 has passed through significant shift in the composition of income stratification of the brazilian society. poverty indices reduction allowed a reference to a ‘new middle class,’ defined by an enlarged c class. the access to better jobs assures higher wages and discretionary income to the families. high rates do not allow them to invest in real estate middle class’ takes advantage of the retail credit to buy personal goods, electronics, items of relatively low price previously considered ‘luxury’ for this socioeconomic class. although rates are still high, the credit is lowing the purchase of many goods at the same time. there is a quick response to fashion trends, as some companies work in integrated groups, through the strategy of fashion democratization which enables middle class woman to have isfies expectations of low income women that are becoming more the impact of online branding is felt as rowley (2009) defined, that is the interface between fast fashion retailer and customer. online channel communicate , while fashion retailers achieve consistency of visual identity. emotions are extremely important, when considering the new brazilian middle class customers with discretionary wealth to be spent in clothes, shoes, purses, cosmetics and accessories. ffective were the findings of moody, kinderman and sinha (2010), in the sense of the strong relationship between the mood, emotion and personality factors and clothing concerning atmosphere, the stimuli suggested by parsons (2011) seemed to be 130 perceived by customers that look for an environment not necessarily sophisticated and “chic”, but pleasant and organised. it should be a store where the customer can easily locate and find the items that he/she wants. it can be modern, with or without sound, aroma/perfume and taste appeal, but a store that responds to his/her anxiety of being ‘in’, despite the reasonably simple environment. once in a while the store has to go through reforms, changing the visual identity, the product distribution inside, and sometimes even moving walls. this is important for the customers to constantly notice the brand innovation. according to the results related to customers, some information can be summarised as follows. customers present different responses related to the fast fashion knowledge and their level of f/f consumption, for both genders. in the feminine segment, 83% of the respondents, that show certain fast fashion knowledge, present some level of f/f consumption. in the masculine group, all customers part the survey, know about f/f and they consume f/f items. comparing both groups, 78% of the feminine segment consumes f/f products and the masculine segment, only 49%. it seems that there is a tendency that customers with some f/f knowledge and level of f/f consumption present higher scores related to the perception of f/f characteristics. the highest score of compliance (agreement versus disagreement), through likert scale is from the feminine segment (+1.500), in the level of f/f non-knowledge plus f/f non-consumption concerning to the statement 4 (“the clothes and accessories displays in the point-of-area are better in fast fashion retail stores”), although this results should be analysed very carefully, because the frequency is too small. the lowest score is from the masculine group (-0.667), in the level of f/f knowledge plus f/f non-consumption linked to the statement 1 (“fast fashion retail stores are more organised than the ones that sell the more traditional fashion”). customers are influenced and they also influence the people around in the consumption process of fashion, although some of them state that they are by themselves in the decision of what to wear (95% of masculine group and 36% of the feminine segment) and they do not exchange fashion ideas with other people (33% of masculine and 19% of feminine). friends play a common role as the ones who exchange ideas of which clothes and accessories the customer is going to wear (frequency of 19 in masculine group and of 15 in the feminine one, as well as who asks for fashion advice to the customers (frequency of 11, masculine and of 8 in feminine group). the feminine customers mention their mother as one of the persons they go for help, to exchange ideas or as the one who asks them for advice concerning to what to wear. “basics” is the first group of clothes that is in the preference of both segment of customers, masculine and feminine, with frequency of 139 and 208, respectively. from its results, it seems that the feminine segment purchase fast fashion items more than the masculine group, although this latter is showing some level of f/f consumption. the practical implications for the retail companies are to pay attention in the customer’s behaviour that consumes fashion items, especially fast fashion clothes and accessories and the timing of collections. as grose (2012) mentioned: it is necessary to “…give people what they want when they want it”. one of the contributions of the research is to show some characteristics of fast fashion customer’s behaviour related to the combination of f/f knowing and f/f consumption, using consolidate theories (engel, blackwell, miniard, 2000; kotler and armstrong, 2008) with new concepts of fast fashion (solomon and rabolt, 2009). the other contribution is concerning of the interfaces between f/f retailers’ and their customers, highlighting some aspects of these relationships, such as, the atmospherics’ elements (schmitt, 1999; lindstrom, 2005), the salespeople closeness, the season’s must-have, the sewing and repairing services, among other features shown in the study. the main issue is to show the importance of business schools’ role in a way to develop contents linked to fashion and its different categories, such as fast fashion retailing and to prepare the future profe such different sides of fashion. this study has some limitations. units. the two surveys are conducted in separated period of time brazil. only street retailers are interviewed. the professionals that work in mall stores (chase, 2012) are not included in the logos, etc. are not shown is the study, only their names which are extracted from public sources. future research on the field could be addressed to: (1) to improve fashion concepts and (2) how to evaluate the customers’ and street retailers’ responses. the research format and its methodology can be used to study diffe such as mall’s stores and online shops. social class and customer’s perception. random sampling can improve the quality of t importance of fast fashion (f/f) between developed and emergent countries. references 1. bam – british academy of management (2012). setting a new research agenda. management, london, uk. 2. brakus, j. j., schmitt, b. h., & l. zarantonello (2009). brand experience: what is it? how is it measured? does it affect loyalty? 68. 3. bruce, m. and daly, l. 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(2002). como sao paulo: 4. ed. atlas (in portuguese). 12. grose, v. (2012). concept to customer 13. kinley, t. r. (2010). fit and shopping preferences by clothing benefits sought. fashion marketing and management categories, such as fast fashion retailing and to prepare the future professionals to deal with of fashion. this study has some limitations. the type of study explains the results only for the sample units. the two surveys are conducted in separated period of time and in different cities of eet retailers are interviewed. the professionals that work in mall stores chase, 2012) are not included in the study. due to copyrights issues, the brands’ images, logos, etc. are not shown is the study, only their names which are extracted from public future research on the field could be addressed to: (1) to improve the knowledge of fast how to evaluate the customers’ and street retailers’ responses. the research format and its methodology can be used to study different kinds of retailing, such as mall’s stores and online shops. (4) it is also possible to study the relationship between social class and customer’s perception. (5) to use mann-whitney test, random sampling can improve the quality of the results. and (6) to study the levels of importance of fast fashion (f/f) between developed and emergent countries. british academy of management (2012). the future of the retail fashion store: setting a new research agenda. retail fashion seminar. british academy of management, london, uk. brakus, j. j., schmitt, b. h., & l. zarantonello (2009). brand experience: what is it? how is it measured? does it affect loyalty? journal of marketing, vol 73 (may), pp.52 bruce, m. and daly, l. 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(3) rent kinds of retailing, it is also possible to study the relationship between whitney test, larger samples and and (6) to study the levels of importance of fast fashion (f/f) between developed and emergent countries. the future of the retail fashion store: . british academy of brakus, j. j., schmitt, b. h., & l. zarantonello (2009). brand experience: what is it? , vol 73 (may), pp.52journal of fashion international retail marketing – a case study , retrieved august, business/internationalbrazil/article593004/. : choosing among five . orlando – florida: comportamento do consumidor [consumer behavior]. rio de janeiro: ltc publishers (in portuguese). a study of the likert technique of attitude scale construction. university of connecticut. , 2013, from fowler, d. and clodfelter, r. 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(2007). pesquisa de marketing [marketing research]. sao paulo: 6ª ed., atlas (in portuguese). 19. moody, w.; kinderman, p.; sinha, p. (2010). an exploratory study: relationships between trying on clothing, mood, emotion, personality and clothing preference. journal of fashion marketing and management. vol. 14 iss: 1 pp. 161-179. 20. parson. (2010). fit and shopping preferences by clothing benefits sought. journal of fashion marketing and management. vol. 14 iss: 3 pp. 397-411. 21. rattam, e. (1998). ‘novo modelo de estratificacao socioeconomica para marketing e pesquisas de marketing’ [new social classification approach for marketing and marketing research] (in portuguese). [on line]: retrieved july 1st, 2008, from <http://www.anpad.org.br/enanpad/1998/dwn/enanpad1998-mkt-27.pdf. 22. rowley, j. (2009). online branding strategies of uk fashion retailers. internet research. vol. 19 iss: 3, pp. 348-369. 23. schmitt, b. h. 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(1981). estatistica aplicada a economia e a administracao [applied statistics for economy and business]. rio de janeiro, brazil: ltc publishers (in portuguese). web pages 1. ibge (2014a). brazil population. retrieved october 24th, 2016 from ftp://ftp.ibge.gov.br/estimativas_de_populacao/estimativas_2016/estimativa_dou_2016_ 20160913.pdf 2. ibge (2014b). young residents parana state. retrieved october 24th, 2016 from http://www.ibge.gov.br/estadosat/temas.php?sigla=pr&tema=censodemog2010_amostra 3. ibge (2014c). retail companies – brazil. retrieved october 24th, 2016 from http://www.ibge.gov.br/estadosat/temas.php?sigla=pr&tema=pac2014 9 coviello_di trapani 169 supply risk management: mitigation strategy antonio coviello, giovanni di trapani irat – cnr, italy received: april 17, 2013 accepted: september 14, 2013 online published: october 14, 2013 abstract the role of risk management is to analyse the measures aimed at protecting firms, specifically the risk management techniques. company protection is a field in which managerial innovations are urgently required. the need for the supply risk management is the result of social awareness for safety, law-makers desire to regulate dangerous activities and protect individuals exposed to risk, the evolution of technologies which are becoming increasingly complex and dangerous. malicious and accidental events imply substantial costs that in the most severe cases can even exceed the company’s financial capability. an accurate management of these events and a mitigation strategy can then be a valuable source of saving. a low level of propensity to manage and govern mere risks is also due to a specific firminsurance company relationship characterised by both co-operation and conflicts: nowadays firms do not want “traditional” insurance policies only; they require a range of quality innovative insurance-financial products with consulting services. key words: supply risk management; mitigation strategy; insurance. introduction the paper will develop, with an inductive/deductive approach, a consistent theoretical frame of reference, based on modern analytical techniques for the assessment of the dynamics of premiums/prices insurance as a result of ongoing changes in the industry. the methodological approach provides, firstly, correlation between factors, risk measurement techniques and discretionary and evaluates prevention plans, plans to reduce and transfer insurance the methodological approach mainly used in the definition of the working hypothesis is quali-quantitative and will be substantially based on the analysis of case studies and best practices. in view of the synergies with the insurance companies and trade association and, more generally, with the stakeholders of the system. will also spread the use of focus groups. the paper intends to explore the theme of global risk assessment company, an operation which is certainly difficult for the governing body of the qualifying element of the company and, ultimately, in ensuring an evolution resonant systemic relations. the paper will study the major insurance instruments to cover the pure risks, through the comparative analysis of the existing insurance schemes in italy and europe in order to assess the compliance of the premium levels for the type and level of insurance cover. these results will form the basis for 170 designing any new tools/services that include both insurance contracts (policies) and reinsurance schemes tailored to the needs of the customers. 1. traditional risk management and relevant evolved typologies innovation has always been the main development driver for individual firms and the production system as a whole. it does not exclusively involve technology and creation of new products and processes. along with technological innovation we also have managerial innovations, namely identification of new techniques for resource management, labour organization, operation planning, decision-making. managerial and technological innovation may be aimed at cost saving, turnover increase, quality improvement (also in the areas that can be hardly quantified), business management. in its evolved typologies risk management is an example of managerial innovation aimed at managing wilful and accidental adverse events, also called business protection (golinelli, 2000). . these adverse events may include fire and computer crime, theft and brand counterfeiting, attacks and industrial injury, all of them causing damage to the organisation’s tangible and intangible assets and to its human capital (crockford 1980 e 1982, banhan 1994, lehar 2002).. business protection is a field urgently requiring managerial innovation due to the following reasons: 1) management of wilful and accidental events likely is – both in the practice and in the corpus of business knowledge – the less advanced area amongst the different areas of the general business management. compared to well-established functions such as marketing, finance, administration, many deficiencies can be found in decision-making methodologies, tool refinement, activity planning, evaluation of results and, in general, in the proper management of a business problem; 2) wilful and accidental events increasingly tend to worsen. this phenomenon does not involve all typologies of risks but is particularly evident with respect to environmental risks and those associated with liability for product malfunctioning. this worsening is due to: a higher social awareness of safety issues; the law-makers’ tendency to regulate hazardous activities; protection of individuals exposed to risk; evolution of technology towards forms characterised by a higher level of complexity and dangerousness; 3) wilful and accidental events involve high costs that, in the most severe cases, cannot be afforded by the firm. a careful management of these events can then be a valuable source of saving. there is an increasing need to rationalise and up-date business protection techniques (antonelli, 1997). amongst the innovations aimed at meeting this need risk management is the one that can be better applied to any typology of risk. actually, while allowing for the management specificities of each class of wilful and accidental risks, risk management is based upon a more general approach. to some extent risk management is a new managerial approach including each individual action aimed at protecting the organisation; it combines different approaches, risk management tools, expertises that, so far, have been characterised by fragmentation and lack of interconnection. it seems that risks can be systematically found at any level of the business functions (something that cannot be ascribed to the latest theoretical developments). the traditional elements of risk management include: a) structuring of risk management activities, according to a sequence-based model where final decisions are supported by a preliminary identification of the individual and potential risk. the model includes three fundamental phases: 1) risk identification, aimed at implementing a regular and constant monitoring of the possible threats; 171 2) risk evaluation, namely the translation of threats in quantitative terms, in particular by determining the likeliness of the event occurrence and the potential seriousness of the damage; 3) risk treatment, within which the most suitable actions are decided and implemented in order to reduce risks and bring them at a level viewed as convenient vis-à-vis the firm’s targets (forestieri, 1996, 1999; barlow, 1993). linking risk treatment to a preliminary data gathering and processing means getting rid of empirical decision-making approaches based on approximations and intuition-based judgements that do not allow for the firm’s overall cost effectiveness. additionally, the identification and evaluation phases enable to enhance prediction abilities as to possible adverse events, above all if they are new events or events that do not occur on a regular basis (leyents a.,1993). b) high integration amongst the different risk management tools. business protection is characterised by a high heterogeneity of the issues covered and by substantial differences amongst the action tools used. insurance on the one hand, and technical solutions to prevent threats on the other hand, are two separate worlds with different counterparts, expertises and philosophies (finken e laux, 2009; lakdawalla e zanjani, 2012) . c) extension of the range of tools, trespassing into the field of flow management financial techniques. the basic principle is the attempt to reproduce a number of aspects typical of the risk portfolio of the insurance companies. the basic advantage is a higher flexibility and freedom when deciding which business protection traditional tools have to be used. d) shifting decision-making methodologies toward a financial approach; in line with what is already done when assessing any business investment. a harmful event is basically viewed as the source of a negative monetary flow and risk management actions as tools to reduce these flows (borio c., furfine c., lowe p., 2001). e) searching for the maximum possible integration between the management of wilful and accidental events and the overall business management. business protection suffers from a sort of a particularly harmful organisational isolation; the managers entrusted with this area should instead constantly interact with the managers from all functions. as each function is exposed to specific risks, managers should contribute to identifying and preventing potential threats. risk management is based on the creation of links between firm protection and firm management, with a specific focus on the development of suitable communication tools and the assignment of a specific position to the person charged with risk management (a position equal to the one held by the various functional managers) (haller m., 1976; williams c.a.,1995 ). however presenting risk management as a managerial innovation is in conflict with the fact that the most advanced nations have adopted this technique many years ago (in particular great britain and u.s.a). risk management is one of the most common managerial techniques used in many no-profit organisations as well. traditionally risk management is confined to the so called pure risks, namely those risks that only take the possibility of loss into accounts (borghesi, 1985; leyents a., 1993). the general aim of the risk management sub-system is then to guarantee protection against unfavourable events and their effects. given for granted that risk management is closely linked to the firm’s size, what mostly differs real risk management from an insurance-type risk management is the assignment of competences both in the prevention and insurance fields. in the case of risk insurance management, a distinction must be made between two different situations: 1) the relationship with the insurances is managed accurately, following modern procedures and with suitable resources; 2) the firm confines itself to a mere 172 operational management of policies and accidents (born e klimaszewski-blettner, 2013; klein e wang, 2009; kunreuther e pauly, 2006),. 2. resources available and relationship with the insurance company it is worth highlighting the low level of dissemination of the risk management function in italy. the typology and quality of the operations carried out, the tasks and objectives assigned and the resources available depend on the deficiency of human and financial resources. additionally, objectives and risk management concept evolve more rapidly than resources, thus generating a deeper discrepancy just in the most developed firms where risk managers perform their function. it is worth mentioning another crucial element of analysis: the variability of resources in the event of a crisis. actually when a firm experiences a period of sales reduction, some of the measures required to maintain management cost effectiveness are: rationalisation of the activities and reduction of unproductive expenses. expense reductions usually involve those related to risk management, although this function is allocated a lower level of resources than other areas equally subject to expense cuts. the objection might be raised that risk management is a function that might generate revenues or non-losses (e.g. the economic damages avoided by the firm thanks to accident prevention). however the business practice is resolutely in favour of the expense centre approach campbell j., y. lettau, m. malkiel, b.g. xu , 2001),. it is usually maintained that the development of risk management is closely linked to the evolution of the firm-insurance company relationship. in the united states the acceleration in risk management growth coincided –as from the 80’s – with a particularly unfavourable economic trend of the insurance market, also characterised by difficulties in obtaining risk coverage for a number of risk categories (crockford g.n., 1982). according to many authors, the practice of the italian insurance market unfortunately reflects this model that does not favour the dissemination of risk management and justifying the firms’ management deficiencies with the behaviour of the insurance companies is not sufficient (coviello a, 2005). in general it can be maintained that risk management tends to develop above all because insurance companies are quite demanding as to safety measures, are unwilling to cover any typology of risk and extremely accurate in searching a cost-effective technical management. the characteristics of the relationship with the insurance company have to be analysed regardless of the coverage problem. the insurance policy can be supplemented with a number of ancillary services that the firm might require from the insurance company (considering its competence in this field) (coviello, 2005; forestieri g. 1996 e 1999) . the risk analysis is the whole set of operations and methodologies used to identify and assess mere risks. the threats the company assets are exposed to cannot be easily identified as they are usually “hidden” behind apparently normal and safe situations. the risk analysis includes collection and processing of data to improve risk knowledge, increase the level of accuracy of the measures and refine the quality of the decision-making processes; identification is instead aimed at analysing which are the potential threats the firm is exposed to, describing their source and potential effects; assessment defines, whenever possible, the extent of the risk through a quantitative measure (maximum possible loss, mean possible loss, etc.) both stages of the risk analysis are necessary, although the former is more widespread and the latter is sometimes viewed as a scarcely useful additional analysis. risk assessment is usually referred to the insurance company that, on its turn, often does not carry out detailed analyses but just applies a number of standard parameters to quantify the threat. 173 there are different effects resulting from an insufficient risk analysis (corvino g.p.,1996): lack of preparation of the firm in front of concrete threats that were not identified or underestimated; misallocation of the resources to various insurance policies and other items, related to different typologies of threat, with excess expenditures for not severe risks and lack of expenditures for really dangerous risks; impossibility, due to the lack of reliable data, to use cost-effective decision-making methodologies. in general, the dissemination of rigorous approaches to risk analysis has to be viewed as a crucial component to assess the practice of mere risk management. modern firms consider the quantity and quality of data as a key for efficiency and competitive success. risk management cannot be included in the crucial management areas without having a reliable information system basically including news and data on risks (davenport t.h., 1991; coviello, 2005; corvino 1996). it is difficult to make empirical and theoretical generalisations with respect to risk prevention. the physical protection of the firm’s resources against malicious or accidental threats is an idea that under unitary concepts – actually hides a large fragmentation of the problems. for example, protection of information systems and repression of brand counterfeiting have very little in common (different expertise required, different operational tools, management principles, reference actors). such a heterogeneity requires independent organisational solutions that prevent from identifying within the firm an area responsible for managing risk prevention as a whole. 3. integration between insurance and prevention one of the risk management key principles provides for a unitary management of physical safety and insurance. these two tools can be either complementary or replaceable. while the complementarity relationship between prevention and insurance is quite obvious (provided the company has accurately analysed the quality of the risk covered and adjusted the premiums consistently), the replaceability relashionship is not always fully understood (carniol f., 1996). risk retention is a solution that can be adopted when the risk can be taken on using the firm’s regular financial resources. it is well-known that, if we consider the resulting positive and negative financial flows, in the long term insurance is never convenient from the economic point of view. actually if the premium paid by the clients is higher (wrong assessment made by the insurer excepted) than the expected average loss linked to the risk taken on without adversely affecting the firm’s financial balance, retention might be an interesting and favourable solution (forestieri g., 1996; coviello 2005). without dwelling on a “financial-term” of risk management (porzio et al, 2011), there is no doubt that retention – vis-à-vis prevention and insurance – constitutes a third element the management of mere risks has to pay the due attention to. an advanced and modern risk management implies that risk managers have to devote part of their time to the financial planning of the interventions to be implemented in close co-operation with the financial managers. 4. decision-making methodologies. decision-making methodologies are the whole set of approaches, techniques and rules used to choose the most suitable option allowing for the objectives to be pursued. 174 all problems admit at least two options as we have to decide whether we want to do something or not. within a firm decision-making methodologies must have an economic feature, as the objectives to be achieved are economic objectives. this means that, in principle, any decision problem must be addressed by comparing the costs and revenues associated with the options available. of course this approach does not include the cases in which a behaviour is compulsory or justified by strategic considerations that do not allow for an economic quantification. in the risk management field decision-making methodologies are affected by the high level of uncertainty of mere risks. to make proper decisions from the economic point of view, we should know in detail which is the loss that a given risk would generate in a given period; however, clearly enough, this information might be acquired only if the risk would be certain, i.e. if the risk would not be a risk any longer. consequently in risk management less rigorous decision-making methods must be adopted, resorting to personal experience and empirical rules. this does not mean that we have to exclude the economic calculation that can be made based on uncertain although quite reliable data, provided that an accurate identification and assessment work is carried out so as to get reliable data on many risks, above all on those the occurrence of which is not very infrequent (space, 1996). brokers and insurers are a crucial reference parameter in the decisions to be made; sometimes law provisions, broker’s or insurer’s opinions are accepted in a passive way (coviello a.-pellicano m, 2010). in highly decentralised firms with long hierarchical scales, top management directly intervenes only on crucial matters; therefore its involvement in risk management has to be interpreted as a sign of interest in the mere risk problems (coviello, 2005). vice-versa, in centralised firms with short hierarchical scales, top management, that often coincides with ownership, tends to participate in any decisions and the not infrequent direct management of mere risks, meant as a mere purchase of insurance polices, has to be viewed as an indicator of a lack of risk management. 5. conclusions the entrepreneurial culture will then be the result of a constant interaction between the assumptions and theories initially conveyed by the firm’s founders into the group and the experience pathway of the group itself may vary as a function of the cultural level of the entrepreneur and his group. the in-firm learning level depends on the strategic approach planned for turning individual knowledge into a collective asset. it is then important for italian entepreneurs to get in line with european standards (england) and world standards (usa). in these countries the risk management function has become increasingly important; it is applied allowing for the firms’ (even small firms’) needs, and the risk manager professional figure is viewed as an opportunity to find the correct answer to anomalous phenomena occurring during the firms’ life. there is a pressing need to analyse the risk management phenomenon so as to stimulate a debate aimed at its actual application in the italian firms, outlining an approach that allows for the different strategic behaviours and industrial policy objectives. this will lead to a cultural growth of the italian top management viewed as crucial by many people; such a cultural growth will also enable to give a different configuration to the tools that the market provides and will provide in the future for risk management. 175 a higher attention to the firm’s risk management is also necessary as result of this current phase of changes that are usually sudden, urgent changes requiring timely decisions demanded by difficult contexts where the firm’s survival is challenged. these are crucial or even drastic and traumatic changes involving not only the strategies but also the organisation culture, the structure of ownership and the stakeholders whose commitment is required to pursue the following objective: bringing the firm back to balance, profitability, development, namely to a normal life with long-term prospects. references allegrini m. 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(1992), “success strategies in a service economy”, european management journal, vol. 10, n. 3, september. williams c.a.,(1995) risk management and insurance, mc grawhill. 3 cecchinato_hu_vescovi 41 the communication of foreign products in china through the store: an empirical analysis francesca checchinato*, lala hu, tiziano vescovi ca’ foscari university of venice, italy received: february 28, 2013 accepted: july 2, 2013 online published: october 10, 2013 abstract in china foreign brands are faced with brand origin confusion, which creates benefits for local brands. therefore, marketers should provide information related to the coo by using not only products and promotions, but also distribution. in particular, stores could be an important starting point to communicate the brand origin and image, as they represent evidence of the brand world and a powerful setting for storytelling. in order to analyse how the coo has been used by foreign (italian) brands in the chinese market, we examined 45 points of sale in china to check whether italy is somehow recalled in their hard elements or during the shopping experience by using the mystery shopping research technique. the results highlight a relatively traditional, marginal, and iconic use of the coo in a market that is new, important, and highly dynamic. some managerial implications will be discussed. keywords: country of origin; store image; retail; mystery shopping; china; foreign brands; italy. 1. introduction china has become one of the major battlegrounds for western brands, competing with local ones to attract consumers’ attention in order to increase their market share. these brands can be sold both in specialized multi-brand stores, among many other foreign brands, and in stores dedicated to the brand (mono-brand or flagship stores). since 1992, when the central government opened china’s retail market to foreign investors, many companies decided to enter this huge market by using the second strategy, opening direct-owned stores, such as flagship stores, to help them reinforce the brand status and enhance and maintain relationships with customers, distribution partners, and the media (moore, doherty, & doyle, 2010). although china remains an opportunity for foreign companies, in the past few years we have faced decreasing competitiveness of foreign brands (zhou & hui, 2003). the reasons are many – e.g. improvement of quality of local products, ethnocentrism, etc. – but one of them could be related to confusion about the brand origin (zhuang, wang, zhou, & zhou, 2008), due to the use of a foreign-sounding name by some local brands or, on the contrary, to the company’s brand localization strategies in the case of foreign brands. chinese consumers are not always aware of the country of origin (coo) of the products they purchase and this could dilute its positive effect. for foreign brands, reducing the brand origin confusion could be 42 helpful as they seem to be preferred to local brands (zhou & belk, 2004; zhuang et al., 2008); thus, the higher is the knowledge of the foreign brand, the less likely consumers will be to misjudge its origin. marketers should provide information related to the coo using the product itself, promotions, and distribution, in particular stores. in the case of multi-brand stores, the coo can be provided with the packaging of the products or in some point of purchase (pop) materials, while in the case of flagship or mono-brand stores, the coo could potentially be used in any attribute of the store. considering the increasing importance of the retailing sector, the role of the store to build a true and long relationship with its customers (hirschman & holbook, 1982; schmitt, 1999) and enhance the brand image most of all in the chinese market (checchinato, 2011), it seems important to analyse how the country of origin has been communicated to consumers through the store, which is the aim of this study. in fact, despite the important role given to the country of origin and country of design by companies and the recognition given by the literature, to our knowledge no study has tried to analyse how this information cue is used in store during the consumer shopping experience, by using store elements and sellers’ information. in particular, this paper aims to analyse how the coo has been used for italian products in the chinese market. we examined 45 points of sale in china by using the mystery shopping research technique, first checking the store’s characteristics, then whether italy is somehow recalled in the hard elements of the store and during the overall shopping experience. the paper is organized as follows. first, we present a review of the literature related to store image and coo, highlighting the gap, then we develop a framework for the analysis. next, we describe the research methodology, providing some details about the technique we decided to use, mystery shopping. last, the results are discussed and some managerial implications are provided. 2. literature review according to many authors (aaker, 1996; kapferer, 1997; keller, 2003), brand image is the perception of a brand as reflected by a network of brand associations in the consumer’s memory. the brand associations are developed from many sources, including the brand name, logo, product use, packaging, communication, and point of sale. in fact, the store, as it is the physical place where the product is sold, represents an important medium for the brand, above all in emerging countries where consumers are less educated about branded products. in order to define a framework to analyse how marketers could provide information related to the coo by using the store, we examined the literature related to two main topics: the elements that contribute to the store image and the main issues related to the coo. traditionally, a store was solely considered as a point of sale (pos), where the customer’s purchase was rationally directed to satisfy a specific need; therefore, the communication in store was simply aimed at selling the product. later, as consumers’ buying behaviour started to be influenced more by symbolic values than by the product’s functions (levy, 1959), the point of sale turned into the point of purchase, representing a point of permanence, too, a place where it is possible to enjoy experiences and give to the customer sensorial, emotional, cognitive, behavioural, and relational values. store image refers to a consumer’s global impression of a retail store (zimmer & golden, 1988); it represents a mixture of tangible or functional factors and intangible or psychological factors that a consumer perceives to be present (lindquist, 1974). 43 in the marketing literature (ghosh, 1990; lindquist, 1974; martineau, 1958; zimmer & golden, 1988), the store image’s attributes have been classified into different categories. martineau (1958) identified four core attributes – layout and architecture, symbols and colour, advertising, and sales personnel – while lindquist’s classification (1974) included nine attributes – merchandise (quality, assortment, styling or fashion, guarantees, and price), service (staff service, ease of return, credit, and delivery service); clientele (social class appeal, self-image congruency, and store personnel); physical facilities (layout and architecture), convenience (mainly location), promotion (sales promotion, product displays, advertising programmes, symbols, and colours), store atmosphere (defined as “atmosphere congeniality”, which represents a customer’s feeling of warmth, acceptance, or ease); institutional factors (projection of the store, reputation, and reliability); and post-transaction satisfaction (returns and adjustments). another categorization was provided by ghosh (1990), who stated that store image is composed of retail marketing mix elements, which are: location, merchandise, store ambience, customer service, price, advertising, personal selling, and sales incentive programmes. if we compare these previous classifications, some attributes are recurrent. first of all are the layout and architecture, which include the store’s physical elements and are termed by pastore and vernuccio (2008) “hard elements”, as opposed to the store’s “soft elements” (entertainment, interactions, brand values …). depending on their location, physical elements can be internal or external. regarding the internal elements, they are composed of the product assortment and store equipment as well as promotional elements (communication material and sales promotion). the product assortment (or merchandise) is represented by the quality, selection or assortment, styling, and fashion of the store products (lindquist, 1974; nevin & houston, 1980), while promotion concerns the actions aimed to create public awareness of the store’s activities (bagozzi, baumgartner, & pieters, 1998), encouraging shoppers to repeat their visits. concerning the external elements, they are the potential influencers that appear at the front of the store: building signs, neon writing, window displays, merchandise presentation, and so on (cornelius, natter, & faure, 2009). especially regarding windows displays, previous researchers have investigated their role in information acquisition, the store entry decision, as well as purchase influence (sen, block, & chandran, 2002). in addition to tangible elements, the literature identifies intangible attributes inside the store, among which the main one is the store atmosphere, defined by kotler (1973) as the conscious planning of buying environments to produce specific emotional benefits that enhance the consumers’ purchase probability. atmosphere consists of four main dimensions: visual (colour, brightness, size, and shapes), aural (volume and pitch), olfactory (scent and freshness), and tactile (softness, smoothness, and temperature). another attribute that previous research has investigated is the customers’ interaction with the seller, which affects customers’ feelings, brand attitudes, and satisfaction (grace & o’cass, 2004) and also provides them with entertainment, an attribute that is part of the store’s soft elements (pastore & vernuccio, 2008). the marketing literature distinguishes the interaction between a customer and a company employee as an “encounter”, if the customer interacts non-specifically with any representative of the organization, and a “relationship”, in the case that the customer engages in repeat contact with a specific employee (gutek, 1995). consequently, in our analysis, the interaction inside the store is considered as an encounter. lastly, the store’s image is also influenced by its clientele, defined as the demographic and lifestyle characteristics of the shoppers (akhter, reardon, & andrews, 1987). lindquist (1974) included sales personnel as part of the clientele; however, in our research framework, 44 we keep these two attributes separate as by referring to sales personnel we focus more on the interaction and service provided rather than the social cues that are defined by the clientele. one particular element of the store image concerns the coo (chaney & gamble, 2008), which is cross-dimensional as it could be related to many of the attributes discussed before. country of origin is not a new concept in the marketing literature; many studies have been conducted to determine how it affects consumers’ evaluation of products, brand perception, and intention to buy (checchinato, disegna, & vescovi, 2012; godey et al., 2012; insch & mcbride, 2004; lim, darley, & summers, 1994; papadopoulos, 1993). even if the findings are not clear yet, as they depend on the countries involved in the studies and the methodologies, the coo continues to be a cue used by companies in order to improve the image of their products and brands. since retailers represent the ultimate participants in the value chain, they can influence consumers’ evaluations and purchase decisions and reinforce the brand communication by spreading values such as the country of origin. while many studies highlight the role of retailers in influencing consumers’ perceptions and behaviour (jacoby & mazursky, 1984; mulhern, 1997; nicholson, clarke, & blakemore, 2002; shergill & cheng, 2008), studies related to the use of the coo in a retailing context are scarce. they analyse the effect of the origin on the retail patronage (swoboda, pennemann, & taube, 2012), how the product origin image improves the retailer-perceived brand equity (baldauf, cravens, diamontopoulos, & zeugner-roth, 2009), the extent to which the store country of origin affects consumers’ perceptions of stores (chaney & gamble, 2008), and the consumers’ view of ethnicity and localness of local vs. foreign stores (mckenzie, 2004). as chaney and gamble’s (2008) findings show, the country of origin of the retail store may have an impact on consumers’ intention to purchase; in addition, foreign stores are perceived as superior to local stores in three dimensions: customer service, products, and complaint handling. while the current literature indicates how the coo influences consumers’ product evaluation, purchase intention, brand equity, and other variables, the ways in which this information is provided to consumers seems to have been investigated little, even though the indicators of origins could be numerous (papadopoulos & heslop, 1993). from the findings related to research on consumer information processing, we can suppose that the differences in the presentation format of products can affect the consumer choice (zhang, 1996), and since the coo is an information cue, using verbal or different visual information can affect consumers’ evaluation. as insch and florek (2009) suggested, research on the use of coo associations in practice is an overlooked issue, but there are differences in the types of coo associations used and how effectively they are communicated to prospective buyers. only a few pieces of research help marketers provide a way to communicate the brand’s origin and how the actors involved in the selling process, i.e. wholesalers, exporters, and stores, transfer this attribute. clarke iii, owens, and ford (2000) analysed marking statutes related to “made in”, but mainly from a legal point of view. insch and floreck (2009) conducted a content analysis about the use of symbols, emblems, or icons that carry the perceptions of coo in the packaging of fast-moving consumer goods (fmcg). some suggestions can also be found in the conclusion and managerial implications of coo studies about the means to make consumers aware of the coo. for example, baldauf et al. (2009, p. 449) suggested referring to “the workmanship and/or design/style of offerings stemming from a specific country to capitalize on positive country associations” through sales communications or advertisements. 45 3 methodology 3.1 the analysis framework while both the importance of the coo and the role of the store in consumers’ product evaluation and purchase intention have been explored, the extent to which retailers indicate the coo in their stores as well as in the brands they sell is unclear. therefore, following the previous research about store image, store dimensions, and attributes and analysing how the information related to “made in” can be provided to consumers through the store, we created a framework to be tested in a sample. the presence of the elements and explicit and implicit information (texts, flags, maps, labels, iconic images, colours, testimonials ...) related to the coo were investigated. the framework was used as a coding scheme for the field analysis (table 1). table 1 – the analysis framework in addition, the researchers were asked to highlight other different elements (not previously coded) that could recall the coo. 3.2 research method in order to achieve our objectives and analyse not only the physical (hard) elements of the store but also the relational elements, the mystery shopping technique was considered the most appropriate. according to wilson (1998, p. 414), mystery shopping is “a form of participant observation, uses researchers to act as customers or potential customers to monitor the quality of processes and procedures used in the delivery of a service”, so it is used to measure the process rather than the outcome, such as customer satisfaction. moreover, as noted by mckechnie, grant, and bagaria (2007, p. 120), “although they are pre-structured, mystery shopping interactions take place in everyday situations, which adds value to the results that are obtained”. mystery shopping can be used to collect factual information, too core attributes presence of coo information in layout and architecture (martineau, 1958) window displays inside the store furniture monitor lcd themed walls store atmosphere (kotler, 1973; lindquist, 1974) visual dimension (colours, texts, images …) aural dimension (music) olfactory dimension (perfumes) promotion (lindquist, 1974) sales promotions communication materials (flyers, catalogues, leaflets, totems) sales personnel (martineau, 1958; pastore & vernuccio, 2008) sellers’ product presentation entertainment experience activated by sellers clientele (lindquist, 1974) international clientele 46 (finn, 2001), such as the number of customers inside the store, the number and gender of the employees serving the clients, etc. this research technique has been used in the service field; in fact, previous empirical findings specifically related to the retail context can be found in the study by mckechnie, grant, and bagaria (2007), who analysed the extent to which service providers use listening actions when interacting with customers, in the work by kehagias, rigopoulou, and vassilikopoulou (2011), who analysed the impact of salesperson behavioural items on the overall evaluation of the salesperson, intention to purchase, and store recommendation in order to develop a reliable mystery shopping inventory (msi), and in the study by finn (2001), who analysed the psychometric quality of mystery shopping data for retail chains and durable goods retailers. 3.3 the field setting the research sample was composed of 45 randomly selected stores belonging to the three sectors of italian excellence with high symbolic values (food, fashion, and furniture), which sell italian products in china’s most relevant first-tier cities: beijing and shanghai. first-tier cities were chosen as they have a more established retail system than second and third-tier cities; in addition, they are characterized by a higher level of consumer sophistication (wong & yu, 2003). previous research (chaney & gamble, 2008) found that more sophisticated consumers are drawn to foreign stores, whereas those from second-tier cities tend to favour locally owned stores. the fieldwork in shanghai was directly conducted by a researcher of chinese origin, while in beijing the mystery shopper was a female of western origin, fluent in the chinese language, who had been living in china for more than three years. the two mystery shoppers belonged to the same age group (28–29 years old), gender (female), and level of education (master’s degree from a western university); however, two different ethnic groups were chosen for the mystery shoppers’ identity as the target of the stores selling italian products in china is not only local, but especially for the first-tier cities also international. this is consistent with wilson’s hypothesis (wilson, 1998), based on which shoppers must match a customer profile that is appropriate for the scenario that they are being asked to enact. moreover, in order to minimize the subjectivity, rating scales were used to judge some predetermined items, such as the evaluation of the sales personnel and store, and some photos were taken to justify the environmental evaluation. data collection was set for a one-month period between november and december 2012. 3.4 conducting of the mystery shopping the shopping fieldworker initiated the activity by examining the point of sale from outside, then she entered the store and started to examine the internal and external elements. the interaction with the mystery shopper was initiated by the sales personnel; only if the salesperson did not actively offer his/her service did the shopper herself start the dialogue. in order to make the simulation credible, the mystery shopper always asked about the products sold in the store with the intention of buying; in fashion stores, she also tried on some items. after the store visit, the fieldworker filled in the framework template, adding some comments if necessary. 47 4. research 4.1 the sample a total of 45 stores were visited, composed by mono-brand stores, i.e. speciality stores based on one brand, and multi-brand stores in which the italian brands have their own corner or their own point of sale in beijing and shanghai. the visited stores belong to the fashion, food, and furniture industries. in the case of food, we did not consider shelf products as their store communication elements are not directly managed by the brands, but by the retailers. only three stores were considered for the food sector: a famous italian pasta corner inside the supermarket of a department store in shanghai, a coffee shop in beijing, and a pizza restaurant in beijing. for each store, we analysed the core attributes using the proposed framework (table 1): layout and architecture, store atmosphere, promotion, store personnel, and clientele. most of the visited stores are located in shopping malls, big structures strategically located in city areas of high foot or car traffic, where top-brand stores are present next to each other (italian and foreign brands in general). compared with western countries, chinese shopping malls are relatively new; they are multi-storey buildings that sell different types of goods, from food to fashion, speciality products, and so on. usually each floor is dedicated to particular categories: for example, supermarkets are in the basement, the first and second floors are occupied by fashion retailers, on the upper floors there are more speciality products, and on the top floors there are restaurants and sometimes a cinema. this distribution format reflects the increasing experiential importance of shopping for chinese consumers (euromonitor international, 2010), who can satisfy their needs in one place. 4.2 layout and architecture coo elements were present in more than half of the visited stores (53.33%) (table 2). the distribution format with the highest percentage of coo elements was the speciality store, in fact 88.89% of the analysed point of sales in this format displayed at least one coo element. also in department stores the usage of coo is above average (62.50%), whereas mono-brand stores had a quite low percentage usage (37.04%). in this consideration the only supermarket sample is not significant. table 2 – distribution format and coo most stores do not have their own window displays (17 stores), as their layout, also when they are located in shopping malls, is similar to open spaces, separated from their competitors by lateral walls only. however, if window displays are present, they tend to be relatively large (14 stores have window displays from 6 to 10 metres). the only store with window displays that surpass 10 metres is a speciality store for furniture in shanghai, which sells italian and foreign luxury brands’ products; in this case, window displays are used to show a selection of the merchandise and capture consumers’ attention. distribution format department store mono-brand store speciality store supermarket total number of stores 8 27 9 1 45 presence of coo (n) 5 10 8 1 24 presence of coo elements (%) 62.50 37.04 88.89 100.00 53.33 48 as we can see from table 3, most stores showed coo elements only inside the store (18); in 6 cases they were both in window displays and inside the store, whereas in none of the analysed stores were they shown only in windows displays. table 3 – presence of coo elements among the stores’ internal elements (table 4), themed walls appeared most frequently (12 stores), followed by lcd displays (5 stores) and furniture (3 stores). one of the furniture elements is represented by a vespa scooter, used in a bag store in shanghai. the total number of stores using at least one of the coo elements in the layout and architecture dimension was 11, 24.44% of our sample. table 4 – elements inside the store and coo note that multiple elements could be present. 4.2 store atmosphere based on the analysis of kotler’s dimensions of store atmosphere (kotler, 1973), the visual dimension (texts, colours, images …) is the prevailing one among italian stores in china. in fact, most stores (14) used texts (both chinese and english) to indicate the products’ coo, then other common elements were the italian flag (11 stores) and images (10 stores). no testimonials were used in the visited stores. table 5 – store atmosphere’s coo elements note that multiple elements could be present. the aural dimension (italian music) was used in two stores (most of the time italian stores played international music or no music at all, as we can see from table 6), while the olfactory dimension (perfumes) was used in one store only. coo elements number of stores inside the store in window displays only both inside and in window displays 18 0 6 themed walls lcd displays furniture stores (n) 12 5 3 presence of coo (n) 7 4 3 presence of coo (%) 58.33 80.00 100.00 images colours texts testimonials italian flag music perfumes presence of coo (n) 10 5 14 0 11 2 1 presence of coo (%) 41.67 20.83 58.33 0.00 45.33 8.33 4.17 49 table 6 – type of music regarding the colours used in the stores, the most common one is white (16 stores, but in 2 cases it was used combined with another colour), followed by other colours (15 stores), black (10 stores), brown (9 stores), and grey (6 stores). in most stores, the colours reflected the brand’s identity more than its country of origin: for example, the store of a pipe manufacturer used the colour of the product’s material, brown. only one store used the italian flag’s three colours in order to stress the coo in the entire environment: more precisely, a pizza restaurant. the total number of stores using the coo at least in one of the atmosphere elements was 21, 46.67% of our sample. 4.3 promotion in our framework, promotion is composed of two categories: sales promotion and the communication materials that are displayed in the store (leaflets, catalogues, totems, etc.). regarding sales promotion, only eight stores ran these, among which five stores communicated them by mean of banners, while in the remaining three stores it was the seller who informed the customer about the special sales, thus giving importance to the interaction between seller and customer. as far as the communication material is concerned, more than half of the visited stores (26) displayed it in different forms: a catalogue (which is the most used material), flyer, leaflet, totem, and counter display (table 8). however, only in 4 stores (20.00%) did the catalogues contain coo elements. table 7 – communication materials and coo note that multiple elements could be present. 4.4 sales personnel as we saw in the previous paragraph, in some chinese stores it is the seller who directly offers the consumer a price discount on the products, making the interaction more personalized. regarding the characteristics of the sales personnel, out of the 45 visited stores, the majority were female (35 stores), while they were male in only 10 stores. the most type of music number of stores italian 2 international 21 no music 20 chinese 2 total 45 catalogue leaflet flyer totem counter display stores (n) 20 8 2 2 2 presence of coo (n) 4 5 2 0 1 presence of coo (%) 25.00 62.50 100.00 0.00 50.00 50 represented age group was formed by people aged between 30 and 39 years (21 stores), followed by the category of 20–29 year olds (18 stores) (table 8). table 8 – age group of sales personnel the middle-age group is linked to the experience of sales personnel, whose level of training and professionalism is relatively high (table 9). sellers’ highest quality results as courtesy, followed by willingness to help, while sellers’ insistence appears to be quite low. only in two stores did the sellers ask the shopper for her phone number in order to keep her updated on the sales promotion. the products’ level of description was above average, but less positive than the other sellers’ attributes. table 9 – general evaluation of sales personnel* * in the evaluation, we used a seven-point likert scale (1 = “strongly agree” and 7 = “strongly disagree”). in the products’ presentation (table 10), of the 45 visited stores, fewer than half of the sellers stressed italian products’ high quality (21 interactions), while in quite a relevant number of situations (10) sellers showed an indifferent attitude towards italian brands, without referring to any special characteristics, in 6 other interactions even comparing them with local or other countries’ products. sellers informed the shopper about the fashionable and famous character of the brand (10 interactions) and emphasized the imported origin of goods (3 interactions), while in 2 situations they informed the client that the product was produced locally. in only one situation did a seller highlight the comfort of the product (more precisely, in a shoe store). concerning entertainment activities, these took place only in the pasta corner of a supermarket in shanghai, where a chinese cook demonstrated how to prepare italian pasta. the product itself implicitly recalls italy and the communication materials also stress the coo. no entertainment activities took place in other stores during the fieldwork. age group number of stores less than 20 0 20–29 18 30–39 21 40–49 5 more than 50 1 total 45 evaluation mean courteous 1.60 experienced 2.84 professional 2.53 willingness to help 1.73 level of product description 3.38 insistent 5.51 51 table 10 – characteristics related to italian products using during presentation note that multiple elements could be present. 4.5 clientele description based on the number of other shoppers visiting the stores while they were present, the fieldworkers evaluated the stores’ traffic. almost all the visited stores were not crowded at all or very little, only one store was very crowded (an italian coffee shop in beijing, similar to the starbucks format), and three stores were fairly crowded (the pasta corner inside a supermarket in shanghai, a young fashion store in shanghai, and a pizza restaurant in beijing). the majority of the visited stores had a mixed clientele of chinese and foreign shoppers (table 11), whereas the clientele was totally local in only six stores. in none of the visited stores was the clientele exclusively composed of foreigners. table 11 – clientele’s composition regarding the clientele’s age and social status, most shoppers encountered during the fieldwork were middle-aged (25–45 years old) and belonged to a high-status group, as shown by their apparel and luxury brands’ bags; thus, the clientele’s image reflects italian brands and their target. the clientele’s image is also closely related to the location of the visited stores, i.e. highlevel department stores or shopping malls with the world’s most famous brands in shanghai and beijing. 4.6 assessment by shoppers based on the store’s physical elements, atmosphere, and clientele’s presence, the fieldworkers gave an overall evaluation of the store, considering the following aspects: pleasantness, cleanness, lighting, spaciousness, tidiness, and crowding (table 12). characteristics interactions materials’ high quality 21 comfort 1 fashionable, famous brand 10 imported goods 3 locally produced goods 2 made in italy not emphasized, product is equivalent to local or other countries’ products 6 no special characteristics 10 clientele number of stores local 6 mixed 39 international 0 total 45 52 table 12 – store’s overall evaluation* * in the evaluation, we used a seven-point likert scale (1 = “strongly agree” and 7 = “strongly disagree”). 5. discussion in general, both the physical elements and the atmosphere of the store are used to communicate the country of origin. out of our sample, 24 stores (53.33%) used at least one of the coo elements. the most common elements to recall coo were texts, which identified “made in italy” products in 14 cases (58.33%). also the flag symbol was frequently used (11 cases, 45.33%). this is consistent with insch and florek’s (2009) research, which examined the different types of coo indicators and found that explicit statements or information disclosing a product’s origin (i.e. “made in” text) are more common than elaborate symbols and labels. as johansson (1993) and lusk et al. (2006) found, a product’s coo is used as an indicator of quality in the case of limited information, which is what happens when consumers are outside the store and do not know the brand sold. as window displays play an important role in information acquisition and the store entry decision (sen et al., 2002), the coo elements should also be placed in the windows. however, the coo was only highlighted there in 6 stores (21.43%) out of the sample that have windows. coo elements favour brand recognition (keller, 2003) and were also emphasized by sales personnel, who stressed the high quality of italian products as their main characteristic, sometimes also mentioning the goods’ imported origin. however, the sellers’ ability in product presentation was not particularly high and the entertaining element was almost completely missing in the visited stores. therefore, in order to make shoppers engage more with the brand, stores’ coo elements together with entertaining activities could be increased. in this way, the sales personnel’s presentation would be facilitated, as well as becoming more interactive and effective, as chinese consumers seem to be fairly influenced by promotions and sellers’ argumentations (lane, stmaurice, & süssmuth dyckerhoff, 2006). moreover, previous research has stressed the importance of the service provided by sales assistants as it influences the customers’ overall shopping experience (merrilees, miller, & mckenzie, 2001) and their satisfaction with the brand (grace & o’cass, 2004). the general impression of the visited italian stores in shanghai and beijing was positive; however, the traffic rate was still relatively low (table 12). this is probably due to two reasons: first, the location of the stores, big shopping areas with a high concentration of foreign brands’ stores, which can facilitate the italian brand awareness, but on the other hand can also makes the competition stronger; second, to be consistent with the luxury brand strategies that try to give a sense of uniqueness to the consumer. in accordance with luxury/foreign brand strategies, in 86.67% of the stores local consumers were mixed with foreign ones. the store is mean pleasant 2.39 clean 1.50 light 2.41 spacious 3.07 tidy 1.73 crowded 6.22 53 overall, the store image of our sample stores is coherent with their brand image in all attributes: physical elements, atmosphere, promotion, sales personnel, and clientele. 6. conclusions and managerial implications this study examined the extent to which the country of origin is used in retail stores. the field setting for the study was composed of 45 stores in the most important first-tier cities of china: shanghai and beijing. mystery shopping and observations were used for the data collection. more than half of our sample used coo elements in the store and this confirms the importance that italian brands give to their origin, in particular those selling products in speciality stores, whereas in mono-brand stores the brand itself prevails over the coo. besides that, the use of the coo could be improved, especially outside the store to convince consumers to enter, during the products’ presentation by sales personnel, and through entertainment activities in order to influence purchase. also, in their communication materials, firms could start to refer to the origin of the brand, if they consider it to be an important cue. the results of our research address some key points: 1. stores represent a powerful setting for storytelling and brand experience; therefore, if the brand is included in the context of a favourable coo image, the point of sale becomes a starting point for the coo storytelling; 2. although marketing studies and institutions involved in promoting firms’ internationalization have recognized that the coo represents a powerful and significant creator of positive images, reputation, and value, so far the coo has not been used in a significant and consistent way by companies; 3. the main tools used to highlight the coo in the stores analysed in the research are relatively traditional, marginal, static, and iconic in a market that is new, important, and highly dynamic; 4. the potential benefits offered by the relationship between sales personnel and customers, as well as storytelling, are not used; in fact, references or image descriptions are provided with generic presentations; 5. as expected, the brand image dominates the coo, but without creating significant integration between the two aspects. the use of the coo image’s descriptive elements cannot follow the logic of standardization or generic globalization since the knowledge of the products’ country of origin can vary in different contexts due to the cultural, geographical, and, in general, psychic distance. this is especially true in china, where we face a new market that has only opened its doors to the rest of world’s products and brands in the last twenty years. as a result, chinese consumers cannot have a consolidated knowledge of and positive stereotypes about the history of the relationship between a product category and the country of origin. in this case, static and self-explanatory elements, such as the flag or the “made in” identification, do not help the client to understand the italian lifestyle better. firms assume that customers should have traditionally strong expertise, which is not present in new markets (or only marginally present). these tools do not tell a story, they just inform the customer that the product comes from a specific country, but if the customer does not know the country’s creative and productive value in a certain category of products, then the informational value is very low. therefore, sometimes the information provided is without value or even incorrect in the case of negative stereotypes, as a not traditionally consolidated image may overlap with more recent images, determined by controversial events (as in the case of japan or the us), leading to a negative brand experience and covering the long history of the products’ quality. 54 managers should consider how the coo value could be built in new markets in an integrated and consistent combination of the individual brands and the country of origin, by using the history of the relationship between the brand and the coo value. if we consider new markets, including the chinese one, in the same way as traditional ones, in which the coo image is well established, taking for granted the knowledge of its value, we make a logical and partly ethnocentric mistake. this is even more risky if the country of origin has not provided recent evidence of excellence that could be highlighted in the hosting country’s media, as in the italian case. in new markets, the coo value has different dimensions and is more related to geographical multi-country regions than specific countries (europe vs. italy). therefore, managers should control and develop the communication, reassurance, and reputation effects on the brand and its relationship with the coo in a different way, gaining more generic and valuable characteristics. in new markets, coo communication requires much more proactive action by companies. to exploit the coo image effectively, it is not sufficient simply to highlight the country of origin, but it is necessary to explain its features and value in the following ways: through integrated communication between the brand image and the coo image; through proactive storytelling activities regarding the meaning and the value of the coo connected to the product and the brand, in order to educate the customer; through increasing the sales staff’s involvement in the development and explanation of the reputation and quality assurance inherent in the product’s and the brand’s coo. regarding the above points, the aspect concerning how the coo is communicated should be considered with specific reference to the chinese market. the coo should be consistent with the specific culture and society, highlighting the product’s role and value according to the cultural and society references, as they can be very different from those normally used in traditional mature markets. for further research, the consumer’s perception and purchase intention related to the coo elements in store represent an interest and new field of investigation. secondly, the coo elements in the store image could be analysed in the context of second-tier cities in order to investigate whether the brand strategies adopted by foreign brands in their stores together with the consumers’ perception differ from those in first-tier cities or not. the latter aspect is particularly relevant in case it is necessary to modify the way in which the coo should be presented and integrated into the brand communication. acknowledgements the authors would like to thank alice giusto for her valuable contribution to the mystery shopping activities and data collection. references aaker, d. 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(1988). impressions of retail stores: a content analysis of consumer images. journal of retailing, 64(3), 265–293. 10 petrucci 155 the effects of musical fit on food preferences francesco petrucci carlo bo university of urbino, italy received: march 7, 2013 accepted: july 5, 2013 online published: october 12, 2013 abstract how music can influence our pleasure for food? when we listen to the music, informations that arrives to the brain to be interpreted may recall, or prime, certain thoughts and feelings that have implications for our attitudes and behaviors. could the thoughts primed by music influence what people actually perceive via another of the senses, in this case taste? results of present experiment suggest that hearing a certain background music while eating some foodstuffs can increase arousing and pleasure in a manner consistent with intrinsic informational aspects of music. according to this it is possible to sentence that people's response may change toward product in a positive way if we match some music congruently with product perceived qualities. marketers have long understood the importance of background music in enhancing consumer's experience satisfaction. the results are discussed in terms of their theoretical implications for research on music and consumer behavior, particularly there is a need to determine whether such effects might be determined by a cognitive response, an affective response or both. keywords : music; consumer behavior; consumer psychology; musical priming; musical fit; consumer preferences. 1 . introduction music has the ability to prime some aspects of our knowledge in a manner consistent with the intrinsic informational content of musical message. these primed knowledges have strong implications for our attitudes and behaviors. because music primes certain thoughts, it makes us more likely to use these thoughts when asked to subsequently think or act. according to these findings several studies within consumer psychology and behavior have shown that informations primed by music can be used, to raises the salience of certain product over the other, causing consumer's selection for those products by activating behaviors associated with that music (north 2012, north 2008, north and hargreaves 1999, mckendrick 1999). for example about the effects of 'atmospheric' content of a retail environment on consumer's purchase intention, many studies argue that music could influence wine purchasing. areni and kim (1993) found that playing background classical music rather than pop music in a wine cellar was associated with the purchase of more expensive wines; in a further research north, heargreaves (1999) found that playing french or german music in a supermarket can lead consumers to buy wine accordingly with music connotations: french music led to french wine outselling german by five bottles to one, whereas german music led to german wine outselling french by two bottles to one. shoppers were not told that 156 music was french or german, nonetheless thanks to musical intrinsic differences of style a notions of 'frenchness' or 'germanness' was primed. similarly north (2012) found that music can affect the way in which we perceive the taste of a wine. for example if the background music is powerful and heavy than the wine is perceived as more powerful and heavy than when no background music is played. if the background music is subtle and refined then wine is perceived as more subtle and refined than no background music was played. the characteristics that people hold concerning listened music influenced their response to wine taste. as seen marketing research focus on the beneficial effects of musical priming concerning its potential to activate and guide consumer's information processing toward certain product attributes. by this approach the affective consequences of priming are regarded as less important. however many studies on consumer behavior point out that music may enhance affective responses to musical stimuli (mattila, wirtz 2001; rickard 2004) since priming the activation of related cognitive constructs is regarding as causing pleasure. there is consequently a need to determine whether the potential benefits of priming are knowledge based, affect based, or both. in the light of arguments such as these, present article addresses one particular influence that music might have on consumer behavior, namely its potential to influence liking and pleasure towards those product which match with its intrinsic characteristics. exactly the experiment here attempts to test if thoughts primed by music can influence arousing and pleasure experienced testing some food, and in particular way liking for cheese. a second research question is advanced regarding the relationship between affective dimension and cognitive dimension in musical priming response. in this regard participants' scores have been analyzed to look for differences in the behavior of the “gender” variable and the “expertise” variable, in order to put in evidence if affective dimension was preeminent rather than the cognitive one. tested predictions are the following: music that is perceived to match with cheese qualities, prime certain thoughts and feelings that lead to an higher judge of liking and pleasure; pleasing and arousal-evoking quality of a musical stimulus are dependent by the extent to which the stimulus is perceived to match with product qualities; musical priming may enhance liking and pleasure toward product experience activating in the consumer an affective based response; while hearing a selection of four piece of music for piano, a group of 29 students was invited to taste two different qualities of cheese. on finishing the cheese, participants were asked to rate their liking for each music-cheese matching and than to compile a brief questionnaire about their musical habit and education and personal preferences for music and cheese. results suggest that matching background music might lead to an higher evaluation of the satisfaction and pleasure and consequently to more positive behavioral responses. 2. theoretical background musical priming can be considered as the “process by which music primes certain aspect of knowledge of the world and leads customers to behave accordingly” (north, yeoh 2009, p.223). these knowledges allow to develop expectancies, as a function of the context, influencing decision's processing on further events (tillman, bigand, 2002). priming in psychology refers to activating parts of particular representations or associations in memory just before carrying out an action or task. it is considered to be one of the manifestations of implicit memory. 157 most affecting attitude of music to prime knowledges results from a sort of coherence level between music and product qualities: this element of coherence can be made operative through the variable of the “musical fit”. mcinnis and park (1994) define musical fit within the elaboration likelihood model (elm) theoretical perspective. the elm states that there are two route to persuasion: central route in which attitude are formed by careful consideration of information relevant to the attitude object, and peripheral route where attitude are formed without active thinking about the object and its attributes, but rather by associating the object with positive or negative cues, such as liked or disliked music, in other words, by some form of conditioning mechanism. high and low involvement are terms used to identify consumer motivations, opportunity and ability to process, or elaborate, information products. the authors argued that musical relevance, or appropriateness to the central message, might positively influence high-involved consumers by conveying and activating relevant information about product qualities. as such music works no more as a peripheral cue but focusing attention on the central message. in fact even if only minimal information of the product are presented (central message), the music might stimulate product relevant-thoughts (gorn 1992). these thoughts might evoke in mind a series of categories as potential attributes, beliefs or attitudes toward products affecting decision's processing and preferences. therefore these knowledges are tools by which handling product informations, saving the cognitive effort needed to perform a response (petty and cacioppo 2004). an example is that priming effects of music are more common if people are asked to judge something that they know little about or find difficult to judge, in these cases people use given patterns of knowledge to access musical experience that is adapting their own cognitive system regarding the events. categories might affect consumer's preferences, since people tend to like those products that they can easily judge typic of a certain category. this cognitive approach about music effect on consumer behavior, is reflected by recent developments in psychology of arts. a number of studies since 1980s have indicated that people prefer artistic objects that are typical exemplar of a given category. according to martindale and moore (1988) “aesthetic preference is hypothetically a positive function of the degree to which a mental representation of a stimulus is activated. because more typical stimuli are coded by mental representations capable of greater activation, preference should be positively related to “prototypicality”, consequently strongest activation are those due to the stimuli judged typical of a category” (p.661). people profess this judge to evaluate the potential of an external stimulus regarding his previous knowledges that constitute just a representative pattern (as a landmark) of his cognitive system. in such a way typic aesthetic patterns, activating relevant related knowledge structures, promoting our pleasure for the stimulus experienced and reinforcing its preference. these cognitive processes, that allow such a sophisticated assessment on what we are experiencing, require a great activation. musical fit seems to stimulates positively this activation, conveying those product related attributes that lead subject's appraisal. therefore applying “prototypicality” model to the concept of musical fit seems to have some promise as a means of explaining the influence of specific musical pieces on people's preferences. this allows us to explain the potential effects of music on consumer behavior in terms of different researched fields in marketing area. many recent studies, in fact, found that music in advertising should similarly prime certain aspects of participants' knowledge of the world. this increased level of activation should enhance the ability to recall the advertisement and the message it contains. while several models of consumer decision making have been proposed (tybout & artz, 1994), this application of the prototypicality model to the concept of musical fit seems to have some promise as a means of explaining the effects of specific 158 musical piece on response to advertising. furtheremore, the notion of fit might explain why stout and leckenby (1988) found that advertisements were perceived more positively (“right for me”) and as more informative when they contained music associated readily with the advertised brand (blair & hatala, 1992); hall, miller, and hanson (1986) found that viewers preferred pop-music videos in which the visual and lyrical content were matched. other researchers has tended to overlook “the communicative meaning that a musical piece may have” (macinnis & park's, 1991, p.225), and “precludes consumers' ability to judge and understand various style and melodies as appropriate and communicative in particular message contexts, exclusive of personal taste”(p.226). indeed, a great deal of research has indicated that responses to music are directly related to their cultural and contextual meaningfulness. in short, music may be affective in promoting advertisement recall because it communicates meaning and information. finally results have confirmed that preference for prototypes model “as it has been applied in the psychology of the art overlaps with notion of fit applied in marketing related research”. nevertheless, despite the potential of such a theoretical framework, a problem concerning the role of the affective response follows from this approach. 3. objectives and methodology in the present study, four music condition were presented to a group of student invited to taste some typology of cheese. two measure of response were observed: first the extent to which subject's liking and preference toward cheese was varying when background music was perceived to match congruently with certain product relevant qualities. second the extent to which subject's judgements was dependent according to personal characteristics as “gender” and “expertise”. as seen through cognitive-oriented models on consumer behavior several variables are responsible to moderate the relationship between music and subjects; this evident complexity of the phenomenon has been here modeled, and thus reduced, observing two main relevant dimension: − one affective related dimension modeled on the trend of the variable “gender”; − one cognitive related dimension modeled on the variable “expertise”. thus three specific hypotheses were tested: the principal hypothesis is that music that is perceived to match with product qualities, prime certain thoughts and feelings that lead to an higher judge of liking and pleasure; second, relevant differences over liking response between 'gender' subgroups, may depend by the activation of heuristically oriented structures of thought. in this case we may assume that fit operate at a sub-cognitive level increasing subject's affective response that reinforce the general arousing level of the stimulus, thus causing a positive response. therefore musical message would be appraised as an aesthetic pattern associated with an emotional contents; third, differences in performance depending on the 'expertise' variable variations are appreciated on the basis of the preference for prototype model. different activations are due to a different way to evaluate stimulus typicality and this is consistent with the hypothesis that musical fit might lead to a different response between experienced subjects and unexperienced. 159 3.1. procedure a sample of 29 students of the university of macerata were asked to taste different qualities of cheese while listening to a selection of musical excerpt. they were asked to verbalize their perception of music, using a series of labels proposed by the experimenter, and to rate their own liking for each music-cheese match. the experiment here has taken place during a university workshop entitled: “consumer's perception: projecting and realizing a sensory experiment on music/product matching” organized at the faculty of economics of the university of macerata. among participants a group of 29 students were selected and trained according to the experiment design. as a first step students were asked to fill out a brief questionary to provide general information about: − personal background: gender, age, and scholarship; − musical background: musical habits, knowledges, attitudes, training; secondly, four musical pieces were played and participants were asked to evaluate own music liking (or disliking) on a four steps scale. students were then provided four labels, elaborated in a preliminary phase of the research, regarding perceptive profile investigated by the research, namely “bold" and strong”, “contrasted and disharmonious”, “soft and refined”, “harmonious and refreshing”. they were asked to match each label with music in a manner consistent with their own perception of the pieces. consequently were offered two kind of italian cheese (“pecorino” and “stracchino”) in return for answering a few questions about its taste while music selection was played in background. finally participants were asked to match each music with both cheese and to rate their preferences for each association by a scale from 1 (disliked) to 5 (liked). a rating of 1 represented a disliking perception of music and food association, while a rating of 5 represented a pleasant and right close perception of both stimuli. for the use in the study following four piano piece have been adopted: p1 – b.j.duskin: dollar bill boogie; p2 – k.stockhausen: study for piano n.ii p3 – f.chopin: nocturne op.9 p4 – w.a.mozart: piano sonata kv 545; each label has been thought on the basis of musical pieces characteristics. they have been adopted to verbalized cross perception between music and food and to observe how in which way fit was perceived. labels also permitted to correlate fit perception to ratings of liking and to relevant variable investigated. responses from students have been almost coherent and correspondent with what hypothesized in the preliminary working phase. indeed the four pieces of music were matched as follows: table 1 – music labels p1 – b.j.duskin: dollar bill boogie bold and strong p2 – k.stockhausen: study for piano n.ii disharmonious and contrasted p3 – f.chopin: nocturne op.9 soft and refined p4 – w.a.mozart: piano sonata kv 545 harmonious and refreshing 160 table 2 results for music/labels matching task: p1 p2 p3 p4 bold/strong 51.7% 6.9% 0.00% 17.2% soft/refined 0.00% 10.3% 89.7% 6.9% harm./refreshing 34.5% 0.00% 10.3% 72.4% dishar./contrasted 13.8% 82.8% 0.00% 3.4% must to think to these categories as variables of a factorial space thanks to which obtaining a graphical display of music with its characteristics and a mapping of the students based on their preferences in such a way that their behavior can be related to musical characteristics. each label is placed at one extreme of a bi-dimensional factorial space and organized for opposite meanings: “harmonious/disharmonious” and “soft/strong”. “harmonious/ disharmonious” axis is been related to a “harmony” factor while the “soft/strong” axis to a “tempo” factor. table 3 – musical characteristics graphical display harmonious soft strong disharmonious b.j.duskin and chopin have been opposed by their tempo, fast tempo vs. slow tempo (these structural indications have been semantically transposed in “soft” vs. “strong” to suggest meanings not technically oriented and thus more suitable for a consumer's analysis context). harmony has been the main variability factor considered between the music of mozart and stockhausen: harmonic vs. dis-harmonic harmony (stockhausen adopt in fact a dodecaphonic system for his piano piece). the second adjective that complete the labels is consistent with a more affective content of music (bold, refined, refreshing, contrasted). current study is not interested to manipulate structural music elements like 'tempo' and 'harmony' in an analytical way. music selection was, in fact, consistent with the idea to create four different evoking profiles simply to survey the perception of fit and correlate it to ratings of likings. the choice to use instrumental piano pieces was consistent with the will to make homogenous certain perceptual parameters (as 'texture' and 'timbre') with the aim to reduce structural contrast between the excerpts and let emerge the general profiles. 3.2. data analysis first step of the analysis has been to extract the set of variables needed to describe musical fit dimension to verify initial hypothesis about the influence of music on subjects' liking and 161 pleasure response. a second step was required to design gender dimension and expertise dimension starting from background questionnaire responses. variable settings adopted for the analysis has been modeled in the following way: music dependent variable: it was selected the variable “musical fit” as musical priming related factor; subject dependent variable: it was selected the variable “musical expertise” as musical background related factor, and the variable “gender” as personal background related factor. the two blocks of variables have been put in correlation under the hypothesis that gender and musical expertise can affect differently musical priming, and consequently consumer's responses. gender is a human nature dimension that moderate the relationship between music and behavior. many studies in the field of psychology of music set out consistent differences between males and females behaviors and especially on hedonic judgements and tastes; there is a clear dissimilarity on stimuli response depending on physiological differences at nervous systems level. on the contrary “musical expertise” factor here, results from the overlapping of two musical related variables: musical knowledges and listening habits. these two elements have been taken to profile the variable of “expertise” used in the research. in brief, measure of the concept of expertise has been based on the observation of variables describing subject's musical behavior, as the sum of his cultural practices in the field of music. this variable was create to split students with a stronger musical training and listening practices (students to which is attributable a certain degree of musical culture) from the others, to explore any differences on behavior. indeed experienced listeners, in a given musical culture, show implicit knowledge of structural pattern and organizational principles in a number of way: trained subjects show better skills in classifying and categorizing musical stimuli also in terms of mental representation. this means that experienced listener can get a deeper insight of musical phenomena (that turns in deeper degree of knowledges) by a better awareness of musical patterns they listen to, in addition ability to judge and understand various styles and melodies as appropriate of a particular context is significantly higher. however present research means to handle a concept of “expertise” concerning a marketing related context, for this reason variables design point out a weaker concept suitable properly for consumers analysis. “expertise profile” designed refers to average musical consumer's skills and not to advanced competence that are beyond the aims of the present research. within the collective analyzed variables of “gender” and “expertise” were distributed as follows: table 4 – percentage conjoint frequencies between gender and musical expertise gender/expertise experienced unexperienced total male female 10.3% 39.3% 32.1% 17.9% 42.4% 57.6% total 50% 50% responses on music/label matching task, between male and female, have been compared with ratings of assigned likings: − chopin's music was congruently perceived as “soft and refined” (89.7% of the collective) and positively associated with the “stracchino” cheese by both groups. ratings of the stracchino as soft and refined were 22.2% higher (mean ratings = 4.52) respect the 162 pecorino (3.41). males scores were 8% higher than females; − stockhausen's music was congruently perceived as “disharmonious and contrasted”(82.8% of the collective) and negatively associated with both cheeses by each group. music was disliked and judged not congruent with product qualities perceived (mean ratings = 1.97 with the “pecorino” and 2.07 with the “stracchino”). no relevant difference of opinions were found between the two groups; − mozart's music was congruently perceived as “harmonious and refreshing from the 94% of the female group and only from the 66% of the male group (72.2% of the whole collective). the piece was positively liked associated with both cheese (mean ratings = 3.4 for both); − duskin's music was perceived as “bold and strong” by the 58% of females and as “harmonious and refreshing by the 65% of males. the pieces was positively perceived by the male group with the pecorino cheese (mean ratings = 4.17), liking was 21% higher than in the stracchino situation (3.08). on the other side female group liking was not positive for either cheese (mean rating = 2.88 for both); differences found between the two groups have been statistically significant (sig. < 0.005) solely in the case of big joe duskin's music and the pecorino cheese. a one-way anova was then calculated to shows differences of liking assigned to each match between the two groups. table 5 – anova gender/score pecorino cheese gender/scores b1 b2 b3 b4 sig. 0.005 0.393 0.503 0.595 f 9.371 0.755 0.461 0.290 means of these ratings, have showed that males's judgements has been more extreme on the scale of liking than those of females, either positively or negatively, about 7% on average. at the same time, where the effects of music congruency appear, we found that the level of liking enhance considerably. in the case of big joe duskin's music, males rated their cheese liking 21% higher respect the scores given to the stracchino cheese (a t-test for paired sample has been conducted: sig. < 0.05) and 25% higher than the females' ratings (sig. < 0.02). males' liking resulted also to be 19,1% higher respect the average of all ratings assigned (3.14). furthermore both groups rated chopin's excerpt with “stracchino” cheese being 22,2% more pleasant than with the “pecorino” cheese, and 27,6% more liked respect the average of the ratings (3.14). liking (or disliking) judgments seems reinforced there where fit is more strongly perceived and it is been observed that ratings became more extreme. especially results regarding big joe duskin and the “pecorino” cheese show differences on response between the gender groups in a clearer way than in the other cases. the two excerpts selected (respectively mozart for females and b.j.duskin for males) primed different thinking that led to different attitudes toward product. it is though to depend on a diverse appreciation of the musical stimulus probably due to the differences on arousing and pleasure perceived. a one way anova show a significant correlation between gender and ratings of liking for music. in the case of b.j.duskin's music a significant value was found regarding males group (sig. < 0.02), while a significant association was found between females and chopin's music (sig. < 0.05). indeed highest rating expressed between music and food has been that of males for 163 b.j.duskin's music (4.17), and that of females for chopin's music (4.75). although these results are not entirely surprising if we consider that dollar bill boogie arousal potential is characterized by a less complex musical structure and to a faster tempo both enhancing positively stimulus's arousing, thus males tends to prefer hedonic stimuli with a stronger arousing potential. on the other side “expertise” variable was found not significantly related to the ratings. although experienced subjects have performed better in matching music and labels, their preferences were shifted toward musics of mozart and chopin, namely the most familiar music selected. 4. conclusions this study provides evidence that background music influenced subjects' response enhancing perceived liking and pleasure toward tested cheese (first hypothesis advanced). however on the basis of the second hypothesis results have showed that expertise dimension did not influenced significantly subjects' judgements. on the contrary two main results must be discussed (third hypothesis advanced). first evidence is that response of males and females was significantly different upon b.j.duskin's music and pecorino cheese. in this case, music might have recall different thoughts since the two group have differently classified the excerpt. indeed great difference on ratings show that musical fit have significantly increased only males' ratings. definitively, in the case of “pecorino” male group has shown to prefer b.j.duskin's music, while the females' preferences resulted oriented toward the music of mozart and chopin but without any significative difference. therefore females do not have found a particular congruency between music and cheese (they indifferently matched the “harmoniums and refreshing” music and the “bold and strong” music) consequently they expressed lower level of liking. a factor analysis indicated that gender variable arrived to explain 81% of the score variance between pecorino and music. even if with strong limitations due to the narrowness of the sample tested, these findings have both theoretical and practical implications. from a theoretical perspective, the finding is consistent with the notion that music can prime related knowledge and arise the potential of liking and pleasure towards certain products if they fit with that knowledge. martindale cognitive theory on pro-typicality has been taken as theoretical starting point to introduce this concept. this conceptualization gets the goal to point out a cognitive oriented approach to musical priming based effects. indeed according to martindale, “expertise” dimension of subjects has been investigated but not positive correlation has been proved between liking response and the level of expertise of the subjects interviewed. as said, still remain a theoretical lack of comprehension through research about if potential benefits of priming are knowledge based, affect based, or both. present results suggest that the emotions primed by musical excerpts are interdependent with their pleasing and arousing qualities, and musical fit resulted decisive to lead the preference among stimuli that present similar levels of arousing and pleasantness. musical fit, as an attribute of the atmosphere of the environment, enhance liking (or disliking) in terms of arousing potential, subjects rate significantly more positive their experience. although we are not trying to explicate musical fit effects on the basis of differences between male and female, but these considerations are absolutely useful for shifting priming effects approach from a cognitive dimension to a more affective one. for these reasons any strong cognitive approaching to the problem lead to elaborate partial models and obtain not satisfactory results. 164 what is considered to be a relevant issue of musical fit is the capacity of activating primed knowledges about product. this activation is due to the arousal-influencing properties of musical fit. in light of this, present work putted in evidence how fit, toward lowinvolvement subjects, activate a positive response in terms of pleasure and so in terms of arousing. many researches have discussed the psychophysiological similarities between pleasure and emotion, and it seems reasonable to assume that expressing preferences (as many other aspect of human aesthetic behavior in everyday life) for an aesthetic stimulus is probably guided by the specific emotional content of the music. it seems probable that the specific piece of b.j.duskin displays characteristics that reflect different emotional connotations of the listening situation given between males and females. emotional and preferential responses are, thus, different and even the arousing perceived as it is outlined by the correlations between ratings and the variable of gender. music affecting attitude to priming results, in this case, as the capability to connote the perception of the product in an affective manner consistent with its intrinsic properties. then here a musical priming affect based, rather than knowledge based, is hypothesized as possible. precedent works consider musical fit effects to be more beneficial for high than for lowinvolvement subjects (yeoh and north 2010, martindale, 1996; macinnis & parks 1994), since appropriate music focuses attention on central attributes of the product. may be this is not completely truth, since evidences found attest an increase of liking even in low-involving subjects. this prospective does not totally match with the idea that music, with low-involved subjects, might to work simply as some form of conditioning mechanism how showed in the elaboration likelihood model (mcinnis & park 1994). it is so possible to speculate that musical fit may have beneficial effects, irrespective of listeners level of involvement with the contextual situation. present data does not allow us to test this alternative explanation. however, two further points should be made. central idea, regarding musical priming, is that music may guide us through the salience attributes of a product. we need to consider that musical information processing is a complex and unpredictable system to which we react activating different dimension that control our behavior, in particular way the affective dimension appears still away to be fully understood. future research examining the relationship between background music, intermediating cognitive and affective processes, and consequent behaviors are clearly warranted. results also indicates the need to examine the effects of context, and to explore the types and nature of underlying factors that are influencing or confounding variables of interest. more specifically, what is the relationship of background music with other elements of the ambient environment, and how might this influence behaviors? musical fit is undoubtedly a multi-faceted concept. for instance, the extent to which a given piece of music fits (or does not fit) with a particular product might be determined by its tempo, intensity, instrumentation, mode, and articulation, among several other possible candidate variables. indeed, the extent to which we should even attempt to define musical fit in terms of objectively-measurable aspects of musical structure reflects a broader debate that has taken place within the field of aesthetics over the past few decades. in that field, several authors have addressed the very well-known absolutist versus referentialist approach to emotional responses to music. at the risk of over-generalising, proponents of the former approach argue 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(2001). intensely pleasurable responses to music correlate with activity in brain regions implicated in reward and emotion. marcus e. raichle, washington university school of medicine. 6 _15-17_ adebiyi international journal of determinants of customers` churn telecommunication industry: an analytic hierarchy process approach university of agriculture abeokuta (funaab), ogun state. nigeria received: may 31, 2015 this paper describes the application of analytic hierarchy process (ahp) for unraveling customers’ motivation for churn of telecommunication network in nigeria. by identifying, modeling and measuring of customers` churn motivations across four mobile telecommunication service providers in nigeria. ahp was used to design a hierarchical model of seven criteria for customers` churning of network and investigates the relative priorities of the criteria through a pairwise comparison. the questionnaire were admin through convenient sampling to 480 mobile telecommunication customers and was completed and returned by 438 mobile phone subscribers in lagos state, nigeria, but only 408 copies were useful for the analysis of this study. the result shows that six have weight above 10% in their individual contribution to motivating customer churn behavior in the nigeria telecommunication industry. the criterion has the highest weight of 18.81% relative to the effectively supported modeling and decision for both the individual and the intelligible framework of decision emerging market like nigeria. keywords: customers` churn; marketing strategies. international journal of economic behavior, vol 5, n. 1, ppinternational journal of economic behavior, 5, n. 1, pp. 3-14, 201 determinants of customers` churn decision in the nigeria telecommunication industry: an analytic hierarchy process approach sulaimon olanrewaju adebiyi university of agriculture abeokuta (funaab), ogun state. nigeria emmanuel olateju oyatoye university of lagos, akoka, lagos. nigeria bilqis bolanle amole university of lagos, akoka, lagos. nigeria accepted: august 24, 2015 online published: abstract this paper describes the application of analytic hierarchy process (ahp) for unraveling customers’ motivation for churn of telecommunication network in nigeria. by identifying, modeling and measuring of customers` churn motivations across four mobile ommunication service providers in nigeria. ahp was used to design a hierarchical model of seven criteria for customers` churning of network and investigates the relative priorities of the criteria through a pairwise comparison. the questionnaire were admin through convenient sampling to 480 mobile telecommunication customers and was completed and returned by 438 mobile phone subscribers in lagos state, nigeria, but only 408 copies were useful for the analysis of this study. the result shows that six out of the seven criteria have weight above 10% in their individual contribution to motivating customer churn in the nigeria telecommunication industry. the inefficient data/ internet plan criterion has the highest weight of 18.81% relative to the churn decision. thus, effectively supported modeling and analyzing subscribers` motivation toward good marketing decision for both the individual and the organization. it helps in developing an analytic and intelligible framework of decision-making on complex problem of customer churn in an . customers` churn; ahp; churn decision; telecommunication international journal of economic behavior, vol 5, n. 1, pp. 8181 14, 201 determinants of customers` churn decision in the nigeria telecommunication industry: an analytic hierarchy process approach sulaimon olanrewaju adebiyi university of agriculture abeokuta (funaab), ogun state. nigeria emmanuel olateju oyatoye akoka, lagos. nigeria bilqis bolanle amole akoka, lagos. nigeria online published: october 7, 2015 this paper describes the application of analytic hierarchy process (ahp) for unraveling customers’ motivation for churn of telecommunication network in nigeria. by identifying, modeling and measuring of customers` churn motivations across four mobile ommunication service providers in nigeria. ahp was used to design a hierarchical model of seven criteria for customers` churning of network and investigates the relative priorities of the criteria through a pairwise comparison. the questionnaire were administered through convenient sampling to 480 mobile telecommunication customers and was completed and returned by 438 mobile phone subscribers in lagos state, nigeria, but only 408 copies out of the seven criteria have weight above 10% in their individual contribution to motivating customer churn inefficient data/ internet plan churn decision. thus, ahp subscribers` motivation toward good marketing . it helps in developing an analytic and complex problem of customer churn in an telecommunication; motivation; 104, 2015 82 1. introduction telecommunication is one of the prime support services needed for rapid growth of any developing economy (arora, 2013). in nigeria, the telecommunication industry received a boost in 2001 with the deregulation (removal of monopoly rights, especially enjoyed by stateowned telecommunication networks) of the sector. the deregulation allows for private global system of mobile communication (gsm) service providers to come into the country to support the state owned telecommunication company popularly known as nigeria telecommunication (nitel). consequently, two private companies econet of zimbabwe and mtn of south africa were licensed by the national communications commission (ncc) to operate gsm in nigeria. these two companies alone increased the mobile telephone lines from 300,000 in 2001 to 1,660,000 in 2002. in 2003, another private-owned service provider, globacom, entered the market with its mobile service called the glomobile (oecd report, 2003/2004). for this therefore, the number of mobile-phone subscriptions increased from less than one million in 2001 to over 133 million by november 2014 (ncc reports, 2014). thus, mobile telecommunication popularly called gsm was well received by most nigerians who have been battling with inefficiency of the only one service provider (nitel) prior to the year 2001. after thirteen years of deregulation and globalisation of nigeria telecommunication industry, nigeria currently has five major gsm service providers namely: airtel, mtn, globalcom, etisalat and the less functioning m-tel. therefore, there are currently options for customers to choose from among multiple service providers and actively exercise their rights of switching from one service provider to another. this right possessed by customer to switch from service provider to another is known as churn. as it applies to this study, churn is explicitly defined as the act of leaving or abandoning a service provider for another. as a result, it become a constant practice among customers/subscribers of mobile telecommunication service providers in nigeria. furthermore, mobile number portability (mnp) implementation in april 2013 lends credence to subscribers’ right to churn by switching their network providers at will on an average of every six months without losing their original number. the advent of cheap “china phones” that combine two to three or even up to four subscribers` identity module or subscriber identification module (sim) cards in a phone, made it possible for most nigerians to keep an average of two to three sim cards of different service providers for various reasons that can be best described by each subscriber. as mobile telecommunication service now becomes essential to our daily life, it is observed that subscribers have learnt to keep their mobile phone (s) at arm’s length at all times, thus, predicting the reasons why mobile churn seems essential from the perspective of mobile service providers. since, unguided movement of mobile phone subscribers from one service provider to another is one of the major phenomenon that can make or mar the survival and the profitability of any mobile telecommunication firm. thus, the need for research driven policy and strategies on customers` churn decision in the growing nigeria mobile telecommunication industry cannot be over emphasised. although, previous studies appear to have focused on churn prediction itself, using different statistical tools like data mining (kolajo and adeyemo, 2012), survival analysis (van den poel and larivie`re, 2004), logistic regression (kim and yoon, 2004; burez and van den poel, 2007), most of these seem to have failed to capture churn motivations, which may serve as good indicator for real churn forecasting. this is a major gap that this study intends to fill with analytic hierarchy process method. this study is important because, the annual churn rate of nigeria mobile telecommunication according to ncc reports, have grown exponentially from 2 percent in international journal of 2001 to 48.4 percent in 2007 (pyramid research, 2010). this became worrisome the consequences of customer loss of revenue, problem of referral, survival in the light fierce competition, and the mnp implementation in april 2013. the on customer churn issues worthwhile. moreover, most prior studies used database of the firms (service providers) w switching behaviour and their causes. (ahp), based questionnaire could termination of contract with servi customers who churn for various reasons that will be supplied through pr collection, it will help stakeholders to link service attributes to subscribers’ decisions and make necessary inference. this analysis. it should also be noted that customer churn is a notorious problem for most industries, since customers are the lifeblood of any organization. 2. literature review ahp is a popular tool for decision released, many individuals and groups in various fields have used the ahp because of its user-friendly interface for multi from a decision-maker’s judgments, degree of importance of each alternative is quantified in the ahp. this procedure identifies not only the most important alternative decision-maker (oyatoye, adebiyi and amole the ahp to analyse the decision respondents’ preferences/motivation use it in this study. the analytic hierarchy process (ahp) is arguably multi-criteria method. it has firm theoretical underpinnings and has been used s help people make better decisions in a wide variety of complex circumstances (golden, and harker, 1989; vaidya and kumar 2006). a main strength of the ahp is that it is both methodologically sound and user design characteristics. the ahp frames a decision as a hierarchy, an organis already familiar with and easy to explain to those who are not. all inputs consist of comparisons between just two are generally considered to be one of the best ways to elicit judgments from people (reynolds and jolly, 1980). the output is easy to understand because it is based on simple scales derived from the pairwise compariso judgments being made which both checks the reliability of the analysis and reduces the chance of making a procedural mistake. of this approach is that it organiz provides a structured relatively simple solution to the decision by breaking a problem down in steps, to the smaller and smaller, one is able to connect, through simple paired comparison judgments, the small to the large (lu, madu, kuei and winokur, 1994 in sum, there are three major concepts behind the ahp mathematical and logical reasoning for arriving at the decision is the strength of the ahp. it helps to analyse the decision problem on a logical footing and international journal of economic behavior, 5, n. 1, pp. 3-14, 201 in 2007 (pyramid research, 2010). this became worrisome the consequences of customers` churn on mobile service providers` profit, cost of loss of revenue, problem of referral, survival in the light fierce competition, and the mnp implementation in april 2013. these and other worrisome statistics trend to on customer churn issues worthwhile. most prior studies used the data or information available in the internal s (service providers) which mask detailed information about customers switching behaviour and their causes. while data, through analytical hierarchy process questionnaire could provide more information on the reasons for customer termination of contract with service provider and help to make a better distinction between customers who churn for various reasons that will be supplied through primary source of data collection, it will help stakeholders to link service attributes to subscribers’ decisions and this in a considerable way, formed the basis for data used in ahp analysis. it should also be noted that customer churn is a notorious problem for most are the lifeblood of any organization. for decision-making developed by saaty (1977, 1980). since it was released, many individuals and groups in various fields have used the ahp because of its friendly interface for multi-criteria decision-making (vargas, 1990). i maker’s judgments, known as pairwise comparisons, are aggregated, and the degree of importance of each alternative is quantified in the ahp. this procedure identifies not only the most important alternative, but also the preference for all alternatives for each , adebiyi and amole, 2015; crawford and williams, 1985). e the decision-making process, therefore, results in a precise clarification of /motivation for the alternatives (sato, 2007). thus, the decision to erarchy process (ahp) is arguably the most well known and widely used criteria method. it has firm theoretical underpinnings and has been used s help people make better decisions in a wide variety of complex circumstances (golden, 1989; vaidya and kumar 2006). a main strength of the ahp is that it is both methodologically sound and user-friendly. its ease of use is due to a unique combination of ision as a hierarchy, an organisational framework many people are already familiar with and easy to explain to those who are not. all inputs consist of comparisons between just two decision elements at a time; pairwise comparisons like these are generally considered to be one of the best ways to elicit judgments from people (reynolds 1980). the output is easy to understand because it is based on simple scales derived the pairwise comparisons. besides, there is in-built measure of consistency in judgments being made which both checks the reliability of the analysis and reduces the chance of making a procedural mistake. according to saaty and kearns (1991), the stre this approach is that it organizes tangible and intangible factors in systematic way, and provides a structured relatively simple solution to the decision-making problems. by breaking a problem down into a logical fashion from the larger, descending in gradual steps, to the smaller and smaller, one is able to connect, through simple paired comparison judgments, the small to the large (lu, madu, kuei and winokur, 1994; stephen, 1984 , there are three major concepts behind the ahp, namely: the ahp is analytic athematical and logical reasoning for arriving at the decision is the strength of the ahp. it the decision problem on a logical footing and assists on converting decision 83 14, 201 in 2007 (pyramid research, 2010). this became worrisome, considering churn on mobile service providers` profit, cost of operations, loss of revenue, problem of referral, survival in the light fierce competition, and the mnp trend to make a research information available in the internal hich mask detailed information about customers analytical hierarchy process on the reasons for customers` ce provider and help to make a better distinction between imary source of data collection, it will help stakeholders to link service attributes to subscribers’ decisions and formed the basis for data used in ahp analysis. it should also be noted that customer churn is a notorious problem for most making developed by saaty (1977, 1980). since it was released, many individuals and groups in various fields have used the ahp because of its making (vargas, 1990). in the ahp, data pairwise comparisons, are aggregated, and the degree of importance of each alternative is quantified in the ahp. this procedure identifies ference for all alternatives for each crawford and williams, 1985). using making process, therefore, results in a precise clarification of thus, the decision to the most well known and widely used criteria method. it has firm theoretical underpinnings and has been used successfully to help people make better decisions in a wide variety of complex circumstances (golden, wasli 1989; vaidya and kumar 2006). a main strength of the ahp is that it is both due to a unique combination of ational framework many people are already familiar with and easy to explain to those who are not. all inputs consist of decision elements at a time; pairwise comparisons like these are generally considered to be one of the best ways to elicit judgments from people (reynolds 1980). the output is easy to understand because it is based on simple scales derived built measure of consistency in the judgments being made which both checks the reliability of the analysis and reduces the and kearns (1991), the strength es tangible and intangible factors in systematic way, and making problems. in addition, er, descending in gradual steps, to the smaller and smaller, one is able to connect, through simple paired comparison ; stephen, 1984). the ahp is analytic: athematical and logical reasoning for arriving at the decision is the strength of the ahp. it n converting decision84 makers’ intuition and gut feelings into numbers which can be openly questioned and be explained by others. the ahp structures the problem as a hierarchy: hierarchic decomposition comes naturally to human beings. reducing the complex problem into sub-problems to be tackled one at a time is the fundamental way that human decision-making have worked. evidence from psychological studies suggests that human beings can compare 7 ± 2 things at a time. hence, to deal with a large and complex decision making problem such as customer churn motivation, it is essential to break it down as a hierarchy. the ahp allows that. the ahp defines a process for decision-making: formal processes for decision-making are the need of the hour. decisions, especially collective ones, need to evolve. a process is required that will incorporate the decision-maker’s inputs, revisions and learning, and communicate them to others so as to reach a collective decision. the ahp has been created to formalize the process and place it on a scientific footing. it also helps in aiding the natural decision-making process. ahp approach is selected in this research to provide an effective tool to the stakeholders for unraveling the motivation for customer churn and measuring the churn drivers in service industry, which in turn, will make insightful contributions to the business world, marketing and operations research literature. therefore, the ahp should be applied to churn decisions of subscribers. 3. methodology churning network provider in order to choose the most proffered telecommunication network provider is a complex problem requiring a multi-criteria decision analysis technique, so as to consider the factors holistically (criteria and alternatives) that motive customer churning behaviour. the analytical hierarchy process was employed in this study in order to structure and simplify the complex problem, bring it to a condition, which is more easily understood. more importantly, the criteria weights and scores are based on pairwise comparisons of criteria and alternatives, respectively, using a ratio scale of measurement. in order to achieve the objectives of this study, survey research designed was found most appropriate and suitable due to the fact that surveys inquiry is about people`s attitude, lifestyles, behaviour, perception and problems (leary, 2001). the survey is in two stages, first is the observation experiment through focus group discussion (fgd), consisting of fifteen subscribers in four groups who discussed extensively on the drivers of customer` churn in the telecommunication industry. the result of the fgd was used in the second stage for building the hierarchical model and drawing an ahp based questionnaires. the questionnaires were designed to enable each subscribers` to compare the relative importance of each driver to subscribers` decision to churn a network provider for the criteria, while the alternatives at the third level were equally pairwise to determine the relative importance of sub-criteria to each driver (criteria) of churn in the nigeria telecommunication market. eighty (80) copies of the questionnaires were administered using convenient sample in each of the six locations within lagos state, corresponding to the administrative division of lagos. the area includes yaba, ikorodu, epe badagry and ikeja. out of the total of 480 questionnaire administered, four hundred and eight (408) were properly filled and found suitable for the ahp analysis. the ahp analysis was done using microsoft excel software by calculating the weight of the criteria and alternatives. the process of analysis using ahp method involved two stages as follows (taylor iii, 2002): i. first stage: build hierarchical model for motivation for customer churn decision in the nigerian telecommunication industry: (a) establishing the pair-wise comparison matrix for each decision alternative for each criterion; (b) synthesization; (c) international journal of establishing the pair-wise comparison matrix for each criteria normalized matrix; (e) values for each decision alternative; according to the values that have been acquired in the previous stage. ii. second stage: test of consistency method, the result of the selection process must be tested for consi consistency was carried out ci = [λmax – n]/(n – 1) where λmax=σwici after acquiring consistency index (ci), th (cr) by using the formula cr = ci/ri where n is the number of items compared; w column; cr is the consistency ratio; ci is the consistency index; and ri consistency index. the random consistency index (ri) can be observed in table 1 as follows: table1 – random index n 1 2 3 4 5 6 r.i. 0 0 0.58 0.90 1.12 1.25 adapted from saaty, (2000) if cr ≥ 10%, the data acquired is inconsistent, otherwise (cr < 10%) the data acquired is consistent. the results obtained from the above procedure discussion section of this paper. ahp customer churn model level 1 the goal: determinant of custo industry. level 2 the criteria: unwanted calls/sms; dispute in billing; mobile number portability (mnp); frequency of promotions/bonuses by competitors; poor inter/intra connectivity; inefficient data plan; and poor complaint management. level 3 the alternatives: alternatives, the alternative of unwanted calls/sms are and irrelevant calls from the network operator charge and charges for service(s) not rendered easiness of mnp and competition brought by mnp are the alternatives of mnp as a driver for customer churn while frequenc on calls/sms/data plan by competitor and poor/dubious promos of present operator as it alternatives. poor intra/inter connectivity has its alternativ calls/sending sms to same network and that of international journal of economic behavior, 5, n. 1, pp. 3-14, 201 wise comparison matrix for each criteria; (d) (e) establishing the preference vector; (f) calcul values for each decision alternative; and (g) determining the rank of alternatives according to the values that have been acquired in the previous stage. second stage: test of consistency: after analyzing the data by using the ahp result of the selection process must be tested for consi carried out using the following formulas and the table 1) after acquiring consistency index (ci), the next step is calculating consistency ratio ri here n is the number of items compared; wi is the weight; ci is the sum along the column; cr is the consistency ratio; ci is the consistency index; and ri the random consistency index (ri) can be observed in table 1 as follows: 4 5 6 7 8 9 10 11 12 0.90 1.12 1.25 1.32 1.41 1.45 1.49 1.54 1.48 1.56 1.57 1.59 acquired is inconsistent, otherwise (cr < 10%) the data acquired is obtained from the above procedure were reported this paper. determinant of customer churn decision in nigerian telecommunication level 2 the criteria: unwanted calls/sms; dispute in billing; mobile number portability (mnp); frequency of promotions/bonuses by competitors; poor inter/intra connectivity; and poor complaint management. level 3 the alternatives: the components of each customer churn drivers formed the alternatives, the alternative of unwanted calls/sms are frequently receiving irrelevant texts e network operator. for dispute in tariff; short d charges for service(s) not rendered by network operator are the alternatives easiness of mnp and competition brought by mnp are the alternatives of mnp as a driver frequency of promotion has competitors’ frequent promos, bonuses on calls/sms/data plan by competitor and poor/dubious promos of present operator as it poor intra/inter connectivity has its alternatives as difficulties in making same network and that of other network while inefficient data p 85 14, 201 (d) establishing the calculating overall determining the rank of alternatives according to the values that have been acquired in the previous stage. after analyzing the data by using the ahp result of the selection process must be tested for consistency. the test of s and the table 1. (3.1) e next step is calculating consistency ratio ri (3.2) is the sum along the column; cr is the consistency ratio; ci is the consistency index; and ri is the random the random consistency index (ri) can be observed in table 1 as follows: 9 10 11 12 13 14 15 1.45 1.49 1.54 1.48 1.56 1.57 1.59 acquired is inconsistent, otherwise (cr < 10%) the data acquired is were reported under results and in nigerian telecommunication level 2 the criteria: unwanted calls/sms; dispute in billing; mobile number portability (mnp); frequency of promotions/bonuses by competitors; poor inter/intra connectivity; customer churn drivers formed the frequently receiving irrelevant texts short-change in service by network operator are the alternatives. easiness of mnp and competition brought by mnp are the alternatives of mnp as a driver competitors’ frequent promos, bonuses on calls/sms/data plan by competitor and poor/dubious promos of present operator as its es as difficulties in making inefficient data plan has 86 sufficient with high cost and insufficient with low cost data plan as its alternatives. the last driver (poor complaint management), has the following as its alternative; service agent nonwilling to resolve customer challenges, non-response and service agent being elusive. thus, the hierarchical model is presented in figure 1. 4. results and discussion 4.1 respondents reduced matrices for customer churn decision the values found in the last column of table 2 denoted by weight, also known as eigenvector, have a direct physical meaning in ahp. they determine the participation or weight of those criteria relative to the total results of the goal. considering the criteria stated for the determinant of customer churn in the nigeria telecommunication industry, inefficient data/ internet plan criterion has a weight of 18.81% relative to the total goal, which states the determinant of customer churn. a positive evaluation on this factor contributes approximately twice more than a positive evaluation on the mobile number portability implementation criterion (9.73%). following the procedure of ahp, there is need to check for data inconsistencies. the main objective is to capture enough information that will help to determine whether the customers have been consistent in their choices. the inconsistency index is based on maximum lambda, which is calculated by summing the product of each element in the eigenvector (weight), by the respective column total of the original comparison matrix. table 4.2 demonstrates the calculation of the maximum eigenvalue also called maximum lambda (λmax). in order to verify that the consistency index (ci) is adequate, saaty (2000) suggests what is called consistency ratio (cr) which is determined by the ratio between the consistency index and random consistency index (ri). the matrix will be considered consistent if the result of the ratio is less than 10%. the random index value is fixed and is based on the number of evaluated criteria as shown in table 1. in the case of the determinant of customers` churn decision criteria, the consistency rate for the initial group criteria is: cr= �� �� = 0.0320/ 1.32 = 0.0242 < 3% since its value is less than 10%, the matrix is considered to be consistent. therefore, considering the eigen vector values / priority weight of determinant of customers churn decision criteria, it is evident that inefficient data/ internet plan criteria have contributed 18.81% to the goal, while mobile number portability implementation criterion contributes (9.73%) to the goal (determinant of customers` churn decision in the nigeria telecommunication industry). international journal of figure 1 – proposed hierarchical model for customers` churn deci telecommunication source: ahp model developed by researchers (2014) u n w an te d ca ll s & t ex ts d is p u te d b il li n g m n p im p le m en ta ti on f re q u en t p ro m ot io n / b on u se s p oo r in tr a/ in te r c on n ec ti vi ty in ef fi ci en t d at a/ in te rn et p la n p o o r c o m p la in t m a n a g em en t d et er m in a n ts o f cu st om er ch u rn d ec is io n in t h e n ig er ia t el ec o m m u n ic a ti on i n d u st ry international journal of economic behavior, 5, n. 1, pp. 3-14, 201 proposed hierarchical model for customers` churn decision in the nigeria mobile keys frit frequently receiving irrelevant texts fric frequently receiving irrelevant calls scsc disputed billing short change in service charged. csnu changed for services not used by operator epmf easiness to port with mnp framework cbmi competition brought by mnp implementation. cfp competitors’ frequent promos bcc bonuses on calls/sms/data plan by competitor dppo dubious promo of present operator dmcsn difficulties in making to same network. dmcon difficulties in making calls/sending sms to other network. sdphc sufficient data with high cost. idplc insufficient data plan with low cost. sanrcc service agent noncustomer challenges. sancc service agent non-response to customer complaint. sabe service agent being elusive. source: ahp model developed by researchers (2014) f r it f r ic e p m f c b m t d m c s n d m c o n s a n r c c s a b e s a n c c s c s c c s n u c f p d p p o b c c s d p h c id p l c 87 14, 201 sion in the nigeria mobile frequently receiving irrelevant texts. frequently receiving irrelevant calls. disputed billing short change in service changed for services not used by operator. easiness to port with mnp framework. competition brought by mnp competitors’ frequent promos. bonuses on calls/sms/data plan by competitor. dubious promo of present operator. difficulties in making calls/sending sms difficulties in making calls/sending sms sufficient data with high cost. insufficient data plan with low cost. -willing to resolve response to customer service agent being elusive. 88 table 2 – reduced matrix for determinant of customers churn criteria in the nigeria telecommunication industry decision criteria unwant ed calls & texts disput ed billing mnp impleme ntation frequent promotion / bonuses poor intra/in ter connec tivity ineffici ent data/in ternet plan poor compla int manag ement weight unwanted calls & texts 1.0000 1.1723 1.9663 1.0900 0.5000 0.5391 1.0217 0.1338 λmax 7.1919 disputed billing 0.8530 1.0000 1.9593 1.3549 1.1181 0.7115 1.5191 0.1596 ci 0.0320 mnp implementation 0.5086 0.5104 1.0000 0.9532 0.6151 0.7162 0.6938 0.0973 cr 0.0238 frequency of promotion/bonu ses 0.9174 0.7380 1.0491 1.0000 1.0766 0.8944 1.5675 0.1397 poor intra/inter connectivity 2.0000 0.8944 1.6258 0.9288 1.0000 1.1277 2.0693 0.1799 inefficient data/internet plan 1.8549 1.4055 1.3962 1.1181 0.8868 1.0000 2.4151 0.1881 poor complaint management 0.9788 0.6583 1.4414 0.6379 0.4833 0.4141 1.0000 0.1016 table 3 – calculation of the maximum eigenvalue of the seven criteria about determinant of customer churn in nigeria telecommunication industry criteria unwanted calls & texts dispute billing mnp implemen tation frequency of promotion and bonuses poor inter/intra connectivity inefficient data/intern et plan poor complaint management eigen vector/priorit y weight 0.1338 0.1596 0.0973 0.1397 0.1799 0.1881 0.1016 column sum 8.1127 6.3789 10.4381 7.0829 5.6799 5.403 10.2865 maximum eigenvalue/(λmax): (0.1338*8.1127) + (0.1596*6.3789) + (0.0973*10.4381) + (0.1397*7.0829) + (0.1799*5.6799) + (0.1881*5.403) + (0.1016*10.2865) = 7.1919 the test for consistency of churn decision criteria is calculated using the formula below: ci = (λmax-n)/(n-1) ci = (7.1919-7) / 7-1 = 0.1919/6 = 0.0320 international journal of table 4 – reduced matrix for unwanted calls & texts alternatives unwanted calls and texts frequently receiving irrelevant texts frequently receiving irrelevant texts frequently receiving irrelevant calls table 5 – the calculation of the maximum eigenvalue alternatives decision alternative of unwanted calls and texts eigen vector/priority weight column sum maximum eigen value (λmax) in considering the decision alternat priority weight was computed and relation to unwanted calls/texts calls/text, frequently receiving irrelevant text (frit) has a weight of 81.23% relative to unwanted calls/text criteria. a positive evaluati (four) times more than a positive evaluation on frequently receiving irrelevant calls alternative (18.77%). following the procedure of ahp, there is need to check for data inconsistencies. the main objective is to capture enough information to determine whether the customers have been consistent in their choices. the inconsistency index is based on maximum lambda, which is calculated by summing the product of each element in the eigenvector (weight), by the respective column total of the original comparison matrix. table calculation of the maximum eigenvalue also called maximum lambda ( the test of consistency is done using the formula below ci = (λmax-n)/(n-1) ci = (2.000-2) /2 -1 = 0/1 = 0.0000. in verifying that the consistency index is adequate, saaty (2000) suggests what is called consistency ratio (cr) which is determined by the ratio between the consistency index and random consistency index (ri). the matrix 10%. the random index value is fixed and is based on the number of evaluated criteria as shown in table 1 in chapter three texts, the consistency rate for the initial group criteria is cr= �� �� = 0.00 since its value is less than 10% the matrix is considered to be consistent. international journal of economic behavior, 5, n. 1, pp. 3-14, 201 reduced matrix for unwanted calls & texts alternatives frequently receiving irrelevant texts frequently receiving irrelevant calls 1.0000 4.3282 0.2310 1.0000 the calculation of the maximum eigenvalue for unwanted calls and texts frequently receiving irrelevant texts frequently receiving irrelevant calls 0.8123 0.1877 1.2310 5.3282 λmax = { (0.8123*1.2310)+(0.1877*5.3282)}= = 1.0000 +1.0001 = 2.0000 onsidering the decision alternatives of unwanted calls/text criteria, the eigenvector was computed and shows the contribution of each decision alternative relation to unwanted calls/texts criteria. based on the decision alternatives of frequently receiving irrelevant text (frit) has a weight of 81.23% relative to unwanted calls/text criteria. a positive evaluation on this factor contributes approximately 4 (four) times more than a positive evaluation on frequently receiving irrelevant calls alternative (18.77%). following the procedure of ahp, there is need to check for data inconsistencies. s to capture enough information to determine whether the customers have been consistent in their choices. the inconsistency index is based on maximum lambda, which is calculated by summing the product of each element in the eigenvector (weight), by column total of the original comparison matrix. table 5 maximum eigenvalue also called maximum lambda (λmax the test of consistency is done using the formula below the consistency index is adequate, saaty (2000) suggests what is called consistency ratio (cr) which is determined by the ratio between the consistency index and random consistency index (ri). the matrix is considered consistent if the ratio is less than 10%. the random index value is fixed and is based on the number of evaluated criteria as in chapter three. in the case of the decision alternative of unwanted calls and rate for the initial group criteria is since its value is less than 10% the matrix is considered to be consistent. 89 14, 201 weight λmax = 2.0000 0.8123 ci = 0.0000 0.1877 cr = 0.0000 for unwanted calls and texts frequently receiving irrelevant calls 0.1877 5.3282 (0.8123*1.2310)+(0.1877*5.3282)}= criteria, the eigenvector decision alternatives in criteria. based on the decision alternatives of unwanted frequently receiving irrelevant text (frit) has a weight of 81.23% relative to on on this factor contributes approximately 4 (four) times more than a positive evaluation on frequently receiving irrelevant calls alternative (18.77%). following the procedure of ahp, there is need to check for data inconsistencies. s to capture enough information to determine whether the customers have been consistent in their choices. the inconsistency index is based on maximum lambda, which is calculated by summing the product of each element in the eigenvector (weight), by 5 demonstrates the ax). the consistency index is adequate, saaty (2000) suggests what is called consistency ratio (cr) which is determined by the ratio between the consistency index and considered consistent if the ratio is less than 10%. the random index value is fixed and is based on the number of evaluated criteria as ernative of unwanted calls and since its value is less than 10% the matrix is considered to be consistent. 90 therefore, considering the eigen vector values / priority weight of decision alternatives of unwanted calls/text, it is evident that frequently receiving irrelevant texts alternative have contributed 81.23% to the unwanted calls/text criteria, while frequently receiving irrelevant calls alternative contributes 18.77% in customers decision to churn a network provider. thus, frequently receiving unsolicited texts messages from network provider can influence customers’ decision to churn more than irrelevant calls. subscribers are more uncomfortable with frequent irrelevant text messages from services provider. table 6 – reduced matrix of dispute billing alternatives dispute billing short-change in service charged charged for services not used by operator weight λmax = 2.0000 short-change in service charged 1.0000 1.1861 0.5426 ci = 0.0000 charged for services not used by operator 0.8431 1.0000 0.4574 cr = 0.0000 considering the decision alternatives of dispute billing criteria, the eigenvector / priority, weight was calculated, and shows the contribution of each decision alternatives in relation to dispute billing criteria. based on the decision alternatives of dispute billing, short change in service charged (scsc) has a weight of 54.26% on disputed billing criteria. a positive evaluation of this factor contributes approximately one (1) more than a positive evaluation on charge for services not used by operator alternative (45.74%). following the procedure of ahp, there is need to check for data inconsistencies. checking for data inconsistencies as before, table 7 presents the computation of the maximum eigen value (λmax), after which the consistency ratio is calculated as usual. table 7 – the calculation of the maximum eigenvalue for disputed billing alternatives disputed billing criteria short-change in service charged (scsc) charged for services not used by operator eigen vector/ priority weight 0.5426 0.4574 total sum 1.8431 2.1861 maximum eigenvalue/(λmax) (0.5426*1.8431) + (0.4574*2.1861) = 2.0000 the test of consistency is calculated using the formula below: ci = (λmax-n)/(n-1) ci = (2.000-2) /2 -1 = 0/1 = 0.0000 as shown in earlier computations, the consistency ratio of disputed billing criteria, using the initial group criteria is: cr= �� �� = 0.00 since the cr value is less than 10%, the matrix is considered to be consistent. therefore, in considering the eigen vector values / priority weight of decision alternatives of disputed billing, it is evident that short-change in service charged (scsc) alternative have international journal of contributed 54.26% to the disputed billing criteria, while charg used by operator alternative, contributes 45.74% to disputed billing criterion. table 8 – reduced matrix for mobile number portability alternatives mobile number portability (mnp) easiness to port easiness to port with mnp framework competition brought by mnp implementation considering the decision alternat priority weight was calculated relation to mnp implementation portability implementation, easiness to port with mnp framework with regards to mnp implementation criteria. a positive evaluation of this factor contributes approximately twice more than a positive evaluation of c implementation alternative, which has a weight of 37.68%. following the procedure of ahp, there is need to check for data inconsistencies. as has been done in previous analyses, the inconsistency index is computed as shown in table table 9 – the calculation of the maximum eigenvalue for mnp alternatives mobile number portability implementation criteria eigen vector/ priority weight total sum maximum eigenvalue/(λmax) the test of consistency is calculated by using the formula below ci = (λmax-n)/(n-1) ci = (2.000-2) /2 -1 = 0/1 = 0.0000 thus, in the case of the mobile number portability implementation criteria, the consistency rate for the initial group criteria is cr= �� �� = 0.00 cr which is less than 10%, indicates that the matrix is consistent. therefore, in considering eigen mobile number portability implementation, it is evident that easiness to port with mnp framework alternative have contributed 62.32% to the mobile number portability international journal of economic behavior, 5, n. 1, pp. 3-14, 201 contributed 54.26% to the disputed billing criteria, while charging customers alternative, contributes 45.74% to disputed billing criterion. reduced matrix for mobile number portability alternatives easiness to port with mnp framework competition brought by mnp implementation weight 1.0000 1.6542 0.6232 0.6045 1.0000 0.3768 considering the decision alternatives of mnp implementation criteria, the eigenvector was calculated, and shows the contribution of each decision alternative mnp implementation criteria. based on the decision alternatives of asiness to port with mnp framework has a weight of 62.32% with regards to mnp implementation criteria. a positive evaluation of this factor contributes approximately twice more than a positive evaluation of competition brought by mnp alternative, which has a weight of 37.68%. following the procedure of ahp, there is need to check for data inconsistencies. as has been done in previous analyses, the inconsistency index is computed as shown in table 9. the calculation of the maximum eigenvalue for mnp alternatives easiness to port with mnp framework competition brought by mnp implementation 0.6232 1.6045 (0.6232*1.6045) + (0.3768*2.6542) = the test of consistency is calculated by using the formula below: thus, in the case of the mobile number portability implementation criteria, the consistency rate for the initial group criteria is cr which is less than 10%, indicates that the matrix is consistent. therefore, in considering eigen vector values / priority weight of decision alternatives of mobile number portability implementation, it is evident that easiness to port with mnp framework alternative have contributed 62.32% to the mobile number portability 91 14, 201 ing customers for services not alternative, contributes 45.74% to disputed billing criterion. weight λmax = 2.0000 0.6232 ci = 0.0000 0.3768 cr = 0.0000 criteria, the eigenvector / decision alternatives in criteria. based on the decision alternatives of mobile number has a weight of 62.32% with regards to mnp implementation criteria. a positive evaluation of this factor contributes tition brought by mnp alternative, which has a weight of 37.68%. following the procedure of ahp, there is need to check for data inconsistencies. as has been done in previous analyses, the the calculation of the maximum eigenvalue for mnp alternatives competition brought by mnp implementation 0.3768 2.6542 = 2.0000 thus, in the case of the mobile number portability implementation criteria, the consistency vector values / priority weight of decision alternatives of mobile number portability implementation, it is evident that easiness to port with mnp framework alternative have contributed 62.32% to the mobile number portability 92 implementation criteria. however, competition brought by mnp implementation alternative contributes 37.68% to the mobile number portability implementation criterion. table 10 – reduced matrix for frequent promotions/ bonuses alternatives frequent promotion/ bonuses competitor’ frequent promos bonuses on calls/sms/data plan by competitor dubious promo of present operator weight competitors’ frequent promos 1.0000 1.1397 1.0582 0.3518 λmax = 3.0347 bonuses on calls/sms/data plan by competitor 0.8774 1.0000 1.6149 0.3710 ci = 0.0174 dubious promo of present operator 0.9450 0.6192 1.0000 0.2772 cr = 0.0299 considering the decision alternatives of frequent promotions/ bonuses criteria, the eigenvector priority weight was calculated and shows the contribution of each of the decision alternatives in relation to frequent promotions/ bonuses criteria. based on the decision alternatives of frequent promotions/ bonuses, bonuses on calls/sms/data plan by competitor has a weight of 37.10% of frequent promotions /bonuses criteria. a positive evaluation of these factors contributes approximately twice more than a positive evaluation of dubious promo of present operator alternative (27.72%). table 11 – the calculation of the maximum eigenvalue for frequent promotions/ bonuses by competitors’ alternatives frequent promotion /bonuses competitors’ frequent promos bonuses on calls/sms/data plan by competitor dubious promo of present operator eigenvector/ priority weight 0.3518 0.3710 0.2772 total sum 2.8224 2.7589 3.6731 maximum eigenvalue/(λmax) (0.3518*2.8224) + (0.3710*2.7589) + (0.2772*3.6731) = 3.0347 the test of consistency was calculated as follows: ci = (λmax-n)/(n-1) ci = (3.0347-3) / 3 1 = 0.0347 / 2 = 0.0174 in the case of the frequent promotion/bonuses criteria, the consistency rate for the initial group criteria is cr= �� �� = 0.0174/ 0.58 = 0.0299 < 3% international journal of since cr value is less than 10%, the matrix is consistent. therefore, in considering the eigen val frequent promotion/bonuses, it is evident that b alternative have contributed 37.10% to the frequent promotion/bonuses criteria, while dubious promo of present operator alternative contributes 27.72% to criterion. table 12 – reduced matrix of poor inter/intra connectivity alternatives poor intra/inter connectivity difficulties in making calls/sending sms to same network difficulties in making calls/sending sms to same network difficulties in making calls/sending sms to other network considering the decision alternat eigenvector priority weight was computed and alternatives in relation to poor inter/intra connectivity alternatives of poor inter/intra connectivity network have a weight of 73.92% on poor inter/intra connectivity criteria. a positive evaluation of this factor contributes approximately thrice more than a positive evaluation of difficulties in making calls/sending sms to other table 13 – the calculation of the maximum eigenvalue for poor inter/intra connectivity alternatives poor inter/intra connectivity criteria eigenvector/ priority weight total sum maximum eigenvalue/(λmax) (0.7392*1.3529)+(0.2608*3.8338) = 2.0000 the test of consistency was calculated as follows: ci = (λmax-n)/(n-1) ci = (2.000 2) /2 -1 = 0/1 = 0.0000 in the case of the poor inter/intra connectivity criteria, the consistency rate for the initial group criteria is: international journal of economic behavior, 5, n. 1, pp. 3-14, 201 since cr value is less than 10%, the matrix is consistent. therefore, in considering the eigen values / priority weight of decision alternatives of frequent promotion/bonuses, it is evident that bonuses on calls/sms/data plan by competitor alternative have contributed 37.10% to the frequent promotion/bonuses criteria, while dubious alternative contributes 27.72% to frequent promotion/bonuses reduced matrix of poor inter/intra connectivity alternatives difficulties in making calls/sending sms to same network difficulties in making calls/sending sms to other network weight 1.0000 2.8338 0.7392 0.3529 1.0000 0.2608 considering the decision alternatives of poor inter/intra connectivity was computed and shows the contribution of each of s in relation to poor inter/intra connectivity criteria. based on th poor inter/intra connectivity, difficulties in making calls/sending sms to same have a weight of 73.92% on poor inter/intra connectivity criteria. a positive evaluation of this factor contributes approximately thrice more than a positive evaluation of making calls/sending sms to other network alternative (26.08%). the calculation of the maximum eigenvalue for poor inter/intra connectivity difficulties in making calls/sending sms to same network difficulties in making calls/sending to other net 0.7392 1.3529 (0.7392*1.3529)+(0.2608*3.8338) = 2.0000 the test of consistency was calculated as follows: in the case of the poor inter/intra connectivity criteria, the consistency rate for the initial 93 14, 201 ues / priority weight of decision alternatives of onuses on calls/sms/data plan by competitor alternative have contributed 37.10% to the frequent promotion/bonuses criteria, while dubious frequent promotion/bonuses weight λmax = 2.0000 0.7392 ci = 0.0000 0.2608 cr = 0.0000 ives of poor inter/intra connectivity criteria, the shows the contribution of each of the decision criteria. based on the decision ifficulties in making calls/sending sms to same have a weight of 73.92% on poor inter/intra connectivity criteria. a positive evaluation of this factor contributes approximately thrice more than a positive evaluation of alternative (26.08%). the calculation of the maximum eigenvalue for poor inter/intra connectivity difficulties in making calls/sending sms to other network 0.2608 3.8338 in the case of the poor inter/intra connectivity criteria, the consistency rate for the initial 94 cr= �� �� = 0.00 since cr value is less than 10%, the matrix is considered to be consistent. thus, in considering the eigen values/priority weight of decision alternatives of poor inter/ intra connectivity, it is evident that difficulties in making calls/sending sms to same network alternative have contributed 73.92% to the mobile number portability implementation criterion, while, difficulties in making calls/sending sms to other network alternative contribute 26.08% to the poor inter/intra connectivity criterion. table 14 – reduced matrix of inefficient data/ internet plan criteria inefficient data/internet plan sufficient data with high cost insufficient data plan with low cost weight λmax = 2.0000 sufficient data with high cost 1.0000 2.7231 0.7314 ci = 0.0000 insufficient data plan with low cost 0.3672 1.0000 0.2686 cr = 0.0000 considering the decision alternatives of inefficient data/ internet plan criteria, the eigenvector priority weight was calculated and shows the contribution of each decision alternative in relation to inefficient data/ internet plan criteria. based on the decision alternatives of inefficient data/ internet plan, sufficient data with high cost have a weight of 73.14% of inefficient data/internet plan criteria. a positive evaluation of this factor contributes approximately thrice (3 times) more than a positive evaluation of insufficient data plan with low cost alternative (26.86%). table 15 – the calculation of the maximum eigenvalue for inefficient data/ internet plan alternatives inefficient data/internet plan sufficient data with high cost insufficient data plan with low cost eigen vector/ priority weight 0.7314 0.2686 total sum 1.3672 3.7231 maximum eigenvalue/(λmax) (0.7314*1.3672) + (0.2686*3.7231) = 2.0000 the test of consistency is done using the formula below: ci = (λmax-n)/(n-1) ci = (2.000-2) /2 -1 = 0/1 = 0.0000 in the case of the inefficient data/internet plan criteria, the consistency rate for the initial group criteria is: cr= �� �� = 0.00 international journal of since the value of the cr is less than 10%, the matrix is considered to be consistent. therefore, in considering the eigen values / priority weight of decision alternatives of inefficient data/internet plan, it is evident that sufficient data plan with high cost alternative have contributed 73.14% to the inefficient data/ internet plan criteria, while inefficient plan with low cost alternative contributes 26.86% to table 16 – reduced matrix of poor complaint management poor complaint management service agent non resolve customer challenges service agent nonwilling to resolve customer challenges service agent nonresponse to customer complaint service agent being elusive considering the decision alternat eigenvector priority weight was calculated and alternative in relation to poor complaint management alternatives of poor complaint management, customer challenges have a weight of 51.46% with regards to poor complaint m criteria. a positive evaluation on this factor contributes approximately thrice more than a positive evaluation of service agent being elusive table 17 – the calculation of the maximum eigenvalue alternatives poor complaint management service agent non customer challenges eigen vector/ priority weight total sum maximum eigenvalue/(λmax) the test of consistency is calculated below: ci = (λmax-n)/(n-1) ci = (3.0394-3) /3 -1 = 0.0394/2 = 0.0197 in the case of the poor complaint management criteria, the consistency rate for the initial group criteria is international journal of economic behavior, 5, n. 1, pp. 3-14, 201 since the value of the cr is less than 10%, the matrix is considered to be consistent. ng the eigen values / priority weight of decision alternatives of inefficient data/internet plan, it is evident that sufficient data plan with high cost alternative have contributed 73.14% to the inefficient data/ internet plan criteria, while inefficient plan with low cost alternative contributes 26.86% to the inefficient data/internet plan criteria. reduced matrix of poor complaint management service agent non-willing to resolve customer challenges service agent non-response to customer complaint service agent being elusive 1.0000 2.2423 2.0880 0.4460 1.0000 1.6229 0.4789 0.6162 1.0000 considering the decision alternatives of poor complaint management was calculated and shows the contribution of each in relation to poor complaint management criteria. based on th poor complaint management, service agent non-willing have a weight of 51.46% with regards to poor complaint m criteria. a positive evaluation on this factor contributes approximately thrice more than a ervice agent being elusive alternative (20.69%). the calculation of the maximum eigenvalue for poor complaint management service agent non-willing to resolve customer challenges service agent non-response to customer complaint 0.5146 0.2784 1.9249 3.8585 (0.5146*1.9249) + (0.2784*3.8585) + (0.2069*4.7109) = 3.0394 the test of consistency is calculated below: in the case of the poor complaint management criteria, the consistency rate for the initial 95 14, 201 since the value of the cr is less than 10%, the matrix is considered to be consistent. ng the eigen values / priority weight of decision alternatives of inefficient data/internet plan, it is evident that sufficient data plan with high cost alternative have contributed 73.14% to the inefficient data/ internet plan criteria, while inefficient data the inefficient data/internet plan criteria. weight 0.5146 λmax = 3.0394 0.2784 ci = 0.0197 0.2069 cr = 0.0339 ives of poor complaint management criteria, the hows the contribution of each decision criteria. based on this decision willingness to resolve have a weight of 51.46% with regards to poor complaint management criteria. a positive evaluation on this factor contributes approximately thrice more than a for poor complaint management service agent being elusive 0.2069 4.7109 (0.5146*1.9249) + (0.2784*3.8585) + (0.2069*4.7109) = 3.0394 in the case of the poor complaint management criteria, the consistency rate for the initial 96 cr= �� �� = 0.0197/ 0.58 = 0.0339 < 4% again since the cr value is less than 10%, the matrix is considered to be consistent. therefore, in considering eigen vector values / priority weight of decision alternatives of poor complaint management, it is evident that service agent non-willingness to resolve customer challenges alternative contributed 51.46% to the poor complaint management criteria, while service agent being elusive alternative contributes 20.69% to poor complaint management criteria. table 18 shows the priorities of the criteria with respect to the main goal which is to determine reasons for customers leaving a particular network provider to another network provider in the nigeria telecommunication industry. based on the views of the customers, the most critical determinant factor for leaving a network provider to another network provider is inefficient data/internet plan with priority 0.1881, followed by poor inter/intra connectivity with priority 0.1799, dispute in billing with priority 0.1569, frequent promotion/ bonuses with priority 0.1397, unwanted calls/ texts with priority 0.1338, and poor complaint management with priority 0.1016, while the least determinant factor is the mnp implementation with priority 0.0973. table 18 – composite priorities of the criteria about goal the horizontal bar chart in figure 2 represents the pictorial diagram of decision criteria where the horizontal bar length is the priority of each criterion. from the chart, inefficient data plan/ internet plan has the longest bar with priority of 0.1881, followed by poor inter/ intra connectivity with priority of 0.1799, dispute billing with priority of 0.1596, frequent promotion and bonuses with priority of 0.1397, unwanted calls and texts with priority of 0.1338 and poor complaints management with priority of 0.1016 while the mnp implementation has the shortest bar with priority of 0.0973. goal: determinants of customer churn in nigeria telecommunication industry unwanted calls/ texts dispute billing mnp implementation frequent promotion/ bonuses poor inter/intra connectivity inefficient data/ internet plan poor complaint management pooled average composite priority 0.1338 0.1569 0.0973 0.1397 0.1799 0.1881 0.1016 relative preference ranking 5th 3rd 7th 4th 2nd 1st 6th international journal of figure 2 – bar chart showing decision criteria with their corresponding priority table 19 reveals the customers perception with regards to the decision alternatives of unwanted calls/texts using the composite priorities. this criterion has only two alternatives in this study. customers` mostly 0.8123 than frequently receiving irrelevant calls (fric) with priority of 0.1877. table 19 – composite priorities of the decision alternative about unwanted calls/ texts decision alternative with regards to unwanted calls/ texts pooled average composite priority relative preference ranking the horizontal bar chart in figure alternatives of unwanted calls/text where the horizontal bar length is the priority of each criterion. from the chart, frequently receiving irrelevant texts has the longest bar with priority of 0.8123, compared to frequen figure 3 – bar chart showing decision alternatives of unwanted calls/texts table 20 reveals subscribers` using the composite priorities. service charge with priority operators with priority of 0.4574 international journal of economic behavior, 5, n. 1, pp. 3-14, 201 bar chart showing decision criteria with their corresponding priority reveals the customers perception with regards to the decision alternatives of unwanted calls/texts using the composite priorities. this criterion has only two alternatives in mostly detest frequently receiving irrelevant texts (frit) with priority frequently receiving irrelevant calls (fric) with priority of 0.1877. composite priorities of the decision alternative about unwanted calls/ texts frequently receiving irrelevant text (frit) frequently receiving irrelevant calls (fric) 0.8123 1 the horizontal bar chart in figure 3 represents the pictorial diagram of decision alternatives of unwanted calls/text where the horizontal bar length is the priority of each frequently receiving irrelevant texts has the longest bar with priority compared to frequently receiving irrelevant calls with priority of bar chart showing decision alternatives of unwanted calls/texts subscribers` perception about the decision alternatives of dispute billing ties. subscribers mostly preferred disputed billing short change in service charge with priority of 0.5426 compared to charged for services not used by the operators with priority of 0.4574. 97 14, 201 bar chart showing decision criteria with their corresponding priority. reveals the customers perception with regards to the decision alternatives of unwanted calls/texts using the composite priorities. this criterion has only two alternatives in xts (frit) with priority frequently receiving irrelevant calls (fric) with priority of 0.1877. composite priorities of the decision alternative about unwanted calls/ texts frequently receiving irrelevant calls (fric) 0.1877 2 the pictorial diagram of decision alternatives of unwanted calls/text where the horizontal bar length is the priority of each frequently receiving irrelevant texts has the longest bar with priority of 0.1877. perception about the decision alternatives of dispute billing preferred disputed billing short change in 0.5426 compared to charged for services not used by the 98 table 20 – composite priorities of the decision alternative about dispute in billing decision alternative with regards to dispute billing disputed billing short change on service charge charged for services not used by operator pooled average composite priority 0.5426 0.4574 relative preference ranking 1 2 the horizontal bar chart in figure 4 represent the pictorial diagram of decision alternatives of dispute billing where the horizontal bar length is the priority of each criterion. from the bar chart, one observes that disputed billing in short change of service charged has the longest bar with priority 0.5426 compared to charge for services not used by operator with priority 0.4574. figure 4 – bar chart showing decision alternatives of disputed billing table 21 reveals the customers perception about the decision alternatives of mnp implementation using the composite priorities. the customers mostly preferred easiness to port with mnp framework, with a priority of 0.6232, compared to competition brought by mnp framework with priority of 0.3768. table 21 – composite priorities of the decision alternative about mnp implementation decision alternative with regards to mnp implementation easiness to port with mnp framework competition brought by mnp implementation pooled average composite priority 0.6232 0.3768 relative preference ranking 1 2 the horizontal bar chart in figure 5 represents the pictorial diagram of decision alternatives of mnp implementation where the horizontal bar length is the priority of each criterion. from the chart, easiness to port using mnp framework has the longest bar with priority of 0.6232, compared to competition brought by mnp implementation with priority of 0.3768. international journal of figure 5 – bar chart showing decision alternatives of mnp implementation table 22 reveals the customers perception about the decision alternatives of frequent promotions/ bonuses using the co study. the customers mostly priority of 0.3710, followed by competitor’s frequent promos with priority least preferred is dubious promo of present operator with priority of 0.2772. table 22 – composite priorities of the decision alternative about frequent promotions/ bonuses decision alternative with regards to frequent promotions/ bonuses pooled average composite priority relative preference ranking the horizontal bar chart alternatives of frequent promotions and bonuses where the horizontal bar length is the priority of each criterion. as the chart the longest bar with priority priority of 0.3518, while dubious promotion by present operators has the shortest bar length with priority of 0.2772. table 23 reveals the customers perception about the decision alternatives of poor intra connectivity using the composite priorities. the customers difficulty in making calls/sending sms to same network with priority difficulties in making calls/sms to other network with priority of 0 the horizontal bar chart in figure of poor inter/intra connectivity where the horizontal bar length is the priority of each criterion. as the chart shows, one observes network has the longest bar with priority calls/sending sms to other network with priority international journal of economic behavior, 5, n. 1, pp. 3-14, 201 bar chart showing decision alternatives of mnp implementation reveals the customers perception about the decision alternatives of frequent promotions/ bonuses using the composite priorities. this criterion has three alternatives in this preferred bonuses on calls/sms/data plan by competitors with 0.3710, followed by competitor’s frequent promos with priority eferred is dubious promo of present operator with priority of 0.2772. composite priorities of the decision alternative about frequent promotions/ competitors’ frequent promos bonuses on calls/sms/ data plan by competitors 0.3518 0.3710 2 1 bar chart in figure 6 represents the pictorial diagram of decision alternatives of frequent promotions and bonuses where the horizontal bar length is the priority chart indicates, bonuses on calls/sms/data plan by competitors has of 0.3710 followed by competitors` frequent promotion with dubious promotion by present operators has the shortest bar length reveals the customers perception about the decision alternatives of poor intra connectivity using the composite priorities. the customers are most difficulty in making calls/sending sms to same network with priority of 0.7392 compared to difficulties in making calls/sms to other network with priority of 0.2608. chart in figure 7 stand for the pictorial diagram of decision alternatives of poor inter/intra connectivity where the horizontal bar length is the priority of each criterion. shows, one observes that difficulties in making calls/sending sms to the same network has the longest bar with priority of 0.7392, compared to difficulties in making calls/sending sms to other network with priority of 0.2608. 99 14, 201 bar chart showing decision alternatives of mnp implementation reveals the customers perception about the decision alternatives of frequent mposite priorities. this criterion has three alternatives in this preferred bonuses on calls/sms/data plan by competitors with 0.3710, followed by competitor’s frequent promos with priority of 0.3518 and the eferred is dubious promo of present operator with priority of 0.2772. composite priorities of the decision alternative about frequent promotions/ dubious promo of present operator 0.2772 3 the pictorial diagram of decision alternatives of frequent promotions and bonuses where the horizontal bar length is the priority bonuses on calls/sms/data plan by competitors has frequent promotion with dubious promotion by present operators has the shortest bar length reveals the customers perception about the decision alternatives of poor inter/ mostly disturbed by 0.7392 compared to the pictorial diagram of decision alternatives of poor inter/intra connectivity where the horizontal bar length is the priority of each criterion. aking calls/sending sms to the same compared to difficulties in making 100 figure 6 – bar chart showing decision `alternative of frequent promotions and bonuses table 23 – composite priorities of the decision alternative about poor inter/intra connectivity decision alternative with regards to poor inter/ intra connectivity difficulties in making calls / sending sms to same network difficulties in making calls/sending sms to other network pooled average composite priority 0.7392 0.2608 relative preference ranking 1 2 figure 7 – bar chart showing decision alternatives of poor inter/intra connectivity table 24 reveals the customers` perception about the decision alternatives of inefficient data/ internet plan using the composite priorities. the customers mostly preferred sufficient data with high cost with priority of 0.7314, compared to insufficient data with low cost priority of 0.2686. the horizontal bar chart in figure 8 represents the pictorial diagram of decision alternatives of inefficient data/ internet plan where the horizontal bar length is the priority of each criterion. from the chart, sufficient data plan with high cost has the longest bar with priority of 0.7314 compared to insufficient data plan with low cost priority of 0.2686. international journal of table 24 – composite priorities of the decision alternative about inefficient data/internet plan decision alternative with regards to inefficient data /internet plan pooled average composite priority relative preference ranking figure 8 – bar chart showing decision alternatives of inefficient data/ internet plan table 25 shows the customers perception about the decision alternatives of poor complaint management using the composite priorities. alternatives. the customers most preferred service agent not willing to resolve customer challenges with priority of 0.5146 complaint with priority of 0.2784 priority of 0.2069. table 25 – composite priorities of the decision alternative about poor complaint management decision alternative with regards to poor complaint management pooled average composite priority relative preference ranking the horizontal bar chart in f alternatives of poor complaint management where the horizontal bar length is the priority of each criterion. from the chart customer challenges has the longest b nonresponse to customers` elusive has the shortest bar length with international journal of economic behavior, 5, n. 1, pp. 3-14, 201 composite priorities of the decision alternative about inefficient data/internet plan with regards to inefficient data /internet plan insufficient data with low cost sufficient data with pooled average composite priority 0.2686 2 bar chart showing decision alternatives of inefficient data/ internet plan the customers perception about the decision alternatives of poor complaint management using the composite priorities. in this study, this criterion has three ternatives. the customers most preferred service agent not willing to resolve customer 0.5146, followed by service agent non-res 0.2784, while the least preferred is service agent bein composite priorities of the decision alternative about poor complaint management service agent non-willing to resolve customer challenges service agent non response to customer complaint pooled average composite priority 0.5146 0.2784 1 2 chart in figure 9 represents the pictorial diagram of decision alternatives of poor complaint management where the horizontal bar length is the priority of each criterion. from the chart, one observes that service agent non-willing customer challenges has the longest bar with a priority of 0.5146, followed by complaint with a priority of 0.2784 and service agent being elusive has the shortest bar length with a priority of 0.2069. 101 14, 201 composite priorities of the decision alternative about inefficient data/internet plan sufficient data with high cost 0.7314 1 bar chart showing decision alternatives of inefficient data/ internet plan the customers perception about the decision alternatives of poor his criterion has three ternatives. the customers most preferred service agent not willing to resolve customer response to customer the least preferred is service agent being elusive with composite priorities of the decision alternative about poor complaint management agent nonresponse to customer service agent being elusive 0.2069 3 the pictorial diagram of decision alternatives of poor complaint management where the horizontal bar length is the priority of willingness to resolve 0.5146, followed by service agent d service agent being 102 figure 9 – bar chart showing decision alternatives of poor complaint management 5. conclusion the study concluded that ahp is appropriate at modeling complex problem such as customer churn motivations in the service industry (such as telecommunication) by assigning priority to churn drivers in the business environment. the criteria and the alternatives in the ahp model are drivers of customers` churn decision in the nigeria telecommunication industry. it also provided weight to each criteria as well as the alternatives as they motivates or influences an average subscriber in the study area to leave/abandon a network provider for competitor. the study also shows that mnp was not on the top priority list of factors that make customers to churn network in nigeria, thereby suggesting that the factor (mnp) is less than effective regulatory policy for stimulating appropriate competition that can yield improved customer service delivery in the nigeria telecommunication industry. the study also concluded that certain promotional activities by telecommunication services providers are dubious and not complementary to attracting customers to their network but further enhances churning decision of subscriber, which may not be in the best interest of private firms whose primary motives to make profit. 6. recommendations and suggestions for future research the following recommendations were drawn from the findings of this study: (i) that gsm operator should improve the quality of their services through appropriate mix of churn drivers in order to increase their market share significantly. (ii) network operators should engage in the use analytic hierarchy process model that can better unravel the motivations for customers churn through pairwise comparison of churn drivers by subscribers who have experienced the service for better decision rather than predicting churn from database. (iii) mobile telecommunication services provider should reverse the churn alternatives with high priority in order to sustain improved market share. (iv) service delivery of network operators in nigeria should be geared towards reversing and correcting the criteria and alternatives that motivates customer(s) to churn network provider. (v) marketing effort should focus more on effective service recovery on criteria and the alternatives motivating subscribers churn in the nigeria telecommunication industry. (vi) mobile network telecommunication service providers in nigeria should avoid dubious promotional means as it trigger subscribers` churn decision, damage organisational reputation and long-term survival. international journal of this study highlighted a number issues on which further order to extend the frontiers of knowledge. (i) it will be necessary to collect data in all the geo federation to ascertain whether the preferences (weight) for the drivers of customers` churn decision will change significantly in order to overhaul the corporate strategies of the telecommunication firms. (ii) the present research study was limited to gsm sub telecommunication industry, further research may access (cdma) sub-sector, which has subscribers. 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(1990). an overview of the analytic hierarchy process and its applications, europe journal of operation research, 48(1), 2-8. 6 iazzi_trio_fait_iaia 103 social web communication and crm in the marketing strategies of wine enterprises monica fait, antonio iazzi, oronzo trio, lea iaia university of salento, italy received: march 15, 2013 accepted: july 31, 2013 online published: october 14, 2013 abstract the aim of the paper is to observe and analyse the contributions made by social media in redefining firm-client relations in the wine sector as a support for crm systems. after a literature review, in order to define the theoretical framework, the research will provide two stages of analysis:the first step concerns an investigation of buyers aimed at gathering information about their degree of usage of social media for interacting with customers as well as the spread of content and critical issues;the second step investigates the content and characteristics of web 2.0 communication for detecting social media best practices in the use of wine blogs and the social networking site facebook. the originality and managerial usefulness of this paper consists of studying the emerging trends in the use of web 2.0 tools in the wine sector, identifying the main purchase determinants that lead the choice process of consumers and developing new guidelines for the effective implementation of the instruments observed. this will help companies to better manage the social media communication tools called scrm applications as well as their related marketing strategies, according to the companies’ mission and goals. key words: social customer relationship management (scrm); social media communication; wine sector 1. introduction the evolution of web-based communication models has contributed to the achievement of an active role for users in the creation and distribution of content (ozuem et al., 2008), producing a review of the marketing strategies adopted by firms. the two pillars of the tools of web communication are based on the interaction or need to listen to and satisfy the customers’ desires as well as the participation and encouragement of companies to the creation of new needs. in addition, crm applications, which in the last few years have established an integrated logic of relationship marketing (borghesi, 2001), are currently enriched by social components (hence, the acronym scrm), with the purpose of integrating the asset of information, taking advantage of the data gained by the “social” evolution of processes and communication channels (wang & owyang, 2010). scrm is a technology that enables companies to monitor, import and manage conversations and relationships with real and potential customers through social media communication tools. scrm represents the response by firms to a communicative context co-managed by and for customers (greenberg, 104 2009), with which it is possible to increase the knowledge of the client, acquire new ones and, as a consequence, personalize the relationship with them. the main contribution of social networks is, in fact, to offer participants the role of cocreator and “commentauthor”; in other words, to become the primary actors in the process of creating the proposal (solima, 2008; riva, 2010; prahalad & ramaswamy, 2004; boaretto, noci & pini, 2007; kotler, kartajaya & setiawan, 2010). the activities of interaction, sharing and regeneration of content (costantinides & fountain, 2008; bernhoff & li, 2008), typical of web 2.0 tools, are well suited to wine products, because of their high cognitive content and complex structure tied with emotional and experiential elements, such as territorial elements, that characterize them (mattiacci, ceccotti & de martino, 2006). it is believed, in fact, that the identification of web-based communication characteristics in the wine sector (lack of constraints on space and time and the full involvement of users) may favour the perception of complex land-brand relationships, allowing them to appreciate autochthonous productions and specific geographical rural areas. the aim of this paper is therefore to observe the contributions made by social media in redefining firm-client relations, assuming both the perspectives of buyers, for the reasons that will be provided later, and of businesses. in particular, this paper will identify the ideal characteristics that this form of communication must highlight in order to generate the planned results. these characteristics are relevant because of the peculiarity of the tools above, which are placed between the marketing and entrepreneurship fields (finotto & micelli, 2013); therefore, they require a planned management approach in order to avoid potential risks and maximize their utility for companies. for the aforementioned reasons, the present work will analyse the content and characteristics of web 2.0 communication as a support for crm systems, with reference to the wine sector – which still represents a relatively under-studied field, despite its growing importance and interest. in fact, this work was prompted by a research project aimed, among other things, at the adoption of scrm in a business enterprise engaged in the production and marketing of wine. such planning is designed to optimize the trade relations and have a greater personalization of the supply (borghesi, 2001) according to a logic of co-creation of value (payne, storbacka e frow, 2008). the theoretical framework of reference is integrated marketing communication, the core of which is the adoption of a relational architecture (network type), which redefines the content (co-created through social interactions), reconfigures the adopted channels, and mixes different forms and information flows. after a literature review on corporate communication in the light of the changes introduced by the advent of social media, the fieldwork considered: an investigation of the buyers’ social media usage, designed to gather information related to: the propensity of social media usage and the most widely spread content as well as critical issues; an investigation of the contents and characteristics of web 2.0 communication, for detecting social media best practices in the use of wine blogs and the social networking site facebook. 2. business communication in the age of social media business communication has undergone a major revision of its traditional paradigms with the rapid spread of social networks, which have allowed access to extraordinary knowledge about consumers using interactive forms of communication and building shared meanings about firms, products and, more generally, supplies (chiarvesio & di maria, 2008). 105 therefore, a new marketing model, called mobile marketing, has emerged, which uses multimedia technology to monitor intentions and consumer behaviours, provide social and interactive experiences that are able to give value to products and services, and transfer the messages to the target audience when the consumer is more focused and ready to consider and acknowledge these messages (mardegan, riva & pettiti, 2012; scatena & mardegan, 2012). this has led to the development of a new frame in which production and consumption are no longer separate, autonomous and independent worlds, but, on the contrary, integrated and complementary entities within which the customer exercises “forms of attention-seeking, unthinkable until the recent past” (fabris, 2008, p. 448). at this point, the business and the consumer become part of the same community and communication takes on new values, directing attitudes, influencing purchasing behaviour (graffigna, ravaglia & brivio, 2012) and strengthening the link between the audience and the brand, thanks to its interactive nature. as noted in recent academic contributions (vernuccio, ceccotti & pastore, 2012) that fit into the branch of research related to integrated marketing communication, the relationship architecture moves from a linear to a networking model, redefining content (co-created through social interactions), reconfiguring channels, allowing different shapes and streams to coexist: one-to-many, one-to-one and many-to-many. the nature of these new forms of communication, attributable to web 2.0 (o’reilly, 2005), is then: (i) the horizontal dimension, (ii) bi-directionality, (iii) the active participation of the client, (iv) the auto-generation of content (solima, 2008; riva, 2010). on the basis of this discussion, it can be said that in the near future, customers will continually increase their use of such technology to communicate information about their own needs and experiences as consumers, turning to blogs to convey and transfer meanings attributed to products and determining implicitly the competitive position of companies and these companies’ degree of satisfaction of customers’ needs (crotts et al, 2009; luquemartinez et al., 2007; kuo e lee; 2009) the new dimension of web marketing will thus increasingly aim to support customer relationship management, creating social bonds and ensuring a quality online service. (biloslvao & trnavcecic, 2009; chen & chiu, 2009; barrutia et al., 2009; lim et al., 2011). this new scenario, in addition to imposing a rethinking of the tools and techniques utilized until now, determines the need to analyse customer behaviour within the environment of social networks for monitoring features and message content (posts) (berton et al., 2007; kaplan et al., 2010). a firm must therefore: (a) constantly keep conversations under control, not merely through a passive revision but by taking part directly in them; (b) evaluate what users share and find common elements among these items; (c) monitor its reputation using appropriate metrics and the development of specific indicators; (d) stimulate the formation of groups according to the characteristics of the individual members of these groups (kietzman et al, 2011). last but not least, the management should concentrate on overseeing the brand that, in the new dimension, must be considered a “social sense-making process (rather than an entity) made by various and dynamic interactions of brand stakeholders, bridged by brand narratives in which all these agents participate.” (mandelli, 2012). this requires the presence of actors in constant conversation in social networks, who act as narrators, animate the discussions about the brand and the company, and have skills in marketing culture. social media brand management therefore becomes an additional marketing strategy that essentially involves the monitoring and gate keeping of relevant conversations with the active 106 participation in them and the involvement of authoritative stakeholders, influencing consequent purchases (weinberg & pehlivan, 2011). 3. research results 3.1 social media in the wine sector: the perception of buyers the first step of the field research concerned the degree of utilization of social communication by commercial agents in order to perceive the main content and obstacles to its diffusion. buyers represent a privileged partner to a company because of their knowledge, creativity and ability to identify the target and trend markets in which the company works. observing the processes of consumer choice through these interlocutors has several advantages (kotler et al., 2012), primarily due to consumers’ direct knowledge of the market (by product categories, customers and territorial area). the investigation was conducted by means of a semi-structured questionnaire, sent to multi-firm agents operating in italian territories. such observations of data were taken between the period of november-december 2012. preliminarily, we attempted to observe some distinctive traits of the respondents with the aim of identifying the level of their business activity (cfr. figure 1). we noted that more than a half of the respondents showed trade relations with more than 100 wholesalers and retail distributors, while one-fifth of respondents related to a number of over 50 interlocutors. the main channels used by agents for the commercialization of products were restaurants (30% of sales), followed by bars (15.7%), wine bars, and wholesale trade, which, in both of the latter cases, had a use percentage exceeding 14%. some agents imported wines from abroad (one-fifth, all from france); one case was significant, where a value of approximately 25% of the turnover was imported, and in another two cases, the quantity imported was equal to 10% of the total. concerning italian wines, the main product brokered (in terms of grape variety) was prosecco, followed by primitivo; guztraminer was the second most marketed product. figure 1 – number of distributors who communicate with agents source: authors' processing the study proceeded, therefore, with the verification of the determining factors of wine purchases, considering the intrinsic and extrinsic attributes of the product (olson & jacoby, 1972); in particular, the respondents were asked to attribute a value between 1-5 (1=not important, 2=of little importance, 3=neither important nor unimportant, 4=important, 10%  10%  6%  19%  55%  1 ‐ 10  11 ‐ 30  31 ‐ 50  51 ‐ 100  more than 100  5=indispensable) to some factors that may determine the purchase of the product (among others schamel & anderson, 2003; goodman, lockshin & cohen, 2005; lockshin & halstead, 2005), in the view of different channels with which they relate. the factor that was attributed greate a mean value equal to 4; the lowest value measured by the variance, equal to 0.27, highlights a common level of attention from all commercial channels. particular consideration was value equal to 3.64, variance 0.30) and importance was attributed to the the internet. in-depth analysis, as presented determining the purchase of wine, with regard to individual sales channels, the factor factor in the case of sales through bar attentive (level of significance of 3.93) to the (3.87) and reputation/recognisability figure 2 – determining factors in the source: authors' processing 5=indispensable) to some factors that may determine the purchase of the product (among others schamel & anderson, 2003; goodman, lockshin & cohen, 2005; lockshin & view of different channels with which they relate. attributed greatest importance in the sales process a mean value equal to 4; the lowest value measured by the variance, equal to 0.27, highlights a common level of attention from all commercial channels. was expressed with relation to the brand manufacturer value equal to 3.64, variance 0.30) and packaging (average value of 3.59, variance 0.27). less attributed to the methods of production and the presence of , as presented in figure 2, shows the value assigned determining the purchase of wine, from the view of the channel used. with regard to individual sales channels, the factor of price was perceived as a relevant factor in the case of sales through bars, wholesale and gd. the restaurant industry attentive (level of significance of 3.93) to the brand manufacturer, the organoleptic quality recognisability of the denomination of origin (3.83). determining factors in the purchase of wine 107 5=indispensable) to some factors that may determine the purchase of the product (among others schamel & anderson, 2003; goodman, lockshin & cohen, 2005; lockshin & was the price, with a mean value equal to 4; the lowest value measured by the variance, equal to 0.27, highlights brand manufacturer (mean (average value of 3.59, variance 0.27). less and the presence of information on in figure 2, shows the value assigned by the agents in perceived as a relevant , wholesale and gd. the restaurant industry was more organoleptic quality 108 this collection of data shows some trends within the italian context: on the one hand attention was focused on some factors such as reputation/recognisability of the denomination of origin production methods were not considered crucial. these results implementation of social communication specific content. referring to the spread resorted to the use of social networks in the management of customer relationships. the main justification for this use, as indicated offer in combination with contained costs that they could gain a better understanding of intermediaries and deal by using social media. conversely, for those who do not use the this non-use is due to the fact that they consider relationships, which, in their view, allow for figure 3 – level of importance of social media source: authors' processing not all of the resources available 3). the use of social networks and the between companies and both and with caterers (3.70 for both tools). the overall figure for each category of interlocutors highlights the increased importance of social media appears to be less attentive to these tools. the evaluation by type of the communication medium demonstrates: i) a greater level of importance (although with a mean value of 3.2 widespread attention, although not high, toward such a tool (variance=0.42); iii) generally the least-used mediums, evidencing a greater focus on communication forms such as many-to-many. the main justification for the use social media concerns the promotion of initiatives (events, wine and food tasting, media is related to the exchange of news and views on specific topics or on the sales. this collection of data shows some trends within the italian context: on the one hand s focused on some factors such as price, brand of the manufacturer and of the denomination of origin; on the other hand, the re not considered crucial. these results have shown to be useful in the communication by way of building, transmitting and sharing referring to the spread of web 2.0 communication, one-third of those interviewed resorted to the use of social networks in the management of customer relationships. the main for this use, as indicated in this study, is linked to the visibility that these tools with contained costs of their use. in addition, the responde that they could gain a better understanding of intermediaries and consumers with whom they using social media. conversely, for those who do not use the aforementioned use is due to the fact that they consider it most convenient to resort to personal relationships, which, in their view, allow for a greater involvement of the interlocutor. level of importance of social media not all of the resources available were used in the same way by those studied 3). the use of social networks and the internet was considered important for the relationship both wine bars (with evaluations equal to 4.14 and 4 and with caterers (3.70 for both tools). the overall figure for each category of interlocutors increased importance of social media with relation to wine bars, appears to be less attentive to these tools. the evaluation by type of the communication medium demonstrates: i) a greater level of importance (although with a mean value of 3.23) attributed to video/photo sharing site widespread attention, although not high, toward such a tool (variance=0.42); iii) used mediums, evidencing a greater focus on communication forms such n justification for the use social media concerns the promotion of initiatives events, wine and food tasting, match wine-typical products, etc). marginally, the use is related to the exchange of news and views on specific topics or on the this collection of data shows some trends within the italian context: on the one hand, brand of the manufacturer and ; on the other hand, the internet and shown to be useful in the of building, transmitting and sharing third of those interviewed resorted to the use of social networks in the management of customer relationships. the main in this study, is linked to the visibility that these tools . in addition, the respondents realized consumers with whom they aforementioned tools, most convenient to resort to personal a greater involvement of the interlocutor. by those studied (see figure considered important for the relationship equal to 4.14 and 4, respectively) and with caterers (3.70 for both tools). the overall figure for each category of interlocutors wine bars, while the gd the evaluation by type of the communication medium demonstrates: i) a greater level of video/photo sharing sites; ii) a widespread attention, although not high, toward such a tool (variance=0.42); iii) chats are used mediums, evidencing a greater focus on communication forms such n justification for the use social media concerns the promotion of initiatives typical products, etc). marginally, the use of social is related to the exchange of news and views on specific topics or on the dynamics of 109 among non-users, only a few consider that customers are willing to use social media. the rest of the respondents maintain that a direct relationship with customers has greater efficacy and that customers appear not to be interested in the aforementioned alternative forms of information exchange. there is no correlation between buyers’ behaviour in using social media tools and their features or operational characteristics. 3.2 a quantitative analysis of the textual content of wine blogs taking into consideration the exploratory purpose of this study, represented by the desire to achieve a descriptive analysis and interpretation of web communication related to wine, this research has focused on the quantitative analysis of the textual content extracted from the selected blogs. the field analysis proceeds as follows: ‐ the first five wine blogs were selected,1 identified by implementing a search on google.com (blog section), in the period between 15th november 2012 to 15th january 2013; ‐ the text mining methodology was implemented, with which texts are processed using statistical methods in order to identify the words that appear most frequently (bolasco, 1997; feldman, & sanger, 2007); the research was carried out using the articles discussing “wine” as the units of context and the “word” as the unit of analysis; ‐ the data was reworked with catpac software, permitting the detection of a data set comprised of the 80 most recurring words for each unit of context. ‐ after the normalization process2 of the dataset above, the only words investigated using ex post encoding (molteni, &troilo, 2003) were those that, coherent with the objective of the study (with “wine” as the main unit of analysis), were indicative of:  ‐ elements of context: terms that refer to intrinsic or extrinsic attributes of wine, such as price, quality, organoleptic characteristics, denomination, grapes, etc (olson, & jacoby, 1972; schamel, & anderson, 2003); ‐ cognitive elements: words within the sphere of knowledge, perception, sensory and emotional factors closely related to wine, such as adjectives explaining the quality (steenkamp, 1990); ‐ experiential/emotional elements: words that recall wine within a holistic/perceptive system, such as terroir, specific wine territories, collateral environmental elements (tragear et al., 1998). based on these classifications, the contingency matrix of “category/blog” was created, in which the following were reported: ‐ the absolute frequencies of each unit of analysis into the individual context units (blog articles), ‐ the absolute frequency of each category, represented by the sum of words belonging to it. 1 jamie goode's wine blog (http://www.wineanorak.com/wineblog/, london, uk), dr. vino (http://www.drvino.com/, california, usa), steve heimoff (http://www.steveheimoff.com/, california, usa), terroirist: a daily wine blog (http://www.terroirist.com/, washington, usa), bacchus&beery (http://wineblog.bacchusandbeery.com/, colorado, usa). 2 adverbs, conjunctions, and pronouns were eliminated. 110 the matrix allowed us similarity, differentiation and specific contingency table was then reworked in order to detect points on the row/column (expressed in terms of relative frequency) that could be indicative for each blog, based on the importance of each category with respect to the total of each and the specific blog. this made to graphically represent the associations between the identified categories and the examined blogs by means of a positioning map. the following observations analysis of the map in figure 4 and the input data recorded in the matrix the map shows that the positioning of the very similar and, in any case, greater than the other two categories. this results fro presence of some similar elements that, in terms of words, belong to this category, characterizing this group of blogs “winemaker,” and “bottle” appearing most frequently wines rather than a denomination or specific brand, with the appearance of words such as “pinot,” “sauvignon,” and “cabernet the presence and common elements of words “tone” that reinforce the references to intrinsic characteristics of references to specific factors, with words such as “oak,” “sauvignon,” “pinot” – terroirist: a daily wine blog to endorse the relationship between figure 4 – positioning of categories/blogs source: authors' processing note: blog 1/jamie goode's wine blog (california, usa), blog 4/terroirist: a daily wine blog (colorado, usa) with regard to cognitive elements, it is possible to note a contrast between compared to blogs 4 and 5 and an intermediate positioning of 3 because of exposit requirements, the matrix of contingency is not reported us to view the lexical composition of the texts, any points of similarity, differentiation and specific associations between categories and blogs. the contingency table was then reworked in order to detect points on the row/column (expressed in terms of relative frequency) that could be indicative for each blog, based on the importance respect to the total of each and the specific blog. this made to graphically represent the associations between the identified categories and the examined blogs by means of a positioning map. the following observations were derived analysis of the map in figure 4 and the input data recorded in the matrix.3 the map shows that the positioning of the elements of context for blogs 1, 2, 3, very similar and, in any case, greater than the other two categories. this results fro presence of some similar elements that, in terms of words, belong to this category, characterizing this group of blogs with the words “taste,” “red,” “vineyard appearing most frequently, followed by a widespread reference to rather than a denomination or specific brand, with the appearance of words such as cabernet.” blog 4, however, had a higher ranking depend common elements of words such as “quality,” “grape,” “nose that reinforce the references to intrinsic characteristics of wine as a product, and , with words such as “cabernet,” “champagne and “cherry.” this point was confirmed by the name of daily wine blog – which, from a lexical point of view, indicates an to endorse the relationship between terroir and wine. positioning of categories/blogs jamie goode's wine blog (london, uk), blog 2/dr. vino (california, usa), blog 3/ terroirist: a daily wine blog (washington, usa), blog 5/ with regard to cognitive elements, it is possible to note a contrast between 4 and 5 and an intermediate positioning of blog 3. in fact, although there because of exposit requirements, the matrix of contingency is not reported. to view the lexical composition of the texts, any points of associations between categories and blogs. the contingency table was then reworked in order to detect points on the row/column (expressed in terms of relative frequency) that could be indicative for each blog, based on the importance respect to the total of each and the specific blog. this made it possible to graphically represent the associations between the identified categories and the examined derived from the joint logs 1, 2, 3, and 5 is very similar and, in any case, greater than the other two categories. this results from the presence of some similar elements that, in terms of words, belong to this category, vineyard,” “noir,” “white,” widespread reference to rather than a denomination or specific brand, with the appearance of words such as a higher ranking depending on nose,” “tannin,” and as a product, and on champagne,” “chardonnay,” point was confirmed by the name of blog 4 ndicates an intention (california, usa), blog 3/steve heimoff (washington, usa), blog 5/bacchus & beery with regard to cognitive elements, it is possible to note a contrast between blogs 1 and 2 log 3. in fact, although there 111 is a substantial homogeneity with all blogs resulting from the use of adjectives such as “good,” “great,” and “better,” indicative of the perception of the quality of the product, and words such as “fruity” and “drinking,” which indicate reminiscent sensory elements associated with the pleasure of tasting. for blogs 1, 2 and 3, in terms of incidence, the link between the frequency of words associated with a particular category and the total number of words found in the text was shown to be relevant. with reference to experiential elements, the positioning of the blog was similar to the type of words utilized. terms such as “people,” “word,” “country/terroir” were common and frequent, except in blog 3, which had a greater territorial contextualization through the use of words such as “valley,” “california,” “napa” and “sonoma.” indeed, it is significant to remember that these outcomes derived from the analysis of texts from the five most indexed blogs, which are characterized by a usa-centred orientation and are specialized in such areas of production. observations taken via the analysis of the data collected, though not exhaustive of the phenomenon, are considered interesting in showing the peculiar trends in the social communication of wine. it is, in fact, possible to identify four components of this kind of communication: ‐ specific characteristics, in which variables are represented by intrinsic factors of the product (“red,” “white,” “nose,” “tannin,” “oak,” “vineyard,” etc), linked to specific geographic areas (“australia,” “usa”). this is indicative of the fact that in the aforementioned areas, these attributes are used with greater frequency as vehicles for communication regarding wine; ‐ extrinsic attributes, which consist of variables that detect the three dimensions of wine: � commercial (“bottle,” “price,” “tasting,” “vineyard”), � sensory (quality adjectives as “great,” “good,” and “old”), � emotional, with references to the pleasure of drinking (“drinking”), to wine tourism territories (“napa valley,” “sonoma valley,” “california”) and experiential elements (“country/terroir,” “people,” “world”); ‐ country image, which involve words that recall territories and adjectives representative of their features (vintage, reminiscent of the aging processes of french wines and english spirits and natural, beckoning the natural landscape of new zealand); ‐ landscape elements, which concern terms corresponding to specific geographical features (“river,” “road”) that, while present in the online conversation, do not characterize it. 3.3 social network communication – facebook pages the conciseness and immediacy that characterize communication in social networks (bernoff and li, 2008; pehlivan and weinberg, 2011) require a methodology of study specific to content analysis. within the present research, the attention has been focused on one of the most popular tools for socializing online, facebook, with the aim of identifying the main topics adopted to generate engagement through the examination of the pages of the wineries previously selected, as well as observing the replies (comments) of the fans. 112 in particular, the first 5 facebook winery pages were selected4, identified by implementing a search on google.com (all the web section) with help from the key words “winery facebook” and “facebook winery” (applying the criteria of relevance). the analysis of the content (posts and comments on facebook pages during the period between 15th november 2012 and 15th january 2013) was carried out by adopting the text mining methodology (bolasco, 2005). using the logic of text mining, the study proceeded with the observation of posts (context units) published by each winery (in the timeframe specified above), considering the word as the unit of analysis. the analysed texts were revised with catpac software, resulting in a dataset of the 25 most used words; this list, as a result of the normalization process,5 represented the starting point of a process of analysis aimed at finding out what messages were sent through those words. the in-depth analysis of the posts of each facebook page was considered, and the comparison of posts allowed the verification of a substantial similarity between the most common terms within facebook communication. below is the list of recorded content, in descending order based on the observed frequencies (cfr. figure 5): ‐ “wine”; ‐ winery name, evocative of the brand image; ‐ product, used in combination with the name of the grape variety, identifies a specific company product (for example “cabernet sauvignon,” “pinot noir,” etc) or it indicates organoleptic characteristics (“flavour,” “quality,” etc); ‐ land, mentioned with reference to both the location where the winery is located and in relation to the territory in a holistic acceptation (for example “napa valley,” “south australia,” “vancouver,” “sonoma valley,” etc); ‐ event, identification of “tasting” organized in cellars (also called “supper party”) and/or scheduled events in the territory, in both cases, the key words included “local,” “food” and “sustainability”; ‐ award, i.e. achievements, awards and accolades gained from the winery and shared with fans; ‐ suggestion, particularly “homemade recipe,” “match” between food and wine and “gift” involving the company’s products, whereby one creates an additional reason for the sharing and appreciation of the products; ‐ curiosity, relevant to the world of wine (“combibloc,” “wine consumer profile”), useful for the involvement of the wine interested; ‐ opinion, necessary to acquire the opinions of the fans on the company’s products or on general topics (“trivia”); ‐ winery life, meaning the specific references to the experience of ownership/management of the winery (“birthday,” “anniversary”), employed to reduce the relational distance with the final consumer. 4 1. ram’s gate winery & estate vineyards (sonoma, california) https://www.facebook.com/ramsgatewinery; 2. v. sattui winery and vineyards (napa valley, california) https://www.facebook.com/vsattui1885; 3. vancouver urban winery (vancouver, canada) https://www.facebook.com/vancouverurbanwinery; 4. bird in hand (woodside, south australia) https://www.facebook.com/birdinhandwinery; 5. robertson winery (robertson valley, south africa) https://www.facebook.com/robertson.winery. 5 cfr. footnote 2. figure 5 – cloud of facebook words p ro fi le c om m en ts source: authors' processing such involvement activity, implemented by those responsible communication of the winery, comment replies to message posts or their personal experiences the main topics, in the cases observed, are essentially attributable to approval, with reference to: ‐ wine (“favourite”), tasted especially during special occasions ( ‐ events organized or suggested by the winery; ‐ winery life&award; ‐ information&suggestion and “local event.” from the examination of facebook pages of the communication strategy adopted following factors: experience sharing, conversation experiences, both on the part of the winery and the users with a was able to generate a conversation tha for the social communication, (aaker, 1997), of the company as a whole. the benefit of the social communicate, through the sharing of specific history and experience of the entrepreneur of belonging to the community company to direct their purchase behaviour, making cloud of facebook words such involvement activity, implemented by those responsible winery, had a response from facebook users as comment replies to message postings, and indeed, spontaneously decide posts or their personal experiences within the social network. , in the cases observed, are essentially attributable to ), tasted by users for the first time or to demonstrate their loyalty, especially during special occasions (“tasting,” “brand loyalty,” “celebration events organized or suggested by the winery; ion&suggestion, requested by the user on “wine,” “match examination of facebook pages of the winery observed, a common thread in the communication strategy adopted within social networks was revealed, ascribable to the experience sharing, conversation and community. in fact, the sharing of , both on the part of the winery and the users with a user opinion s able to generate a conversation that, if animated and well-managed by those responsible social communication, created and reinforced the consent, and hence the loyalty company as a whole. the benefit of the social network is, in fact, attributable to the opportunity to communicate, through the sharing of specific topics, the contents of a product/brand (origins, history and experience of the entrepreneur and values). precisely, the involvement and sense community corroborate the loyalty of users toward the brand company to direct their purchase behaviour, making the use of essential information for the 113 such involvement activity, implemented by those responsible for the social as far as they wrote , and indeed, spontaneously decided to share winery , in the cases observed, are essentially attributable to thanks and users for the first time or to demonstrate their loyalty, celebration”); match,” “winery event” observed, a common thread in the was revealed, ascribable to the . in fact, the sharing of user opinion-oriented view, managed by those responsible the consent, and hence the loyalty is, in fact, attributable to the opportunity to the contents of a product/brand (origins, values). precisely, the involvement and sense brand, allowing the use of essential information for the 114 implementation of strategies, of communication or marketing in general, beneficial for its competitiveness. 4. conclusions the success of the social media has imposed a rethinking of traditional marketing strategies in the wine sector. in particular, as shown by the conducted study, companies appear to be increasingly oriented to consider these channels as a way to reduce the relational distance with the client and, through the sharing of content and the object of the communication, render the client a participant in the creation of generated value. the conducted analysis, aimed at supporting the implementation of the social component of a scrm application, has allowed us to observe the characteristics of the communication conveyed by the best practices (wine blogs and facebook pages) identified, in order to establish guidelines for the effective use of social media. the first step of research has shown a limited recourse of these formulas by the agents that, in two out of three cases, claimed that they are not useful in the promocommercialization of the product. in general, the use of social media appears to be particularly important in dealing with wine bars and restaurants that, overall, account for almost half of the product intermediated by the interviewees. the observation of the content transmitted through wine blogs allowed us to identify four macro-themes – recognition of the intrinsic elements of the product, appreciation of extrinsic country images, landscape elements – around which the current communication about wine revolves. this observation was also confirmed by the study of the facebook communication of the selected winery, which revealed that topics used to promote the involvement of fans are essentially the same as discussed in wine blogs. communication within social networks aims, through experience sharing, to stimulate conversation and give life to a community around the company brand with positive returns on the brand image. analysing these issues with a view of glocal marketing (bauman, 2005), it is possible to make interesting management observations. therefore, as claimed, wine is a product with a high cognitive content, capable of stimulating emotional and experiential situations that can be effectively communicated and shared through the aforementioned tools. the topics identified during the analysis of best practices of the web communication related to wine, in fact, allow the opportunity to share knowledge relating to the tangible and intangible heritage that animates such productions, consenting to create and exploit a specific identity. additionally, we observed the possibility of pursuing a specific preservation of traditional local productions and, in this way, promoting awareness on the issues of protection of territories and the consequent diffusion of sustainable agricultural 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(2011), social spending: managing the social media mix, business horizons, 54, 275-282. zhang articolo formatted 2 3 dynamic interactions among growth, environmental change, habit formation, and preference change wei-bin zhang ritsumeikan asia pacific university, japan received: march 27, 2013 accepted: july 30, 2013 online published: october 10, 2013 abstract the purpose of this study is to construct an economic growth model with environmental change and preference formation. the paper is focused on dynamic interactions among capital accumulation, environmental change, habit formation, preference change, and division of labor in perfectly competitive markets with environmental taxes on production, wealth income, wage income and consumption. the model integrated the dynamic economic mechanisms in the neoclassical growth theory, the environmental dynamics in traditional models of environmental economics, and the literature of economic growth with habit formation and within a comprehensive framework. it is showed that the motion of the economic system is given by three nonlinear autonomous differential equations. we simulate the time-invariant system. the simulation demonstrates some dynamic interactions among the economic variables which can be predicted neither by the neoclassical growth theory nor by the traditional economic models of environmental change. for instance, if the past consumption has weaker impact on the current consumption, although the long-term equilibrium of the dynamic system will not be affected, the transitional paths are shifted as follows: initially the transitional path of the stock habit becomes lower than its original path; the consumption level falls initially in association with falling in the propensity to consume; the exogenous disturbance causes the propensity to consume to fall and the propensity to save to rise; the national wealth and capital inputs of the two sectors are augmented; the labor force is shifted initially from the industrial sector to the environmental sector, but subsequently the direction is opposite before the labor distribution comes to its original equilibrium point; the wage rate is enhanced in association with falling in the rate of interest; the level of pollution falls initially, but rise subsequently; the output levels of the two sectors and the total tax income are enhanced before they come back to their original paths. keywords: habit formation; preference change; environmental tax; pollution; economic growth. acknowledgements: the author is grateful for the financial support from the grants-in-aid for scientific research (c), project no. 25380246, japan society for the promotion of science. 4 1. introduction economic growth has close relationships with environmental changes. as far as neoclassical growth theory is concerned, early formal modeling on tradeoffs between consumption and pollution were found in the seminal papers by plourde (1972) and forster (1973). interactions between environmental change and economic growth have received increasingly attention in the literature of economic growth and development (see, for instance, pearson, 1994; grossman, 1995; copeland and taylor, 2004; stern 2004; brock and taylor, 2006; dasgupta, et al. 2006). in the literature of economic development and environmental change many researches are conducted to confirm or question the environmental kuznets curve. the environmental kuznets curve refers to the phenomenon that per capita income and environmental quality follow an inverted u-curve. a recent survey on the literature of the curve is given by kijima et al. (2010). in fact, in the increasing literature of empirical studies on relations between growth and environmental quality rather than the suggested environmental kuznets curve one finds different relations such as inverted u-shaped relationship, a u-shaped relationship, a monotonically increasing or monotonically decreasing relationship (dinda, 2004; managi, 2007; tsurumi and managi, 2010). the various relations between economic development and environmental quality the inability of economic theories for properly explaining these observed phenomena implies the necessity that more comprehensive theories are needed. the purpose of this study is to introduce habit formation and preference change into the literature of economic growth and environmental change. as far as i am aware, there is no formal neoclassical growth model based on micro economic foundation which deals with economic growth, environmental change, habit formation, and preference change in an integrated framework. people behave under influences of their habits. these habits are formed over years. people may change their habits with different speeds. habits are parts of preferences. different people have different preferences. the preference is also changeable over time for the same person. this study tries to integrate habit formation, preference change and economic growth within a comprehensive framework. preferences are changeable and many factors may attribute to these changes. for instance, becker and mulligan (1997) found that expenditures in health and education have positive impacts saving (see also, fuchs, 1982; shoda et al., 1990; olsen, 1993; kirby et al. 2002; chao et al., 2009). many empirical studies identify relations between preference changes and other changes in social and economic conditions (e.g., horioka, 1990; sheldon, 1997, 1998). in the literature of economic growth with preference change, economists analyze preference change mainly by introducing time preference change in the ramsey growth model. a main approach to modeling relations between growth and preference change is the socalled endogenous time preference. the formal modeling in continuous time formation was initiated with uzawa’s seminal paper (uzawa, 1968). following uzawa, lucas and stokey (1984) and epstein (1987) establish relations between time preference and consumptions. becker and barro (1988) build a time preference change model in which the parent’s generational discount rate is connected to their fertility. there are other studies on the implications of endogenous time preference for the macroeconomy (see, e.g., epstein and hynes, 1983; obstfeld, 1990; shin and epstein, 1993; palivos et al., 1997; drugeon, 1996, 2000; stern, 2006; meng, 2006; dioikitopoulos and kalyvitis, 2010). the idea of analyzing change in impatience in this study is influenced by the literature of time preference. we introduce changes in impatience in an alternative utility proposed by zhang (1993). except the literature on time preference change, this study is also influenced by the so-called habit formation or habit persistence model. the model was initially proposed in formal economic analysis by duesenberry (1949). becker (1992) explains the role of habit in affecting human behavior as follows: “the habit acquired as a child or young adult generally continue to influence behavior even when the environment 5 changes radically. for instance, indian adults who migrate to the united states often eat the same type of cuisine they had in india, and continue to wear the same type clothing.” habit formation is also applied to different fields of economic analysis (for instance, pollak, 1970; mehra and prescott, 1985; sundaresan, 1989; constantinides, 1990; campbell and cochrane, 1999; de la croix, 1996; boldrin et al., 2001; christiano et al. 2005; ravn et al., 2006; huang, 2012). it should be noted that since the research by abel (1990), ‘catching up with the joneses’ is often used exchangeable with external habit formation. the purpose of this paper is to study economic growth with environmental change and preference change on the basis of the solow one-sector growth model, zhang’s approach to household behavior, the neoclassical growth models with environmental change, the literature of time preference and the literature of habit formation. the model in this paper is an extension of zhang’s two models on environmental change and habit formation. the interdependence between savings and dynamics of environment is mainly based on zhang (2011), while the habit formation and preference change are based on zhang (2012). section 2 introduces the basic model with wealth accumulation, environmental dynamics, habit formation and preference change. section 3 studies dynamic properties of the model and simulates the model, identifying the existence of a unique equilibrium and checking the stability conditions. section 4 conducts comparative dynamic analysis with regard to some parameters. section 5 concludes the study. the appendix proves the analytical results in section 3. 2. the basic model the production side of the economy consists of one industrial sector and one environmental sector. the industrial sector is similar to the standard one-sector growth model (see burmeister and dobell 1970; barro and sala-i-martin, 1995). the economy has only one (durable) good and one pollutant in the economy under consideration. in the literature of environmental economics, there are different kinds of environmental variables (e.g., moslener and requate, 2007; repetto, 1987; leighter, 1999; and nordhaus, 2000). capital of the economy is owned by the households who distribute their incomes to consume the commodity and to save. exchanges take place in perfectly competitive markets. the population n is fixed and homogenous. the labor force is fully employed by the two sectors. the commodity is selected to serve as numeraire (whose price is normalized to 1), with all the other prices being measured relative to its price. the industrial sector economic productivities are affected by pollution through different channels. for instance, pollution may directly affect production technology or the productivity of any input (grimaud, 1999; chao and peck, 2000; gradus and smulders, 1996; ono, 2002) for the impact on the productivity of any input. we assume that production is to combine labor force, ( ),tn i and physical capital, ( ).tk i we add environmental impact to the conventional production function. the production function is specified as follows ( ) ( )( ) ( ) ( ) ,1,0,,, =+>γ= iiiiiiiiii atntkteatf ii βαβαβα (1) where ( )tfi is the output level of the industrial sector at time ,t ( )eiγ is a function of the environmental quality measured by the level of pollution, ( ),te ia is the total productivity, and iα and iβ are respectively the output elasticities of capital and labor. the environmental impact on the productivity ( )eiγ is specified as follows 6 ( )( ) ( ) .0, ≤=γ ibi btete i in perfectly competitive markets are competitive, labor and capital earn their marginal products. the environmental quality is not decided by any individuals firm. let ( )tr and ( )tw represent respectively the rate of interest and wage rate as follows ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) , 1 , 1 tn tf tw tk tf tr i iii i iii k τβτα δ − = − =+ (2) where kδ is the fixed depreciation rate of physical capital and iτ is the fixed tax rate, .10 <<< iτ consumer behaviors the representative household decides how much to consume and how much to save. this applies the approach to behavior of the household proposed by zhang (1993). per capita wealth is denoted by ( ).tk we have ( ) ( ) ,/ ntktk = where is the total capital stock. the per capita disposable current income which is the sum of the interest payment ( ) ( )tktr and the wage payment ( )tw after taxation is given by ( ) ( ) ( ) ( ) ( ) ( ),11 twtktrty wk ττ −+−= where kτ and wτ are respectively the tax rates on the interest payment and wage income. the per capita disposable income is ( ) ( ) ( ).ˆ tktyty += (3) the disposable income is distributed between saving and consumption. the representative household spends the total available budget on saving, ( ),ts and the commodity, ( ).tc the budget constraint is ( ) ( ) ( ) ( ),ˆ1 tytstcc =++ τ (4) where cτ is the tax rate on the consumption. in this study we neglect the possibility that consumers explicitly take care of environment. for modern economies, consumers tend to make efforts in improving environment, for instance, by preferring to environment-friendly goods. as observed by selden and song (1995), when society has a lower level of pollution, the representative agent may not care much about environment and spends his resource on consumption; however, as the environmental quality lowers and the agent earns more, the agent may spend more resources on environmental improvement. the household decides the two variables, ( )ts and ( ).tc this study specifies the utility function as follows ( ) ( )( ) ( )( ) ( )( ) ( ) ( ) ,0,,, 000000 >= − χλξχλξ tttetstctu ttt 7 where ( )t0ξ is the utility elasticity of the commodity, called the propensity to consume, ( )t0λ is the utility elasticity of saving, called the propensity to own wealth, and 0χ is the elasticity of environmental quality. this type of utility function was initially proposed by zhang (1993). as balcao (2001) and nakada (2004), we assume that utility is negatively to pollution, which is a side product of the production process. according to munro (2009: 43), “environmental economics has been slow to incorporate the full nature of the household into its analytical structures. … [a]n accurate understanding household behavior is vital for environmental economics.” in our approach, for the representative household, )(tw and )(tr are given in markets. maximizing )(tu subject to (4) yields ( ) ( ) ( ) ( ) ( ) ( ),ˆ,ˆ tyttstyttc λξ == (5) where ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) . 1 ,, 1 00 0 0 tt ttt tt t c λξ ρλρλ τ ξρ ξ + ≡≡ + ≡ we call ( )tξ and ( )tλ respectively the relative propensities to consume and to save. it is the values of the relative propensities, not the propensities, which matter in determining the expenditure allocation. dynamics of wealth accumulation according to the definition of ( ),ts the change in the household’s wealth is given by ( ) ( ) ( ).tktstk −=& (6) the equation simply states that the change in wealth is equal to saving minus dissaving. the demand and supply balance the output of the industrial sector equals the sum of the level of consumption, the depreciation of capital stock and the net savings. hence we have ( ) ( ) ( ) ( ) ( ),tftktktstc ik =+−+ δ (7) where ( ) ( ) ntctc = is the total consumption, and ( ) ( ) ( )tktkts kδ+− is the sum of the net saving and depreciation, where ( ) ( ) .ntsts ≡ full employment of production factors we use n te ( ) and k te ( ) to respectively stand for the labor force and capital stocks employed by the environmental sector. as full employment of labor and capital is assumed, we have ( ) ( ) ( ),tktktk ei =+ ( ) ( ) .ntntn ei =+ (8) 8 environmental change we now describe dynamics of the stock of pollutants ( ).te both production and consumption pollute environment. the dynamics of the stock of pollutants is specified as follows ( ) ( ) ( ) ( ) ( ),0 tetqtctfte ecif θθθ −−+=& (9) where q qf c, , and q0 are positive parameters and ( ) ( ) ( ) ,0,,,)( >γ= eeeeeeee atntkeatq ee βαβα (10) where ,ea ,eα and eβ are positive parameters, and )0()( ≥γ ee is a function of .e as in gutiérrez (2008), the emission of pollutants during production processes is linearly positively proportional to the output level. this is reflected by ffθ in (10). as in john and pecchenino (1994), john et al. (1995), and prieur (2009), in consuming one unit of the good the quantity cθ is left as waste. we consider cθ is related to the technology and environmental sense of consumers. the term e0θ is the rate that the nature purifies environment, where 0θ is called the rate of natural purification. we use the term, ,ee ee nk βα in qe to reflect that that the purification rate of environment is positively related to capital and labor inputs. the function )(eeγ means that the purification efficiency is related to the stock of pollutants. for simplicity, we specify eγ as follows ( ) ,ebee ee θ=γ where eθ and eb are parameters. the behavior of the environmental sector in this study we consider that the environmental sector is financially supported by the government. the sector decides the number of labor force and the level of capital employed. the government’s tax revenue consists of the tax incomes on the industrial sector, consumption, wage income and wealth income. hence, the government’s income is given by ( ) ( ) ( ) ( ) ( ) ( ).tktrtwntctfty kwciie ττττ +++= (11) as in ono (2003), we assume that all the tax incomes are spent on environment. for simplicity, we assume that all the revenue of the government is spent on protecting environment. the environmental sector’s budget is ( )( ) ( ) ( ) ( ) ( ).tytntwtktr eeek =++ δ (12) according to zhang (2011), the environmental sector employs labor and uses capital in such a way that the purification rate achieves its maximum under the given budget constraint. the sector’s optimal problem is given by ( )tqemax s.t.: ( )( ) ( ) ( ) ( ) ( ).tytntwtktr eeek =++ δ the optimal solution is ( )( ) ( ) ( ) ( ) ( ) ( ),, tytntwtytktr eeeek βαδ ==+ (13) 9 where ., ee e ee e βα β β βα α α + ≡ + ≡ the time preference and the propensity to hold wealth following zhang (2012), we introduce preference change through making the propensity to own wealth and propensity to consume endogenous variables. zhang’s approach is influenced by the traditional approach to preference change in economic theory. to illustrate the approach in this study, we consider a traditional modeling framework by chang et al. (2011) in which the representative household maximizes the following discounted lifetime utility with perfect foresight ( ) ( ) ,, 0∫ ∞ − tdemcu tρ in which u is the utility function, c is consumption, and m is holdings of real money balances. the time preference ( )tρ is endogenously determined (see also, uzawa, 1968; epstein, 1987; obstfeld, 1990; and shi and epstein, 1993). the variable changes as follows ( ) ( )( ) , 0∫ ∆= t sdsutρ where 0>∆ is an instantaneous subjective discount rate at time ,s which satisfies ,0' >∆ ,0" >∆ and .0' >∆−∆ u we have ( ) ( )( ).tut ∆=ρ& there are many other studies with endogenous time preference (for instance, dornbusch and frenkel, 1973; persson and svensson, 1985; blanchard and fischer, 1989; orphanides and solow, 1990; das, 2003; hirose and ikeda, 2008). although this study does not follow the ramsey approach in modeling behavior of household, we will adapt the ideas about time preference within the ramsey framework. the time preference in the traditional approach is related to real wealth or/and current consumption. this study treats the propensity to save as a function of the wage rate and wealth. following zhang (2012), the dynamics of the propensity to save is ( ) ( ) ( ),0 tktwt kw λλλλ ++= (14) where ,0>λ ,wλ and kλ are parameters. when ,0== kw λλ ( )t0λ is constant. if we follow uzawa’s idea, then it is reasonable to assume 0>wλ and .0=kλ if we follow the assumption that the rate of time preference is positively related to wealth, for instance, accepted by smithin (2004) and kam and mohsin (2006), then 0=wλ and .0>kλ 10 the habit formation and the propensity to consume the modeling of the propensity to save is influenced by the literature of time preference change. in order to model how the propensity to consume, we will adapt the basic ideas in the habit formation approach to our framework. to illustrate the ideas in the traditional approach, we introduce the following habit formation (e.g., alvarez-cuadrado et al., 2004; and gómez, 2008) ( ) ( ) ( ) ( ) ,10,0,10 ≤≤>= − ∞− − ∫ φρρ φφ sdscscet t tsh h where ( )tc is the consumer’s consumption and ( )tc is the economy-wide average consumption. a larger value for 0h implies that the household puts lower weights to more distant values of the levels of consumption. taking the derivatives the equation with respect to time yields ( ) ( ) ( ) ( )[ ].10 tscsct hhh& −= −φφ if ,0=φ the habit formation corresponds to the model with external habits. if ,1=φ the habit formation corresponds to the model with internal habits. if ,10 << φ habits arise from both the consumer’s and average past consumption. there are other models with habit formation (deaton and muellbauer, 1980; carroll, 2000; fuhrer, 2000; kozicki and tinsley, 2002; amano and laubach, 2004; carroll et al., 1997; corrado and holly, 2011). following zhang (2012), this study also applies the concept of habit stock to analyze how the past consumption affects the current preference. the habit formation is specified as ( ) ( ) ( )[ ].0 ttct hhh& −= (15) equation (15) corresponds to the model with internal habits. if the current consumption is higher than the level of the habit stock, then the level of habit stock will rise, and vice versa. the propensity to consume is relate to the habit stock as follows ( ) ( ) ( ),0 ttwt hw hξξξξ ++= (16) where ,0>ξ wξ and 0≥hξ are parameters. if 0=wξ and ,0=hξ ( )t0ξ is constant. the term ( )tywξ implies that the propensity to consume is affected by the wage rate. if ,0)(<>wξ then a rise in the wage rate enhances (lowers) ( ).0 tξ it is reasonable to assume .0≥wξ the term ( )th hξ shows that if ( )th rises, the propensity to consume will rise, and vice versa. we have thus built the dynamic model. we now examine dynamics of the model. 3. the motion of the economic system the appendix confirms that the motion of the economic system is given by three autonomous differential equations with ( ) ( )ttz h, and ( ).te as the variables, where ( )tz is a new variable defined by 11 ( ) ( )( ) .ktr tw tz δ+ ≡ the following lemma shows that once we solve the time-invariant system, we know the values of all the other variables in the economy at any point of time. lemma 1 the motion of the three variables, ( ) ( )ttz h, and ( ),te is obtained by solving the following three autonomous differential equations with ( ) ( ) ( ) ( )( ),,, tettztz z h& λ= ( ) ( ) ( ) ( )( ),,, tettzt c hh& λ= ( ) ( ) ( ) ( )( ),,, tettzte e h& λ= (17) in which ,zλ ,cλ and eλ are functions of ( ) ( )ttz h, and ( )te defined in the appendix. all the other variables are solved as functions of ( ) ( )ttz h, and ( )te as follows: ( )tr and ( )tw by (a2) → ( )t0ξ by (a16) → ( )t0λ by (a15) → ( )tλ and ( )tξ by (5) → ( )tki and ( )tke by (a7) → ( ) ( ) ( )tktktk ei += → ( ) ( ) ntktk /= → ( )tni and ( )tn x by (a1) → ( )tfi by (1) → ( )tqe by (10) → ( )tŷ by (3) → ( )tc and ( )ts by (10). from the procedure in lemma 1 we can get the value of any variable at any point of time as functions of ( ) ( )ttz h, and ( ).te the three dimensional autonomous differential equations are nonlinear. it is almost impossible to get analytical solution of the time-invariant system. nevertheless, we can use a common computer to follow the motion of the three-dimensional time-invariant system. to simulate the model, we choose the following parameter values .03.0,05.0,1.0,1.0,05.0,05.0 ,05.0,05.0,40.0,10.0,2.0,1.0,02.0,01.0 ,6.0,05.0,05.0,4.0,4.0,3.0,5.0,1,5 0 0 ====== =======−= =−=−======= kcfwk cihwkw eieeisi bbaan δθθθττ ττξξξλλ λβαα h (18) in the remainder of this study, the depreciation rate is fixed as .03.0=kδ the population is chosen 10 and the total available time is unity. in our neoclassical model the population size has no impact on the per-capita variables, even though it affects the aggregate variable levels. the chosen values of the available time and the population will not affect our main conclusions. the total productivity and the output elasticity of capital of the capital goods sector are respectively ,1.1 ,35.0 and the total productivity and the output elasticity of capital of the capital goods sector are respectively 9.0 and .30.0 it should be noted that both in theoretical simulations and empirical studies the output elasticity of capital in the cobb-douglas production is often valued approximately equal to 3.0 and the value of the total productivity is chosen to be close to unity (e.g., miles and scott, 2005; abel, bernanke, croushore, 2007). although the chosen values of the preference parameters are not empirically based, we choose the coefficients associated with the wage and wealth very small so that we may effectively analyze the effects of changes in these coefficients on the economic structure. we now specify the initial conditions to see how the variables change over time. to follow the motion of the system, we choose the following initial conditions: 12 ( ) ( ) ( ) .3.10,120,5.60 === hez figure 1 plots the simulation result. we first observe that the habit stock of leisure time falls while the habit stock of consumer goods rise till they respectively approach the leisure time and the consumption level of consumer goods. this happens as the two stocks are initially different from their corresponding variables. the work time, total labor supply and labor inputs of the two sectors are increased over time. the total capital and capital input of the consumer goods sector fall, while the capital input of the capital goods sector rises. the price and wage rate fall slightly, while the rate of interest rises. the propensity to consume rises, while the propensities to use leisure time and to save are affected only slightly. the gdp and the output level of the consumer goods sector fall while that of the capital goods sector rises. it should be noted that it takes much less time for the leisure time to converge to its habit stock level than the consumption level of consumer goods to its habit stock. figure 1 shows that the variables tend to move towards stationary states. this implies the existence of an equilibrium point. our simulation identifies the equilibrium values of these variables as follows .09.1,72.0,27.0 ,65.0,25.0,83.0,11.0,05.3,69.11 ,50.0,50.4,83.0,53.0,31.5,96.10,75.14 00 ==== ====== ======= c ei eieei c wrkk nnyqfek hλξ λξ it is straightforward to get the following three eigenvalues .05.0,03.0137.0 −±− i as the three eigenvalues have real negative parts, the equilibrium point is locally stable. hence, the system always approaches its equilibrium if it is not far from the equilibrium point. this is important as it guarantees the validity of comparative dynamic analysis for transitional paths. 4. comparative dynamic analysis from the analysis in the previous section we know that that the economic system has a unique locally stable equilibrium. this guarantees that we can make comparative dynamic analysis. this section conducts comparative dynamic analysis with regard to some parameters. it should be remarked that because the system contains many variables which nonlinearly interact with each other in a very complicated manner over time, it is not easy to accurately interpret how all these variables interact over time. 13 figure 1 – the motion of the economic system lower weights being put to more distant values of the levels of consumption we first study the case where the household puts lower weights to more distant values of the levels of consumption in the following way: .3.01.0:0 ⇒h the rise in the parameter also means that the habit stock and the current level of consumption mutually converge faster. figure 2 diagrams the simulation results. in this study we use the variable ( )tx∆ to stand for the change rate of the variable, ( ),tx in percentage due to changes in some parameter value. indeed, the disturbance in the speed of adjustment will not affect the equilibrium of the dynamic system. nevertheless, the transitional paths towards the equilibrium points of the variables are strongly perturbed. as the household puts lower weights to more distant values of the levels of consumption, initially the transitional path of the habit stock is deviated from the original path. as the speed is sped up, the path of the stock habit becomes lower than its original path. as the habit stock becomes lower, the consumption level also falls initially in association with falling in the propensity to consume. the disturbance causes the propensity to consume to fall and the propensity to save to rise. as the relative propensity to save is λ increased, the national wealth is augmented. the disturbance in the national wealth enables the two sectors to employ more capital. the labor distribution path is also shifted. the labor force is shifted initially from the industrial sector to the environmental sector, but subsequently the direction is opposite before the labor distribution comes to its original equilibrium point. the wage rate is enhanced in association with falling in the rate of interest. the level of pollution falls initially, but rise subsequently. the output levels of the two sectors and the total tax income are enhanced before they come back to their original equilibrium levels. the environmental tax rate on consumption being enhanced we now enhance the environmental tax rate on consumption as follows: .07.005.0: ⇒cτ the impacts are plotted in figure 4. as the tax rate on consumption is increased, the consumption 25 50 75 100 12 13 14 15 25 50 75 100 11 11.3 11.6 11.9 0 25 50 75 100 0.82 0.83 0.84 0 25 50 75 100 3 4 5 0 25 50 75 100 0.72 0.78 0.82 0.86 0 25 50 75 100 0.5 0.55 0.6 0.65 25 50 75 100 1.1 1.2 1.3 25 50 75 100 0.255 0.26 0.265 0.27 25 50 75 100 0.1 0.104 0.108 h k 0ξ λ r t t c t t t t t t t e in ek if ey w eq en 0λ ξ 14 figure 2 – the household puts lower weights on more distant values of consumption level and the habit stock of consumption are lessened. the lowered habit stock diminishes the propensity to consumption, which implies augmenting in the propensity to save. the national wealth is increased as the propensity to save is increased. more capital and labor resources are located to the environmental sector. the environment is improved. both the rate of interest and wage rate are increased. it should be noted that in the solow-type neoclassical growth theory without endogenous environment, the rate of interest and wage rate are changed in the opposite directions. in our model the two variables are changed in the same direction because the environmental change affects the productivity. in our simulation case the improved environment augments the productivity of the industrial sector. this leads to the same change direction in the wage rate and the rate of interest. the net consequence of the rising national wealth and capital input of the environmental sector leads to lowering in the capital input of the industrial sector. as the capital and labor resources located to the industrial sector are lowered, the output level of the industrial sector is reduced. wealth more strongly affecting the propensity to save how the propensity to save may influence economic growth and development is a main question in economics. it is well known that adam smith and keynes have the opposite opinions about the effects of a change in the saving propensity. adam smith holds that a rise in the propensity to save will encourage long-run economic growth as to save more means more capital in the economy, while keynes argues that to save less means to create more job opportunities and economic growth will be encouraged. in modern economics there is no convergence in empirical studies about the impact of the propensity to save. moreover, there are only few formal models of economic growth with endogenous preference for saving. our model explicitly introduces endogenous propensity to save. 30 60 90 0 0.15 0.3 0.45 30 60 90�0.04 0.02 0.08 0.14 0 30 60 90 0 0.2 0.4 0 30 60 90 0 0.4 0.8 1.2 30 60 90 �0.15 �0.1 �0.05 0 0 30 60 90 0 0.1 0.2 0.3 30 60 90 �1.2 �0.8 �0.4 0 30 60 90 �6 �4 �2 0 30 60 90 �1.2 �0.8 �0.4 0 t k∆ h∆ 0ξ∆ ey∆ c∆ ek∆ ik∆ t t t t t t t t 0λ∆ in∆ e∆ r∆ w∆ i f∆ eq∆ en∆ λ∆ ξ∆ 15 figure 3 – a rise in the tax rate on consumption we now examine how the economic system responds to the following exogenous disturbances: .03.002.0: ⇒kλ the change augments the propensity to save. the relative propensity is increased, while the relative propensity to consume is lessened. the change in the preference results in the increase of national wealth. the two sectors’ capital inputs are thus increased. more capital supply leads to lower rate of interest and rising wage rate. labor force is shifted from the environmental sector to the industrial sector. the net result of lessened labor input and augmented capital input of the environmental sector is the rising output level of the sector. as the increased production and consumption pollute the environment more severely than before, the more efforts in cleaning environment do not improve the environment. the environmental sector improving its productivity we now deal with the impact of the following productivity enhancement in the environmental sector: .6.05.0: ⇒ea an immediate result of the productivity improvement is augments of the environmental sector’s output level. the environment is provided as the economy is more effectively in cleaning the environment. the labor distribution is slightly changed. the improved environment enhances the productivities of the industrial sector. although the relative propensity to save is lowered, the national wealth is augmented. the two sectors employ more capital inputs irrespective of rising in the cost of capital. the wage rate, habit stock of consumption and the consumption level are raised. 30 60 90 0 4 8 12 30 60 90 �9 �6 �3 0 30 60 90 0 0.16 0.32 0.48 30 60 90 �1.5 3 7.5 12 30 60 90 0 4 8 12 0 30 60 90 0.04 0.07 0.1 0.13 30 60 90 �1.8 �1.2 �0.6 0 30 60 90 �1.2 �0.8 �0.4 0 0 30 60 90 0 0.3 0.6 0.9 t k∆ h∆ 0ξ∆ ey∆ c∆ ek∆ ik∆ t t t t t t t t 0λ∆ in∆ e∆ r∆ w∆ if∆ eq∆ en∆ λ∆ ξ∆ 16 figure 4 – the propensity to save being more strongly affected by wealth figure 5. the environmental sector improving its productivity raising the tax rate on the industrial sector let us now change the tax rate on the output level of the industrial sector as follows: .07.005.0: ⇒iτ the raised tax rate lowers the output level of the industrial sector. as the tax revenue is increased, the environmental sector has more resources to employ more capital 30 60 90�0.9 0.2 1.3 2.4 30 60 90 �0.2 0.2 0.6 1 0 30 60 90 0 1 2 30 60 90 0 2 4 6 30 60 90 �0.9 �0.6 �0.3 0 30 60 90 3 4 5 30 60 90 �3 �2 �1 0 30 60 90 �3 �2 �1 0 1 30 60 90 �5 �3 �1 0 0 30 60 90 0 6.5 13 19.5 30 60 90 �15 �10 �5 0 0 30 60 90 0 0.45 0.9 1.35 0 30 60 90 0 0.4 0.8 1.2 30 60 90 �0.025 �0.015 �0.005 0.005 30 60 90�0.04 0 0.04 0.08 0 30 60 90 0 0.08 0.16 0.24 0 30 60 90 0 0.45 0.9 1.35 0 30 60 90 0 0.065 0.13 0.195 t k∆ h∆ 0ξ∆ ey∆ c∆ ek∆ ik∆ t t t t t t t t 0λ∆ in∆ e∆ r∆ w∆ if∆ ∆ en∆ λ∆ ξ∆ t k∆ h∆ 0ξ∆ ey∆ c∆ ek∆ ik∆ t t t t t t t t 0λ∆ in∆ e∆ r∆ w∆ if∆ ∆ en∆ λ∆ ξ∆ 17 and labor inputs. the resources are shifted from the industrial sector to the environmental sector. the environment is improved. the industrial sector’s productivity is enhanced. as the productivity is enhanced only slightly in initial stage, the wage rate is reduced. as the productivity is further increased, the wage rate is increased. the reduced national wealth is associated with rising cost of capital. the relative propensity to save rises initially, but subsequently falls. the consumption level and habit stock of goods are increased. figure 6 – raising the tax rate on the industrial sector 5. concluding remarks the paper constructed an economic growth model with environmental change and preference formation. the paper is focused on dynamic interactions among capital accumulation, environmental change, habit formation, preference change, and division of labor in perfectly competitive markets with environmental taxes on production, wealth income, wage income and consumption. the model integrated the dynamic economic mechanisms in the neoclassical growth theory, the environmental dynamics in traditional models of environmental economics, and the literature of economic growth with habit formation and within a comprehensive framework. we could have synthesized the different ideas in a few main streams of economic theory as we applied an alternative approach to household behavior initially proposed by zhang (1993). we showed that the motion of the economic system is given by three nonlinear autonomous differential equations. we simulated the time-invariant system. the simulation demonstrates some dynamic interactions among the economic variables which can be predicted neither by the neoclassical growth theory nor by the traditional economic models of environmental change. for instance, we examined the effects that the household puts lower weights to more distant values of the levels of consumption. if the past consumption has weaker impact on the current consumption, although the long-term equilibrium of the dynamic system will not be affected, the transitional paths are shifted as follows: initially the transitional path of the stock habit becomes lower than its original path; the consumption 30 60 90 0 5 10 30 60 90 �9 �6 �3 0 30 60 90�0.1 0 0.1 0.2 0.3 30 60 90 0 3 6 9 30 60 90 0 3 6 9 30 60 90 0 0.05 0.1 0.15 30 60 90�0.1 �0.02 0.06 0.14 0 30 60 90 0 0.4 0.8 1.2 0 30 60 90 0 0.5 1 1.5 t k∆ h∆ 0ξ∆ ey∆ c∆ ek∆ ik∆ t t t t t t t t 0λ∆ in∆ e∆ r∆ w∆ if∆ ∆ en∆ λ∆ ξ∆ 18 level falls initially in association with falling in the propensity to consume; the exogenous disturbance causes the propensity to consume to fall and the propensity to save to rise; the national wealth and capital inputs of the two sectors are augmented; the labor force is shifted initially from the industrial sector to the environmental sector, but subsequently the direction is opposite before the labor distribution comes to its original equilibrium point; the wage rate is enhanced in association with falling in the rate of interest; the level of pollution falls initially, but rise subsequently; the output levels of the two sectors and the total tax income are enhanced before they come back to their original paths. as the model is based on the basic ideas in some economic theories, it is straightforward to extend the model in some directions. for instance, we may introduce leisure time as an endogenous variable. munro (2009: 3) observes: “in the unitary model, the household acts as if it is a single individual maximizing a single utility function in the face of one budget constraint. it is a simplifying modeling assumption that is widely used in most branches of economics, but it is wrong. the fact that the unitary model is inaccurate is well-known and has been known for many years now.” it is necessary to model family structure and economic structure for understanding relations among growth, environmental change and preference change (see, for instance, dinda, 2004; hamilton and zilberman, 2006). appendix: identifying the three autonomous differential equations we now find the three autonomous differential equations and confirm the procedure in the lemma. first, from (2) and (15), we solve , e ee i ii n k n k z ββ =≡ (a1) where ,/ jjj αββ ≡ ., eij = substituting (1) into (2) yields ( ) ( ) ,,,, i i i i i iii k iiii za ezw z a ezr α α β β β β δ βα γ =− γ = (a2) where we use (a1). from (8) and (a1), we solve .nzkk eeii =+ ββ (a3) insert (5) in (7) ( ) .ˆ ik fkkyn =+−+ δλξ (a4) put (3) in (a4) ( )( )[ ] ( ) ,1 iwk fwnkr =++−++ τλξδτλξ (a5) where kk ττ −≡ 1 and .1 ww ττ −≡ replacing if in (a5) with ( ) iiiki krf ταδ /+= from (2), we acquire 19 ( )( )[ ] ( ) ( ) .1 ii i kwk k rwnkr τα δτλξδτλξ +=++−++ (a6) from ,kkk ei =+ (a6) and (a3), we solve ,,, ei e ii ei kkk knz knk += − == β β φ (a7) where ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )[ ] ./,~ ,11,,1, ,~,,, ieiik keikwek rez rrezwzrez z ez βδβταδδφ τββτφτβτφ φφλξ δφλξ λξφ ξ ξξ ξξ ξ −++≡ +−+≡++≡ ++ −+ ≡ from the definition of ξ and ,λ we have , ~ 00 00 λξ λξτ λξ + + =+ (a8) where ( ).1/1~ cττ +≡ insert (a8) in the definition of φ ( ) ( ) ( ) ( ) ( ) .~~ ~ ,,, 0000 0000 00 λξφφλξτ λξδφλξτ λξφ ξξ ξ +++ +−+ = z ez (a9) from (14), we acquire .0 kn wn k w k +      + = λ λλ λ λ (a10) put (a7) in (a8) , ~ 00 φβφλ += (a11) where ( ) ( ) .~,,0 e kie e k w z wez β λββ β β λ λλφ − ≡++= (a12) put (a9) in (a11) 20 ( ) ( ) ( ) ( ) ,~~ ~~~ 0000 0000 00 λξφφλξτ λξδβφβλξτ φλ ξξ ξ +++ +−+ += z (a13) we rewrite (a13) as follows ,0201 2 0 =−+ ωλωλ (a14) where ( ) ( ) .~ ~~~~~ ,, ,~ ~~~~~ ,, 000000 02 0000 01 ξξ ξξξ ξξ ξξξξξ φφ ξφβτξδβξφφφφξτ ξω φφ φβδβφφφφξφφξτ ξω + +−+ ≡ + −+−−+ ≡ z ez z ez we solve (a14) with 0λ as the variable ( ) . 2 4 ,, 2 2 11 00 ωωω ξλ +±− =ez (a15) we have two solutions from the above equation. in our simulation case the solution ( ) 2 4 ,, 2 2 11 000 ωωω χξλ ++− =z is meaningful. from (16), we have ( ) .,,0 hh hw wez ξξξξ ++= (a16) we solve all the variables as functions of ,z ,e and h as follows: r and w by (a2) → 0ξ by (a16) → 0λ by (a15) → λ and ξ by (5) → ik and ek by (a7) → ei kkk += → nkk /= → in and xn by (a1) → if by (1) → eq by (10) → ŷ by (3) → c and s by (10). here, we express the function for wealth obtained by this procedure as ( ).,, hezk φ= from (11), (3), (15) and (17) and the procedure to determine the variables as functions of ,z ,e and ,h we have the following three differential equations ( ) ,ˆ,, kyezk −≡λ= λh& (a17) ( ) ,,, 0 eqcfeze ecife θθθ −−+≡λ= h& ( ) ( ) ( )[ ].,, 0 ttcezc hhhh& −≡λ= (a18) we do not provide the expressions because they are tedious. taking derivatives of ( )h,, ezk φ= with respect to time yields 21 , h && ∂ φ∂ λ+ ∂ φ∂ λ+ ∂ φ∂ = ce e z z k (a19) where we also apply (a18). injecting (a17) in (a19) yields ( ) .,, 1−       ∂ φ∂ 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(2012). habits, saving propensity, and economic growth. scientific bulletin economic sciences, 11(2), 3-15. 5 pencarelli_francioni_gabbianelli modif 85 factors driving consumer attitude and purchase intention towards sporting firearms in italy , barbara francioni, linda gabbianelli carlo bo university of urbino, italy received: april 15, 2013 accepted: october 7, 2013 online published: october 14, 2013 abstract the objectives of the paper are twofold: the first one is to identify the critical variables that influence the process of buying firearms according to the opinion of italian hunters and retailers. the second objective is to try to identify hunters’ groups with similar generic characteristics and similar behavior in purchasing a firearm for the purpose of understanding customers’ behavior. in order to achieve the first objective we have interviewed 455 italian hunters and 200 firearms retailers from may to september 2011. results show that according to hunters the main factors influencing firearm purchases are manageability of the firearms and competence of the retailer; while according to retailers the key purchasing factors are price of the firearms and the image of the producer. the survey reveals that, in spite of these different perceptions, retailers know their customers’ behavior and preferences fairly well. however, the study also suggests that firearms retailers under valuate the weight of the functional characteristics of the product and the hunters’ competences and autonomy in decision-making during the purchasing process. in order to achieve the second objective of the study, we perform a segmentation through a cluster analysis and results reveal that there are six main hunter groups named the recommended, the conservative, the innovative, the informed, the stingy and the maniac. the italian firearms producers could evaluate whether their current competitive strategy is exploiting these potential market spaces. keywords consumer behaviour; sporting firearms sector; italian hunters and firearms retailers. 1. introduction one of the priorities that a firm should consider in order to achieve the objective of creating firm value is to identify a target of customers and understand their needs and attitudes in order to project, to produce, to communicate and to deliver customer value. it’s therefore important that a company identifies which are the main factors that affect the purchase behavior of their customers. consumer purchase intention is the decision making process used by consumers relating to a market deal in the form of purchase of products and services from one seller or group of sellers. consumers go through different decision criteria when making any purchase decision like brand, prices, quality, performance, features, convenience and user friendliness tonino pencarelli 86 (khan, ghauri & majeed, 2012). purchase intention can be defined as individual’s intention to buy a specific brand which has chosen after certain evaluations; the corporate and product brand image is one of the most important variables which measure the consumers’ purchase intention. (laroche, kim & zhou, 1996, laroche & sadokierski, 1994, mackenzie, lutz & belch, 1986). researchers have noted that for the competitive success, managers of firms should have a good knowledge of their consumers’, understanding how they develop relationship or interaction with brands and how they participate in brand communities in their own lives (esch, tobias, bernd & patrick, 2006). studies (shukla, 2011; bian & forsythe, 2012; aghekyan-simonian, forsythe, kwon & chattaraman, 2012; chen, hsu & lin, 2010; chiang & dholakia, 2003; wang, li, barnes & ahn, 2012) about factors driving the customer’s purchase intention have been applied to a wide range of contexts (automotive, food, luxury goods, e-commerce and so on) but no study was focused on firearms. this is the reason why we investigate which are the factors driving consumers’ attitudes and purchase behavior towards sporting firearms. in particular, we analyze the italian firearms industry as it’s a very important productive sector in terms of the turnover and value added generated in the italian economy. moreover, this sector is a part of the precision mechanics industry that represents the excellence of made in italy at a global level (musso, cioppi & francioni, 2012). the first objective of this paper is to identify the critical variables that influence the process of buying firearms. according to the literature background, on the basis of the following discussion, this paper attempts to show how brand image and product features, interpersonal influence and service quality influence the hunters’ purchase intention. the analysis was carried out identifying the critical factors in firearm purchasing according to hunters and retailers. the second objective is to try to identify, through a segmentation realized by the cluster analysis, hunter groups with similar generic characteristics and similar behavior in purchasing a firearm. the article begins with a section presenting the theoretical background. subsequent section describes our research method and design. next, the obtained findings are showed. finally, a concluding section with a discussion of the results, the theoretical and managerial implications and future research direction are presented. 2. theoretical background in this section we discuss the most important factors affecting italian sporting hunters’ purchase intention, dividing them into four categories: 1. the brand image and product features (image of the producer, aesthetics and ergonomics, cheapness, manageability, ease of cleaning and maintenance, innovation, tradition); 2. the interpersonal influence (word-of-mouth from friends and acquaintances, degree of diffusion among hunter groups) 3. factors related to the retailer image and the service quality (competence and quality offered by the retailer, availability of the nearest retailer). 2.1. brand image and product features several researchers (shukla, 2011; thakor & kohli, 1996) concentrated their attention on different aspects of brand that can influence purchase, like brand origin, brand equity and brand image. with specific reference to brand image, keller (1993, p.3) defined it as ‘‘perceptions about a brand as reflected by the brand associations held in consumer memory’’, while aaker (1996, p. 71) stated that brand image is “how a brand is perceived by 87 consumers”. brand image generally comprehends the product’s name, its main physical features and appearance and its main functions (ataman & ülengin, 2003). “brand performance links to its intrinsic properties and to how consumers perceive the fit between the brand and their functional needs (features, quality of product, services related to the brand, style and design, price)”. (godey, pederzoli, ayello et al, 2012) hankinson (2007) argues that “typically, these brand associations – held in consumer memory about brand – have been classified into two categories: functional attributes, which are the tangible features of a product or service; and emotional/symbolic attributes, which are the intangible features that meet consumer needs for social approval, personal expression or self-esteem. other authors add a third category: experimental attributes, which relate to how it feels to use a product or service and satisfy internally generated needs for stimulation and variety”. the product attributes, the benefits/consequences of using a brand, and brand personality are the three key components of the brand image (plummer, 2000, 1985). according to the definition of brand image above, as it is what is perceived by customers and is formed through both the tangible and intangible characteristics of the product, in this study we associate the brand image with the product features. a number of studies have revealed that brand image is positively related with consumer’s purchase intention (keller, 1993; del rio, vazquez & iglesias, 2001), as “the more favourable the brand image is, the more positive is the attitude toward the branded product and its attributes” (aghekyan-simonian, forsythe, kwon & chattaraman, 2012). moreover, according to several authors (aaker & keller, 1990; keller, 1993 park & srinivasan, 1994) a strong brand image usually helps to create a brand’s position, build a brand’s uniqueness compared to competitors, improved the performance and, consequently, play an important role in establishing long-term brand equity (bian & moutinho, 2011). 2.2. interpersonal influence a considerable amount of literature has been published on interpersonal influence on individual’s consumption behaviour (shukla, 2011¸ kropp, lavack, & silvera, 1999; mourali, laroche, & pons, 2005). in 1989, bearden and colleagues, attempting to develop a scale to measure consumer susceptibility to interpersonal influence, identified two types of influences, namely informational interpersonal influences and normative interpersonal influences (shukla, 2011). informational influence is related to potential consumer’s tendency to receive information from others to increase knowledge, while normative influences includes utilitarian influence, that can be described as the individual attempt to follow the expectation of others for obtaining approval, and value expressive influence, that is the people’s need to improve his or her self-concept through referent identification (bearden, netemeyer, & teal, 1989; mourali, laroche & pons, 2005). 2.3. factors related to the retailer image and service quality service quality can be considered as one of the most investigated topics in service marketing (fisk, brown & bitner, 1993; gronroos, 2010). consequently, during the years several authors attempted to give their own definition, like parasuraman et al. (1985), who defined service quality as the overall evaluation attitude mainly based on the discrepancy between consumers’ perceptions and their expectation of what is actually delivered (wu, yeh, & hsiao, 2011) or chakrabarty and colleagues (2007, p.3), who described it as “the conformance to customer requirements in the delivery of a service”. 88 several studies (cronin & taylor, 1992; sullivan & walstrom, 2001; wu et al. 2011) have revealed that service quality have a positive influence on purchase intentions. particularly, cronin and taylor (1992) showed that this strong influence of service quality on customers’ behavioural intentions can be found in several sectors, especially in that of services, such as banking, pest control, dry cleaning, and fast food (chakrabarty, whitten & green, 2007). 3. methodology on the basis of previous discussion, this paper attempts to analyze how brand image, interpersonal influence and service quality influence the hunters purchase intentions. moreover, this study wants to create a segmentation on the basis of the hunters’ characteristics and attitudes towards firearms’ purchase. as said in the introduction, the first objective of the research is to identify factors driving consumer attitude and purchase intention towards sporting firearms and the second objective is to identify some hunters groups with similar generic characteristics and similar behavior in purchasing a firearm. in order to achieve the first objective we have interviewed two groups of respondents (455 hunters and 200 firearms retailers) in two different time periods through the administration of the questionnaire. in the case of hunters group we have administered a face-to-face questionnaire to 455 hunters using an intercept survey technique. the hunters were interviewed, considering the age distribution of respondents, during the rome trade fair in may 2011. in the retails case, in the period from july to september 2011 we carried out telephone interviews with 200 retailers selected using a stratified reasoned sampling which took into account a geographically homogeneous distribution of respondents.1 the questionnaires were designed in collaboration with the management of important firearms’ brands. the questionnaires were composed of two parts: the first part contained requests for information about interviewees’ demographic characteristics and the second part was focused on measurement scale regarding factors influencing the purchase behaviour, adopting a 5point likert scale where 1 was “not important” and 5 was “very important”. therefore, in the case of the 455 italian hunters interviewed we decided to eliminate all questionnaires not completely filled, remaining with 403 questionnaires. table 1 summarizes the primary characteristics of the sample. the data of table 1 show that 99.8% of respondents were male. the age of respondents is almost equally distributed into three categories: 27 to 40 years (22.8%), 41 to 50 years (23.1%) and 51 to 60 years (25.6%).with regard to the area of origin it turns out that 79.4% of respondents come from central italy: this non-distribution in the different areas is due to the fact that the interviewees were selected during a trade fair held in rome and addressed to central italian customers. the remaining sample analyzed was composed of 2% which resides in northern italy and 18.6% in the south. most hunters interviewed were workers (35%) and professional people (20.8) while 13.9% were employees and 10.2% retired. finally, the remaining 4.4% were students (1.7%) or company managers (2.7%). an interesting datum is that almost 70% of the hunters interviewed hold between 2 and 7 firearms while 7% of respondent posses more than 10 arms. this implies that italian hunters could be very expert consumers. 1according to musso, cioppi and francioni (2012), in italy the number of gun shops amount to 1.200, while italian hunters are 751.876. the sample of retailers is highly significant while the sample of hunters of affected limit of geographical distribution as they are concentrated in the center of italy. 89 in the second case, 200 retailers were surveyed, of which 68 (34.0 per cent) were located in northern italy, 59 (29.5 per cent) in southern italy and 73 (36.5 per cent) in the centre of italy; so this means that it is a stratified sample that tries to take into account the geographic distribution of retailers. we decided to conduct two parallel surveys in order to compare the different perception of the critical variables that influence the process of buying firearms according to the opinion of italian hunters and retailers. table 1 – main characteristics of the hunters sample frequency percent gender man 402 99.8 woman 1 0.2 age 18-26 54 13.4 27-40 92 22.8 41-50 93 23.1 51-60 103 25.6 more than 60 years 61 15.1 origin northern italy 8 2.0 southern italy 320 79.4 centre of italy 75 18.6 job office worker 56 13.9 workman 141 35.0 student 7 1.7 professional freelancer 84 20.8 director manager 11 2.7 retired 41 10.2 other 63 15.6 number of firearms owned 0 0 0 1 25 6.2 2 62 15.5 3 77 19.0 4 60 15.0 5 55 13.7 6 35 8.7 7 22 5.5 8 11 2.7 9 15 3.7 10 12 3.0 more than 10 28 7.0 4. results and discussion 4.1. comparison between hunters and retailers perception in order to evaluate the different perception of the two samples, we adopted a five point likert scale. in detail, respondents were asked to provide a score ranging from 1 (no importance) to 5 (high importance). the mean of the likert scale responses was then compared to a midpoint of 2.5 to determine their significance. the considered features influencing consumer firearms purchasing are: 90 1. aesthetics and ergonomics, that means product design and the capacity of the firearms to adapt to the person’s physiognomy; 2. cheapness; 3. manageability, namely the ease of handling the firearm; 4. ease of cleaning and maintenance of the firearm; 5. innovation, in terms of materials, weight, etc. built-in firearm; 6. availability of the nearest retailer; 7. image of the producer; 8. degree of diffusion among hunter groups that is, how many hunters belonging to the same group use the same firearm; 9. tradition; 10. word-of-mouth from friends and acquaintances; 11. competence and quality offered by the retailer. these features are divided into three groups of variables, identified in the previous literature background. in particular, the group brand image and product features, conceived as customers perception based on the tangible and intangible characteristics of the product (godey, pederzoli, aiello & al, 2012; hankinson, 2007; ataman & ülengin, 2003) include the image of the producer, the aesthetics and the ergonomics, the cheapness, the manageability, the ease of cleaning and maintenance, the innovation and the tradition. the group interpersonal influence comprehends the word-of-mouth from friends and acquaintances and the degree of diffusion among hunter groups. the last group of factors related to the retailer image and the service quality includes the competence and quality offered by the retailer and the availability of the nearest retailer. starting from the perspective of hunters (figure 1), the most important groups of factors in the firearm purchasing process are the retailer image and its service quality (mean 3.82). within this large group of factors, competence and quality offered by the retailer received a score of 4.01 and the availability of the nearest retailer received a score of 3.64. the second most important group of factors is the brand image and product features, obtaining a mean score of 3.70. the most important factors included in this group are the ease of cleaning and maintenance (4.00), the cheapness (3.82) and the image of the producer (3.72), followed by the manageability (mean 4.61). the group named interpersonal influence is the less crucial in the hunter perception, obtaining a mean score of 2.67. the word-of-mouth from friends and acquaintances and the degree of diffusion among hunter groups, belonging to the interpersonal influence group, receive a score of respectively 2.72 and 2.62. considering each feature, the most important in the firearm purchasing process (figure 2) is manageability (mean 4.61), competence and quality offered by the retailer (mean 4.01), ease of cleaning and maintenance (4.00), cheapness (3.82), image of the producer (3.72), followed by the availability of the nearest retailer (3.64), aesthetics and ergonomics (3.30) and tradition (3.28). on the contrary, the less important characteristics are innovation (3.17), word-of-mouth from friends and acquaintances (2.72) and degree of diffusion among hunter groups (2.62). 91 figure 1 – group of factors considered in the hunters’ firearm purchasing process from figure 2 we can note, however, that each factor doesn’t have a mean score less than 2.5, so we can state that all of them are important in the hunters purchase process. even retailers were asked to indicate which are in their opinion the critical variables that influence the hunters’ purchasing process. according to retailers (figure 3), the groups of factors influencing the hunters’ purchasing process of a firearm are first of all the interpersonal influence (mean score 4.25) followed by the retailer image and service quality (mean score 4.16) and by the brand image and product features (mean score 3.44). figure 2 – factors considered in the hunters’ firearm purchasing process ranking in order of importance in the retailers opinion, regarding the interpersonal influence group, the factor of word-ofmouth from friends and acquaintance obtained a score of 4.35, while the degree of diffusion among hunter groups received a score of 4.14. as regards to the group of factors named retailer image and service quality, the respondents state that hunters are more careful about the competence and quality offered by the retailer (4.27) compared to the availability of the 3.82 3.70 2.67 retailer image and service quality brand image and product features interpersonal influence 2.62 2.72 3.17 3.28 3.30 3.65 3.72 3.82 4.01 4.01 4.61 degree of diffusion among hunter groups word-of-mouth from friends and acquaintances innovation tradition aesthetics and eronomics availability of the nearest retailer image of the producer cheapness ease of cleaning and maintenance competence and quality offered by the retailer manageability 92 nearest retailer (4.05). finally, the most relevant factors belonging to the brand image and product features group are the cheapness (mean 4.62), the image of the producer (4.48), the aesthetics and ergonomics (4.35) and the manageability (4.17). figure 3 – group of factors considered in the hunters’ firearm purchasing process according to retailers figure 4 shows which are the most important factors in the hunters’ firearm purchasing process according to retailers. in particular, hunters pays attention first of all to the cheapness (mean 4.62), the image of the producer (4.48) and the word-of-mouth from friends and acquaintances, the aesthetics and the ergonomics (both of them average 4.35), followed by the competence and quality offered by retailer (4.27), the manageability (4.17) and the degree of diffusion among hunter groups (4.14). the less important factors for purchasing a firearm are the availability of the nearest retailer (average 4.05), the ease of cleaning and maintenance (3.94), the tradition (3.52) and the innovation (3.38). as for hunters, also in this case, all factors proposed have a mean score greater than 2.5 and they can be considered therefore important for the choice of the firearm. figure 4 – factors considered in the hunters’ firearm purchasing process according to retailers ranking in order of importance comparing the perception of the two samples, it differs mainly with regard to the group of the interpersonal influence and the group of the retailer image and service quality (table 2), that is, according to retailers, hunters are more influenced by the interpersonal relationships and are more careful about the service quality offered by the retailer. table 2 could highlight 4.25 4.16 3.44 interpersonal influence retailer image and service quality brand image and product features 4.62 4.48 4.35 4.35 4.27 4.17 4.14 4.05 3.94 3.52 3.38 cheapness image og the producer aesthetics and ergonomics word-of-mouth from friends and acquaintances competence and quality offered by the retailer manageability degree of diffusionamong hunter groups availability of the nearest retailer ease of cleaning and maintenance tradition innovation 93 that the perception of retailers on purchase behavior may not be correct and anyway differs from what the hunters state. table 2 – comparison of the perspective of hunters and retailers table 3 compares the hunters and retailers perception about the new firearm purchasing process, considering all factors included in each category and it reveals that the greatest differences in the scores given by the two samples concern the cheapness (0.80 points gap), the aesthetics and ergonomics factor (1.06 gap), the degree of diffusion among the hunter groups (1.53 gap) and the word-of-mouth from friends and acquaintances (1.64 gap), with assessments from retailers always being higher than those from hunters. this result could mean that, according to retailers, hunters give a higher importance to aesthetics and ergonomics, degree of diffusion among hunter groups and word-of-mouth from friends and acquaintances. in particular, if the most important factors for hunters’ purchasing process are manageability, ease of cleaning and maintenance and competences and quality offered by the retailer, in the dealers’ opinion hunters pay great attention to cheapness, word-ofmouth from friend and acquaintances and aesthetics and ergonomics. as said previously, this result highlights that the retailers’ perception purchase behavior may not be correct and anyway differs from what the hunters state. we can state that the retailers’ perception does not match the hunters’ one because retailers overvaluate the importance of word-of-mouth, the degree of diffusion among hunter groups and cheapness. in fact, the hunters’ answers show a greater autonomy in customers’ purchasing behavior and also less attention to the firearm’s price. the same consideration could be made about the factor of aesthetics and ergonomics of the firearm. in brief, the differences in the perception of consumer behavior highlight the fact that even though retailers know their customers quite well, they overvaluate some important factors. it means that the challenge facing dealers is to improve their knowledge of their customers because at present their perception is inaccurate. table 3 – the comparison between the perception of critical factors for the firearm purchase according to hunters and to retailers the comparison between the critical factor perception of hunters and of retailers hunters retailers gap (r-h) 1. aesthetics and ergonomics 3.29 4.35 1.06 2. cheapness 3.82 4.62 0.80 3. manageability 4.61 4.17 -0.44 4. ease of cleaning and maintenance 4.00 3.94 -0.06 5. innovation 3.17 3.38 0.21 6. availability of the nearest retailer 3.64 4.05 0.41 7. image of the producer 3.71 4.48 0.77 8. degree of diffusion among hunter groups 2.61 4.14 1.53 9. tradition 3.28 3.52 0.24 10. word-of-mouth from friends and acquaintances 2.71 4.35 1.64 11. competences and quality offered by the retailer 4.01 4.27 0.26 group of factors hunters retailers gap (r-h) brand image and product features 3.70 3.44 -0.26 interpersonal influence 2.67 4.25 1.58 retailer image and service quality 3.82 4.16 0.34 94 at this point, results should confirm what has been stated in the literature review, regarding the positive relation between the brand image and product features and the consumer’s purchase intention (keller, 1993; del rio, vazquez & iglesias, 2001), as “the more favourable the brand image is, the more positive is the attitude toward the branded product and its attributes”. the same positive effect could be applied to the interpersonal influence on individual’s consumption behaviour and to the service quality offered by the retailer since it conforms to the customer’s requirements in the delivery of a service. in fact, the positive relationship between the groups of purchasing factors and consumer behaviour are encountered in the high score given by hunters and retailers to each factor analyzed. 4.2. segmentation as another important purpose of this research is to try to identify hunters groups with similar behavior in purchasing a firearm, it is necessary to perform a non-hierarchical cluster analysis, that “aims to identify and classify similar entities, based upon the characteristics they possess. this helps the researchers to understand patterns of similarity and difference that reveal naturally occurring group” (malhotra & birks, 2007). cluster analysis is a commonly used statistical technique in a variety of disciplines when classification of subjects is the objective. in this paper, through the cluster analysis it was possible to create hunters preferences maps.2 the aim of the cluster analysis is to group into sub-sets or classes (clusters) elements belonging to a larger whole, so that the elements belonging to each group are as homogeneous as possible and the different groups are as heterogeneous as possible. typically, this analysis is applied to achieve the segmentation, which allows to identify consumer groups with similar preferences within themselves and different as regards the other groups. it is possible to adopt hierarchical cluster analysis algorithms (mainly applicable on qualitative data) and nonhierarchical ones (usually applicable on quantitative data set). here we will apply the “kmeans” hierarchical algorithm. the data collected through the questionnaire as input of the classical segmentation analysis consists of importance evaluation, on likert scale (1 = not at all important, 5 = extremely important), given to each attribute in the process of choosing and purchasing a firearm. to these, we added data relating to the generic characteristics of the hunter such as the age, the area of origin and the profession. starting the analysis, table 4 shows the number of hunters who are part of each of the 4 clusters, to which belong 92, 34, 87 and 87 hunters respectively. as the system considers only hunters who fully responded to all answers of the questionnaire (to all the questions used in the cluster analysis), we considered as valid 300 interviews and therefore the profile of 300 hunters. table 4 – number of cases in each cluster number of cases in each cluster o cluster 1 92 2 34 3 87 4 87 valid 300 missing 103 2 for reasons of space we have decided not to build and even explain the factor analysis we are aware that through the factor analysis we have the opportunity to see if the factors proposed belong to the categories, but as it requires further processing it could be an aspect to be explored in future researches. 95 table 5 – number of cases in each cluster anova cluster error f sig. mean square df mean square df aesthetics and ergonomics 18.291 3 1.824 296 10.030 .000 cheapness 14.218 3 1.279 296 11.113 .000 manageability 1.450 3 .389 296 3.732 .012 ease of clearing and maintenance 14.422 3 1.069 296 13.492 .000 innovation 108.461 3 1.044 296 103.919 .000 image of the producer 27.221 3 1.461 296 18.629 .000 degree of diffusion among hunter groups 35.718 3 1.253 296 28.509 .000 tradition 63.283 3 1.336 296 47.363 .000 word-of-mouth from friends and acquaintances 67.699 3 1.213 296 55.795 .000 availability of the nearest retailer 75.923 3 1.265 296 59.999 .000 competences and quality offered by the retailer 24.888 3 1.102 296 22.574 .000 age 13.111 3 1.543 296 8.497 .000 area of origin .082 3 .169 296 .483 .695 occupation – ordered (sorted) by salary 9.071 3 1.228 296 7.387 .000 to understand which variables most influenced the determinations of clusters, we analyze the anova table (table 5). the anova table indicates which variable contributes most to the identification of the cluster. innovation (mean square 108.461) is the most significant variable, followed by availability of the nearest retailer (75.923), word-of-mouth from friends and acquaintances (67.699) and tradition (63.283). the less influential characteristics are reliability, safety and duration over time of the firearm3. for the purpose of segmentation, being less influential does not mean that they are not considered important by hunters, but that they do not allow us to divide hunters in groups, which must be internally homogeneous but different from each other. in order to give an interpretation to the obtained groups and to understand what hunters belonging to the same group have in common, final cluster centres (table 6) have been developed. the cluster centre consists of the mean of each variable inside of the group, and it is useful to understand characteristics of hunters belonging to each group. in particular, through table 6 it is possible to answer the question: who are the hunters belonging to a particular cluster? assuming that all clusters consider reliability, security, accuracy and manageability as very important factors when buying a firearm, for the description of the different clusters, we will rely mainly on four factors that, according to the anova table described above, contribute most to the determination of the cluster: innovation, availability of the nearest retailer, word-of-mouth from friends and acquaintances and tradition. 3 the area of origin cannot be considered as a reliable variable as almost all respondents belong to the central area of italy. because of the distortion of the geographic distribution of hunters (due to the fact that we interviewed hunters in a particular area of italy during one of the most important trade fairs held in rome), we have decided not to realize the cross-tabulation between the clusters and the demographic characteristics. 96 table 6 – final cluster centres cluster 1 (92 hunt.) 2 (34 hunt.) 3 (87 hunt.) 4 (87 hunt.) aesthetics and ergonomics 3.01 3.08 3.10 4.00 cheapness 3.50 3.56 3.90 4.43 manageability 4.55 4.32 4.69 4.70 ease of clearing and maintenance 3.68 3.44 4.17 4.49 innovation 1.91 2.00 4.05 4.05 image of the producer 4.22 1.53 3.31 4.29 degree of diffusion among hunter groups 3.83 2.59 3.49 4.33 tradition 2.45 1.76 2.21 3.48 word-ofmouth from friends and acquaintances 3.59 3.74 2.07 4.01 availability of the nearest retailer 2.90 1.82 1.86 3.84 competences and quality offered by the retailer 4.29 2.68 3.92 4.28 age 41-50 years old 51-60 years old 41-50 years old 51-60 years old area of origin middle italy middle italy middle italy middle italy occupation – ordered (sorted) by salary employee worker employee worker cluster number 1 is composed of 92 individuals (largest cluster), that are hunters who are on average between 41 and 50 years old and are mainly employees. indeed, among the factors that become more important (in addition to factors such as reliability, security, accuracy, and manageability) are the competence and the quality of the retailer and the availability of the nearest retailer. in addition, those that belong to this group consider the tradition and the image of the producer as rather important factors, while they don’t consider as relevant: innovation , the degree of diffusion of a particular firearm among hunters’ groups and word-of-mouth from friends and acquaintances. cluster number 2 is the less numerous, being composed of 34 elements, and it is formed by hunters with an average age ranging from 51 to 60 years old and who are generally workers. even in this case, features like reliability, security, accuracy, manageability and durability are of extreme importance in the choice of the firearm. in addition, tradition seems to be the characteristic that receives more attention, while innovation, the image of the producer, the availability of the nearest retailer and the word-of-mouth from friends and acquaintances have less importance. the third cluster is composed of 87 hunters, who are aged between 41 and 50 years old and are mainly employees. compared to the previous clusters, these hunters, when choosing a firearm, consider innovation, together with reliability, security, accuracy and manageability as factors of high importance, while they consider the tradition of the firearm of less importance. for these hunters, the opinion of the trusted retailer is quite important, but not the nearby location of the retailer. finally, neither the degree of diffusion among hunter groups nor wordof-mouth from friends and acquaintances are considered as influential factors. finally, the cluster number 4 is composed by 87 hunters (the same as the cluster number 3). they are mainly workers and are aged between 51 and 60 years old. this group thinks that all factors can be considered as extremely important. in fact, the average score given to each characteristic is more than 3.4. in this case, both innovation and tradition are items of extreme importance as well as the competence and the quality of the retailer and the availability of the 97 nearest retailer. factors that seem to be less important are word-of-mouth and the advice of friends and degree of diffusion among hunters’ groups. table 7 – number of cases in each cluster cluster error f sig. mean square df mean square df aesthetics and ergonomics 7.265 1 .617 198 11.767 .001 cheapness .572 1 .580 198 .987 .322 availability of the nearest retailer 29.880 1 .781 198 38.240 .000 image of the producer 9.623 1 .436 198 22.090 .000 degree of diffusion among hunter groups 15.588 1 .484 198 32.228 .000 tradition 28.240 1 1.089 198 25.926 .000 easy cleaning and maintenance 25.685 1 .766 198 33.547 .000 innovation 162.651 1 .911 198 178.451 .000 manageability 20.492 1 .531 198 38.619 .000 word-of-mouth from friends and acquaintances 11.116 1 .418 198 26.621 .000 competence and the quality by the retailer 16.615 1 .489 198 33.984 .000 through the quantitative survey carried out on the italian retailers it has also been possible to obtain information about the characteristics which, according to the retailer, a hunter usually considers before buying a firearm and how important they are during the purchase process. such information enabled us to create two additional hunter clusters. also in this case, to understand which factors better describe the differences between the two clusters we have to observe the anova table. table 7 shows that the elements that allow us to distinguish the two clusters are innovation, followed by availability of the nearest retailer and tradition. moreover, also in this case, in order to describe the different groups, we created table 8 regarding the final cluster centres. table 8 – centres of the final cluster cluster 5 (103 retailers) 6 (97 retailers) aesthetics and ergonomics 4.17 4.55 cheapness 4.56 4.67 availability of the nearest retailer 3.67 4.44 image of the producer 4.26 4.70 degree of diffusion among hunter groups 3.86 4.42 tradition 3.16 3.91 easy cleaning and maintenance 3.59 4.31 innovation 2.50 4.31 manageability 3.85 4.49 word-of-mouth from friends and acquaintances 4.13 4.60 competence and the quality by the retailer 3.99 4.57 cluster number 5 is composed of 103 retailer opinions. according to them, the hunters who buy a firearm are mainly those who give importance to all the factors except innovation. in fact, even tradition appears of extreme importance. the most important factor in hunters’ selecting a firearm is the price. the competence and the quality of the retailer are considered 98 important, but not as much as other factors such as word-of-mouth from friends and acquaintances, and the image of the producer. finally, cluster number 6 is composed of 97 opinions of retailers. according to them, before purchasing a firearm, hunters analyze carefully all factors, considering them of extreme importance for the buying process. the absolutely important factor is the image of the producer, while the less important one, but still with a high score, is the tradition. 5. conclusion, limitations, managerial implications and suggestions for future research 5.1. conclusion the paper examines the purchasing behavior of hunters in the italian firearms sector, a field insufficiently studied by scholars. in particular, we have analyzed the italian firearms industry as it is a very important productive sector in terms of turnover and value added generated in the italian economy. moreover, the sector represents one of the excellences of “made in italy” at a global level (musso, cioppi & francioni, 2012). the first objective of the study was to identify the critical variables influencing the firearms’ buying process according to hunters and retailers. the second objective was to try to identify, through a segmentation realized by the cluster analysis, hunters’ groups with similar generic characteristics and similar behaviour in purchasing a firearm. results showed that, according to a sample of 455 hunters interviewed, the most important group of factors influencing the firearm purchasing process are the retailer image and its service quality and the brand image and product features, while the less relevant is the interpersonal influence. according to the 200 respondent dealers, the group of factors that determine the purchase of a firearm are first of all the interpersonal influence and the retailer image and service quality, while the less relevant group of factors is related to the brand image and the product features. combining this results with the valuation given to word-of-mouth and price factors, we can state that the perception of retailers on purchase behaviour may not be completely correct and anyway differs from the hunter’s answers. one can state that the retailer’s perception does not match the hunter’s one, because retailers overrate the importance of word-of-mouth and degree of diffusion among hunters’ groups and cheapness. in fact, the answers of hunters show a greater autonomy in the customer’s purchasing behaviour and also a decreased attention to the firearm’s price. the same consideration could be made about the factor of aesthetics and ergonomics of the firearm. in brief, the differences in the perception of consumers behaviour highlight that even though retailers know their customers quite well, they overvaluate some important factors. at this point, results should confirm what has been stated in the literature review, regarding the positive relation between the brand image and product features and the consumer’s purchase intention (keller, 1993; del rio, vazquez & iglesias, 2001), as “the more favourable the brand image is, the more positive is the attitude toward the branded product and its attributes”. the same positive effect could be applied to the interpersonal influence on individual’s consumption behaviour and to the service quality offered by the retailer since it conforms to the customer’s requirements in the delivery of a service. in fact, the positive relationship between the groups of purchasing factors and consumer behaviour are encountered in the high score given by hunters and retailers to each factor analyzed. in order to achieve the second objective of the research, we performed a non-hierarchical cluster analysis, that allowed us to identify consumer groups with similar generic characteristics and similar behaviour in purchasing a firearm within themselves and different 99 as regards the other groups. results reveal that all clusters identified consider reliability, security, accuracy and manageability as very important factors when buying a firearm, while factors that contribute most to the segmentation (grouping the hunter in six clusters) are: innovation, availability of the nearest retailer, word-of-mouth from friends and acquaintances and tradition. we identified six segments, four through the hunters’ survey and two through the retailers’ survey. we named them: the recommended, the conservative, the innovative, the informed, the stingy and the maniacs. cluster number one has been named “the recommended”. this group is composed of hunters who probably, before buying a firearm, neither do research on the internet, nor get information from specialized magazines. when they want to purchase a new firearm, they go to their trusted retailer and seek advice from him. in addition, if they had to choose between two firearms, they would choose those with a long tradition behind it rather than a latest generation one. cluster number two is entitled “the conservative”: this cluster consists of those who are very traditionalist. after the purchasing process, they probably choose to buy the same brand because they prefer to be conservative and not change. innovation is not considered as an influential factor. cluster number three has been named “the innovative”. within this cluster are those who place a high importance on innovation, and when they decide to buy a firearm they are not interested in tradition and in advice from friends and relatives. probably, before going to a retail store, they are already quite well informed about the most advanced firearms. cluster number four has been named “the informed”: this group is composed of those who consider all the characteristics as important and they carry out considerable research and consult friends, acquaintances and other hunters before deciding which brand and which type of firearm to select. therefore, when they go to the retailer, they already have a clear idea of the type of firearm which answer their requirements; however, before purchase, they ask the retailer for advice. cluster number five has been entitled “the stingy”: this cluster is made up of those who, despite conducting research and consulting friends before buying a firearm, they will be attracted by the one that offers the best value for money. finally, cluster number six was named “the maniac”: within this cluster we found those who carefully consider every detail and characteristic before buying a firearm. all clusters consider reliability, security, accuracy and manageability as very important factors when buying a firearm. however, the factors that contribute most to the determination of the cluster are innovation, availability of the nearest retailer, word–of-mouth from friends and acquaintances and tradition. in fact, innovation is a very important factor for the innovative, the informed and the maniac, while it is less important for the recommended, the conservative and the stingy. the availability of the nearest retailer is relevant for all clusters except for the conservative and the innovative, while word–of-mouth is irrelevant for the recommended, the conservative, the innovative and the informed. finally, tradition is an important factor for the recommended and the conservative, while it isn’t for the innovative, the informed and the maniac. for the maniacs and the stingy all factors are extremely important, but with a small difference. the stingy give absolute importance to cheapness and a less importance to innovation, while the maniac pays particular attention to the image of the producer and less attention to tradition. 100 5.2. managerial implication, limitations and suggestions for future research from our empirical study, we can state some important managerial implications for firearms producers and dealers. according to what emerges from the opinion of the hunters, it is very important for the producers to pay great attention first of all to the retailer image and the service quality, and in particular to the competence and quality offered by the retailer and the availability of the nearest retailer. this highlights the crucial role of the trade channel for competitive advantage in the firearms industry. great attention needs to be dedicated to the brand image and product features, both factors that involve marketing departments, which are obliged to understand the hunter’s purchasing behavior when they propose and communicate new solutions for creating value for customers. the same challenge involves the dealers, who, as is shown in this research, need to improve their customer knowledge. also, according to what emerges from our hunter segmentation, we can state that firearms producers and dealers face some important strategic challenges. first of all they could imagine new market niches, new businesses identified with original clustering criteria, that could help managers to identify interesting “blue oceans”4 to enter with new value solutions for new customers. the features of each customer’s purchasing behavior within the cluster provide several useful managerial implications for firearms producers. in particular, the study suggests that brand investment is as important as product innovation and that there could be some market segments that offer interesting opportunities of growth. in added, the italian firearms producers could evaluate whether their current competitive strategies are exploiting these potential market spaces. the limitations of this study provide directions for future research. firstly, the study is focused on italy. future research could analyze other countries. a second limitation was that the study did not take into account other potential factors which may influence the hunter’s purchase intention. such a limitation could be overcome by future studies. for example we could add product usability, product performance and brand association in customers’ memory. we also recommend that future works should be conducted analyzing the differences in the purchasing intention of hunters and sports marksmen. references aaker, d. a. 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(2011). the effect of store image and service quality on brand image and purchase intention for private label brands. australasian marketing journal, 19, 30-39. 7 _15-33_ candelo international journal of economic behavior, 5, n. 1, pp. 3 towards corporate shared value in retail sector: a comparative study over grocery and banking between received: may 21, 2015 the research investigates the extent to which banking and grocery social responsibility (csr) in accordance to evolving consumers’ expectations and build a strategic model of corporate shared value (csv) to strive for economic and social returns simultaneously. the paper adopts a qualitative appro study methodology by investigating a sample of twelve banking and grocery retailers in italy and the uk. differences and similarities in csr as new strategic model among countries and retail sectors emerge, with uk compan integration of csr within their business strategy. the chance for both italian and uk retail companies is to adopt the best practices emerging from the case studies to turn their csr programs into a strategic business model of csv that will allow a stronger retailer relationship based on social improvements and a reinforcement of their brand image. keywords: corporate social responsibility, corporate shared value, banking retailers, grocery retailers, branding, consumers’ perception 1. introduction considering that attitudes are generally accepted as something people acquire, marketing academics have stressed on the importance of understanding how such attitudes develop and 1* despite the paper is the result of the 6, chiara civera wrote sections 4 and 5 and cecilia casalegno wrote section international journal of economic behavior, vol 5, n. 1, pp international journal of economic behavior, 5, n. 1, pp. 3-14, 201 towards corporate shared value in retail sector: a comparative study over grocery and banking between italy and the uk elena candelo university of turin, italy cecilia casalegno university of turin, italy chiara civera university of turin, italy accepted: sept 10, 2015 online published: abstract the research investigates the extent to which banking and grocery retailers use corporate social responsibility (csr) in accordance to evolving consumers’ expectations and build a strategic model of corporate shared value (csv) to strive for economic and social returns simultaneously. the paper adopts a qualitative approach, based on the comparative case study methodology by investigating a sample of twelve banking and grocery retailers in italy differences and similarities in csr as new strategic model among countries and retail sectors emerge, with uk companies from both the sectors showing the most formalized integration of csr within their business strategy. the chance for both italian and uk retail companies is to adopt the best practices emerging from the case studies to turn their csr ategic business model of csv that will allow a stronger retailer relationship based on social improvements and a reinforcement of their brand image. corporate social responsibility, corporate shared value, banking retailers, etailers, branding, consumers’ perception. considering that attitudes are generally accepted as something people acquire, marketing academics have stressed on the importance of understanding how such attitudes develop and despite the paper is the result of the cooperation among the three authors, elena candelo wrote sect 6, chiara civera wrote sections 4 and 5 and cecilia casalegno wrote sections 3 and 1 international journal of economic behavior, vol 5, n. 1, pp. 105 105 14, 201 towards corporate shared value in retail sector: a comparative study over grocery and banking between italy and the uk elena candelo*1 university of turin, italy cecilia casalegno* university of turin, italy chiara civera* university of turin, italy online published: october 26, 2015 retailers use corporate social responsibility (csr) in accordance to evolving consumers’ expectations and build a strategic model of corporate shared value (csv) to strive for economic and social returns ach, based on the comparative case study methodology by investigating a sample of twelve banking and grocery retailers in italy differences and similarities in csr as new strategic model among countries and ies from both the sectors showing the most formalized integration of csr within their business strategy. the chance for both italian and uk retail companies is to adopt the best practices emerging from the case studies to turn their csr ategic business model of csv that will allow a stronger retailer-consumer relationship based on social improvements and a reinforcement of their brand image. corporate social responsibility, corporate shared value, banking retailers, considering that attitudes are generally accepted as something people acquire, marketing academics have stressed on the importance of understanding how such attitudes develop and cooperation among the three authors, elena candelo wrote sections 2 and 105-120, 2015 106 how they are affected. regarding the business world, and in particular the retail sector, where customers interact with their chosen company, this tends to bring in a mixture of disciplines including psychology, sociology and economics (hoyer and mcinnis, 2012). the knowledge explicit in modern marketing and business techniques has meant that it is possible to influence and in some cases create consumer attitudes and influence them positively for reaching the business purpose. the social responsibility that this brings with it has been recognised in the development of codes of practices and ethical-driven processes for enhancing brand value and communicating it effectively. consumers, who, for the past decades, have been mostly influenced by business communications, are, nowadays alike affected by business activities beyond the communication itself and the coherence between brand image and companies’ actual practices and processes. according to consumers’ evolving expectations (de pelsmacker janssens and mielants 2005; barksdale and darden, 1972), it is commonly accepted that corporate social responsibility (csr) on behalf of business organisations represents to overcome the merely profit-oriented mentality and play a role as good citizen in the society (carrol, 1991; ahmed and machold, 2004). according to the 2013 consumer trend report, nowadays products are asked to give back a specific set of expected and shared values. they need to be more than transparent to their audience, to become "naked" in communicating concrete and tangible benefits that go beyond the merely purpose a product or a service is supposed to serve. "brands' wishes will be consumers' command" (consumer trend report, 2013) and, in this sense, consumers keep driving companies' choices in the establishment of a new vision, new business models, products and services and coherent ways of advertising and creating marketing campaigns. therefore, as a set of non-business oriented actions addressed to temporarily improve corporates’ behaviour and give them a voice within the social debate, csr is not a new concept for them. the difference nowadays consists in the fact that it is largely being strengthened to include a concrete set of tools and planned communication activities addressed to solve social and environmental issues with positive repercussions on the reference community and ultimately on the existent and potential consumers’ perceptions and satisfaction. it is, in other words, a new way of positioning business and relations with community by using the traditional csr drivers and shaping them in a different way (macleod, 2001; mohr et al., 2001; kuepfer and papula, 2010). actions within corporate social responsibility are becoming part of companies’ core concerns. can we consider this a new business model, even if less business-oriented? or marketing and branding are just playing with words? before analysing the link between csr and firms’ strategies and highlighting the innovative implications of it for companies, a quick overview on csr is required. generally considering that responsible, sustainable and philanthropic behaviours along with business ethics principles might represent a “good” way of reacting to the current societal and economic market scenario from the perception of consumers (casalegno et al., 2012; torres et al., 2012; de pedro and gilabert, 2012; vallaster at al., 2012; kuepfer and papula, 2010; neal and cochran, 2008; macleod, 2001; mohr et al., 2001), the real impulse within companies towards csr development raises issues of different kinds and the dilemma is not of an easy solution. what appears certain and clear, though, is that csr needs to impose itself as a new corporate mindset with its own strategic implications (kim et al., 2011). despite the multiple conceptualizations of csr and the fact that a single definition has yet to be accepted (vallaster et al., 2012), it is possible to group all its meanings under a csr international journal of economic behavior, 5, n. 1, pp. 3 mindset focusing on precise dimensions and activities that make csr “a cross management tool which aims at achieving long term goals by fostering voluntary corporat multi-stakeholders relationships” (civera and musso, 2012). according to this definition, the authors has built and considered three main dimensions of csr, in its traditional shape. they are: accountability, referring to the way companies give evidence of their behaviour towards csr through reports and codes of practices seen as differentiation elements; corporate philanthropy, identified as the sum of activities carried out in order to respond to various community needs by supporting projects of socia admired third sector organizations; and, sustainability, which is related to the inclusion and communication of environmental, societal and ethical concerns in process, goods/products and services. 2. branding and corporate social responsi understanding company differentiation is often realized by brand strategy to provide customers with quality, consistency and security. definitely brand is a vehicle to influence stakeholders’ quality perception and to add value to products the reasons why consumers give their preference to a brand among the many offers available and, consequently, it is important to analyse desires at the basis of their choice (aaker, what are customers’ needs, wishes and requirements according with current societal and environmental factors? evidence shows that social concerns are getting increasingly important for stakeholders in general and for consumers in particular. thus corporate should build a true relationship with consumers and with their societies, primarily having consistency between the values associated with the brand and those transmitted by the behaviour of the company as a whole. today corporate brands must be not only well known but also well regarded (allen and root, 2004): companies’ behaviour and brand identity appear inextricably linked, with repercussions on the brand image and on the brand loyalty by customers. the consequence of these arguments is that bran awareness to create a coherent identity (aaker, 2009): a kind of social legitimacy (melo and galan, 2011), which, in affluent societies, implies more than just profit maximization. csr concerns emerge in this context a perceptions, thus impact on the financial results of the company. therefore companies have to move away from one-dimensional financial perspectives of business to a holistic view of societal relationships to incorporate sustainability into the whole culture of the organization (gupta and kumar, 2013). consequently, firms must implement the value of the relationship between brand and stakeholders through csr strategies, especially in the medium therefore the brand acts as a tool that integrates the company with its stakeholders by creating valuable associations connected with sustainability, responsibility, philanthropy and ethics (grace and o’cass, 2002). considering brand strategy, inside and outside the company to create brand associations and communicated media. the positive word-of strategy. building a relationship between brand loyalty and, considering csr complexity and evolution, a question arises: shall csr become more than just a driver of branding and be translated in a whole organization and outside it international journal of economic behavior, 5, n. 1, pp. 3-14, 201 mindset focusing on precise dimensions and activities that make csr “a cross management tool which aims at achieving long term goals by fostering voluntary corporat stakeholders relationships” (civera and musso, 2012). according to this definition, the authors has built and considered three main dimensions of csr, in its traditional shape. they are: accountability, referring to the way companies give e of their behaviour towards csr through reports and codes of practices seen as differentiation elements; corporate philanthropy, identified as the sum of activities carried out in order to respond to various community needs by supporting projects of socia admired third sector organizations; and, sustainability, which is related to the inclusion and communication of environmental, societal and ethical concerns in process, goods/products branding and corporate social responsibility: a premises for a strategic company differentiation is often realized by brand strategy to provide customers with quality, consistency and security. definitely brand is a vehicle to influence stakeholders’ quality d value to products and services. it is therefore necessary to understand the reasons why consumers give their preference to a brand among the many offers available and, consequently, it is important to analyse desires at the basis of their choice (aaker, what are customers’ needs, wishes and requirements according with current societal and environmental factors? evidence shows that social concerns are getting increasingly important for stakeholders in general and for consumers in particular. rporate should build a true relationship with consumers and with their societies, primarily having consistency between the values associated with the brand and those transmitted by the behaviour of the company as a whole. today corporate brands must be not only well known but also well regarded (allen and root, 2004): companies’ behaviour and brand identity appear inextricably linked, with repercussions on the brand image and on the the consequence of these arguments is that brand reputation is as important as brand awareness to create a coherent identity (aaker, 2009): a kind of social legitimacy (melo and galan, 2011), which, in affluent societies, implies more than just profit maximization. csr concerns emerge in this context as they affect both the social legitimacy and the stakeholders’ perceptions, thus impact on the financial results of the company. therefore companies have to dimensional financial perspectives of business to a holistic view of lationships to incorporate sustainability into the whole culture of the organization consequently, firms must implement the value of the relationship between brand and stakeholders through csr strategies, especially in the medium-long term. fore the brand acts as a tool that integrates the company with its stakeholders by creating valuable associations connected with sustainability, responsibility, philanthropy and ethics (grace and o’cass, 2002). considering brand strategy, activities carried out within csr should be made visible inside and outside the company to create brand associations and communicated of-mouth generated develops an integrated communication between brand and csr is important to strengthen customers’ loyalty and, considering csr complexity and evolution, a question arises: shall csr become of branding and be translated in a formalized approach and outside it? 107 14, 201 mindset focusing on precise dimensions and activities that make csr “a cross-functioning management tool which aims at achieving long term goals by fostering voluntary corporates’ according to this definition, the authors has built and considered three main dimensions of csr, in its traditional shape. they are: accountability, referring to the way companies give e of their behaviour towards csr through reports and codes of practices seen as differentiation elements; corporate philanthropy, identified as the sum of activities carried out in order to respond to various community needs by supporting projects of social interest and admired third sector organizations; and, sustainability, which is related to the inclusion and communication of environmental, societal and ethical concerns in process, goods/products bility: a premises for a strategic company differentiation is often realized by brand strategy to provide customers with quality, consistency and security. definitely brand is a vehicle to influence stakeholders’ quality services. it is therefore necessary to understand the reasons why consumers give their preference to a brand among the many offers available and, consequently, it is important to analyse desires at the basis of their choice (aaker, 1996). what are customers’ needs, wishes and requirements according with current societal and environmental factors? evidence shows that social concerns are getting increasingly rporate should build a true relationship with consumers and with their societies, primarily having consistency between the values associated with the brand and those transmitted by the behaviour of the company as a whole. today corporate brands must be not only well known but also well regarded (allen and root, 2004): companies’ behaviour and brand identity appear inextricably linked, with repercussions on the brand image and on the d reputation is as important as brand awareness to create a coherent identity (aaker, 2009): a kind of social legitimacy (melo and galan, 2011), which, in affluent societies, implies more than just profit maximization. csr s they affect both the social legitimacy and the stakeholders’ perceptions, thus impact on the financial results of the company. therefore companies have to dimensional financial perspectives of business to a holistic view of lationships to incorporate sustainability into the whole culture of the organization consequently, firms must implement the value of the relationship between brand and fore the brand acts as a tool that integrates the company with its stakeholders by creating valuable associations connected with sustainability, responsibility, philanthropy and activities carried out within csr should be made visible inside and outside the company to create brand associations and communicated through the integrated communication and csr is important to strengthen customers’ loyalty and, considering csr complexity and evolution, a question arises: shall csr become formalized approach shared by the 108 sharing is the imperative. the question is, what and how to share? one of the most difficult intangible asset competitors cannot imitate is surely the way a certain organization behave and share its principles and social values with internal customers (employers) and external clients (consumers) ultimately. what is called organizational culture (schein, 2010) refers to the values and patterns of belief and behaviour that are commonly accepted and practiced by the members of a particular organization (pringle et al., 1988). in this scenario, the company is asked to put “everything together and make it work” (schultz et al., 1993) and, integrate communication with coherence and transparency. (schultz et al., 1993; romano, 1988; krugman et al., 1994; collesei, 2002; duncan and mulhern, 2004; collesei and ravà, 2008; belch and belch, 2009). the necessity of integrating communication tools and lever on constant factors (collesei, 2002) is perceived by companies as the most effective and strategic way to give their assets and business a reason to exist, and this is undisputed, especially in crisis periods (casalegno et al., 2012) and valid for all the stakeholders as extended audience (kliatchko, 2008), considering that communication is not a two-way factor anymore. coherence is the driver of communication and helps creating the right reputation. according to this perspective, over the last years csr has become one of the most powerful internal and external way of communicating homogenization and good behaviour in the way of conducting business activities. accordingly, if principles and shared values can represent powerful levers for competitive advantage, it is likewise true that nowadays the audience is not simply persuaded by paid activities – e.g. advertising that aim to make them understand how ethic a certain company is. customers are positively influenced by companies that do not need to prove their csr through branding; instead by those who place it and communicate it on the market as a new business model addressed to social improvements. here it is that csr should turn into a strategic business model where actions undertaken in the field of ethics, sustainability, environment and philanthropy are coordinated and homogeneous within the core business of the company and therefore communicated transparently to achieve economic and social returns at the same time. in accordance with an on-going research current put forth by michael porter in several of his works from 2002, the imperative for companies is to create and share values with the double purpose of reaching better performances in their competitiveness and improve their community well-being in a long-term perspective. sharing values is reflected in communication as well as in the creation of concrete and valuable strategies. in other words corporates need to strengthen csr both as communication and strategy and bring it to a new level, the one of corporate shared value (csv) (porter and kramer, 2011). under the logic of csv, any ethical, responsible and philanthropic action becomes profitable in an innovative way and places itself at the core of any companies’ businesses: the design of new products and services that meet social and environmental needs while simultaneously delivering a financial return, for instance, goes beyond the merely communication of corporate values, citizenship and sustainability or the compliance to national and international standards (moore, 2014); it confirms, instead, a strategic intention by the company to move beyond business and social concerns trade-off. with csv companies coherently build a set of policies and practices that can buster their competitive power meanwhile improving environmental and social conditions within the community, which ultimately, like a virtuous circle, will positively impact on the company as well. given that “the more a social improvement relates to a company’s business, the more it leads to international journal of economic behavior, 5, n. 1, pp. 3 economic benefits as well..” (porter and kramer, 2002), the breakthrough within the logic of csv stays in the coherency through which companies place their responsible strategies within their core business and in the transparency when communicating them. philanthropy is used to enhance competitive context, the more it economic goals into alignment and improve a company’s long (porter and kramer, 2002) in essence, csv represents a change of mentality processes/goods and services and communication. csv starts from csr but imp strategies in the form of a new business model. in particular, the csr dimensions previously described evolve towards a more strategic fram compulsory activity to respond to the on philanthropy as combined set of activities to support social and good causes in areas of competitive advantage for the company sustainable deliverables as concrete development of sustainable processes, goods/products and services that meet social needs while achieving economic return communication plays a key role within the new str considered the primary route through which corporates talk to and are able to reach their audience. brands talk simultaneously for different purposes consequence, transparency and coherency become u of the activities carried out within communities’ interest will be reasonably firstly addressed and communicated to empower corporates’ brand awareness and perception as forms of advertising in the interest of the compa in the stakeholders’ interest and communicated accordingly. as far as strategic accountability and in a csv perspective, companies are asked to certain activity almost compulsorily and the community through plans returns. given the theoretical fram just a driver of branding or the big move towards cs more structured way of thinking csr) is being undertaken and, to which extent, by grocery and banking retailers comparing the situation in italy and the united kingdom. 3. italy and united kingdom: similarities and differences towards csr csr strategies are built in different ways depending on the country (brammer and pavelin, 2006), so the choice of italy a characterizations in the adoption of csr as strategy to achieve economic and reputational benefits (brammer and millington, 2005). italy and the united kingdom present many similarities in their economical and geographical backgrounds and, at the same time, quite remarkable differences in their cultural environments, where beliefs, personal attitudes and preferences of individuals are formed. therefore, this particularly affects corporates' attitu towards ethics and the choice of their major csr activities, from corporate giving to the implementation of some more marketing on one hand, general settings and economic situation appear to be quite similar in t considered countries. firstly, the population is estimated to be 60.8 million in italy and 62.8 in the uk (united nation data, 2012) and secondly the gross domestic product shows similar values in both countries: the un data estimates italy gdp for the equal to billion $2.013 and uk gdp for the same year to be billion $2.471 (united nation data, 2012). international journal of economic behavior, 5, n. 1, pp. 3-14, 201 nefits as well..” (porter and kramer, 2002), the breakthrough within the logic of csv stays in the coherency through which companies place their responsible strategies within their core business and in the transparency when communicating them. for instance enhance competitive context, the more it could bring social and economic goals into alignment and improve a company’s long-term business prospects in essence, csv represents a change of mentality involving human resources, core processes/goods and services and communication. csv starts from csr but imp strategies in the form of a new business model. in particular, the csr dimensions previously described evolve towards a more strategic framework, including: strategic accountability ompulsory activity to respond to the on-going challenges within society; as combined set of activities to support social and good causes in areas of competitive advantage for the company and coherent to its mission and core business; as concrete development of sustainable processes, goods/products and services that meet social needs while achieving economic return. communication plays a key role within the new strategic model of csv, being considered the primary route through which corporates talk to and are able to reach their talk simultaneously for different purposes and to different targets consequence, transparency and coherency become undisputable when communicating: some of the activities carried out within communities’ interest will be reasonably firstly addressed and communicated to empower corporates’ brand awareness and perception as forms of of the company and, some others will merely serve social purposes in the stakeholders’ interest and communicated accordingly. strategic accountability and strategic philanthropy are concerned, for instance, in a csv perspective, companies are asked to implement and increase the communication of certain activity almost compulsorily and give more and more evidence of their efforts towards through plans clearly and concretely reporting on investments and given the theoretical framework, the aim of the paper is to investigate whether csr is just a driver of branding or the big move towards csv implementation (as innovative and more structured way of thinking csr) is being undertaken and, to which extent, by grocery lers comparing the situation in italy and the united kingdom. 3. italy and united kingdom: similarities and differences towards csr csr strategies are built in different ways depending on the country (brammer and pavelin, 2006), so the choice of italy and uk has been driven by considering their peculiarities and characterizations in the adoption of csr as strategy to achieve economic and reputational benefits (brammer and millington, 2005). italy and the united kingdom present many economical and geographical backgrounds and, at the same time, quite remarkable differences in their cultural environments, where beliefs, personal attitudes and preferences of individuals are formed. therefore, this particularly affects corporates' attitu towards ethics and the choice of their major csr activities, from corporate giving to the implementation of some more marketing-oriented strategies like sponsorships. on one hand, general settings and economic situation appear to be quite similar in t considered countries. firstly, the population is estimated to be 60.8 million in italy and 62.8 in the uk (united nation data, 2012) and secondly the gross domestic product shows similar values in both countries: the un data estimates italy gdp for the equal to billion $2.013 and uk gdp for the same year to be billion $2.471 (united nation 109 14, 201 nefits as well..” (porter and kramer, 2002), the breakthrough within the logic of csv stays in the coherency through which companies place their responsible strategies within for instance, the more could bring social and term business prospects involving human resources, core processes/goods and services and communication. csv starts from csr but imposes its strategies in the form of a new business model. in particular, the csr dimensions previously strategic accountability as going challenges within society; strategic as combined set of activities to support social and good causes in areas of and coherent to its mission and core business; as concrete development of sustainable processes, goods/products ategic model of csv, being considered the primary route through which corporates talk to and are able to reach their and to different targets. as a ndisputable when communicating: some of the activities carried out within communities’ interest will be reasonably firstly addressed and communicated to empower corporates’ brand awareness and perception as forms of will merely serve social purposes concerned, for instance, ment and increase the communication of give more and more evidence of their efforts towards investments and social ework, the aim of the paper is to investigate whether csr is implementation (as innovative and more structured way of thinking csr) is being undertaken and, to which extent, by grocery lers comparing the situation in italy and the united kingdom. 3. italy and united kingdom: similarities and differences towards csr csr strategies are built in different ways depending on the country (brammer and pavelin, nd uk has been driven by considering their peculiarities and characterizations in the adoption of csr as strategy to achieve economic and reputational benefits (brammer and millington, 2005). italy and the united kingdom present many economical and geographical backgrounds and, at the same time, quite remarkable differences in their cultural environments, where beliefs, personal attitudes and preferences of individuals are formed. therefore, this particularly affects corporates' attitudes towards ethics and the choice of their major csr activities, from corporate giving to the oriented strategies like sponsorships. on one hand, general settings and economic situation appear to be quite similar in the considered countries. firstly, the population is estimated to be 60.8 million in italy and 62.8 in the uk (united nation data, 2012) and secondly the gross domestic product shows similar values in both countries: the un data estimates italy gdp for the year 2012 to be equal to billion $2.013 and uk gdp for the same year to be billion $2.471 (united nation 110 on the other hand, factors like the social conditions, institutional and historical settings (cgap, 2011) and the culture as mentioned above greatly differ between italy and the uk, affecting csr activities’ typology and communication. by examining closer these differences, at a first glance it is worthy to mention how history and tradition affect the context in which csr is born. on one hand, companies in united kingdom, traditionally, have always played a central role in building and maintaining the so-called welfare state by emphasising on their business philanthropy for responding to “social, economic and political needs” (cgap, 2011). in this sense, the environment for the proliferation of formalized policies within the area of csr has always seemed to be more conducive. in italy, on the other hand, historically, the growth of cooperative organizations had been instrumental in creating a welfare state whilst corporate philanthropy has always been more connected to religion purposes and characterized by far less visibility and impact if compared to the uk (assifero, 2010). by analysing the results achieved by national and international researches and reports, a clearer understanding of the countries' differences in facing the challenge of csr at a corporate level emerges: investments in csr are generally increasing. amount and reasons for investing still differ between the countries. in particular, 73% of italian companies with more than 80 employees adopt csr programmes formally within the company and towards society (rga, 2012) and communicate them with excellence (kpmg, 2013). when taking into consideration the philanthropic effort among italian and uk companies, what emerges is that the average estimated amount for cash and in-kind donations per company out of a broader range of csr activities is much more higher in the uk ("uk company giving", 2011/2012; osservatorio socialis, 2014). moreover, the second “report on sustainability and competitiveness” carried out by rga in 2012 shows that in italy corporates still find hard to integrate responsibility and sustainability into their business model and suffer of a lack of formalization in their csr management (istituto italiano donazione, 2012): they do not operate autonomously within their department and any choice regarding csr projects, donations and sponsorships are taken along with the marketing, communication or human resources departments. even if italian companies are paying more attention to innovate their business models, initiatives for csr are still declared to be highly related to the idea of strengthening brand image and corporate reputation, to attract new customers and improve employees' satisfaction (osservatorio socialis, 2014). data available for the year 2009 (rga, 2009) compare italy to 31 countries (including uk) evaluated for their responsible competitiveness and it is unsurprising that italy is placed 26th in the ranking, while uk at the 13th position, anticipating at a first glance what the findings from the empirical analysis will reveal. the peculiar configuration of csr leading to different level of implementation of csv between italy and the uk explains the choice of such geographical areas as objet of the study. 4. research methodology and sample design the present research has been carried out as part of an on-going international study that seeks to analyse the link between branding and csr and the extent to which companies operating in various industrial sectors concretely achieve the implementation of corporate shared value. in particular, the aim of this paper is to focus on two retail sectors (banking and grocery) and compare the level of formalization and methods of communication of companies’ csr strategies between italy and the united kingdom; and to investigate whether international journal of economic behavior, 5, n. 1, pp. 3 companies included in the sample are developing a new business model, striv csr to csv, varying from retail sector and country. grocery and banking sectors are the object of the study, for three main reasons. first of all, more than other industrial sectors and especially nowadays, they have the duty toward their customers to respond responsibly to their secondly, on one hand, these retailers get in touch with their customers constantly, both at a corporate level through communication and at local level through their products, services and employers. on the other hand, customers have nowadays the power and the capacity to monitor companies’ actions and judge the coherence between their communication and actual behaviour at the point of sale (grocery store or banks’ branches) and influence powerful mouth-to-mouth advertising. transparency, in this sense, becomes the core and key word for grocery and banking retailers who want to establish long thirdly and eventually, these are the sectors most involved and to interestingly and not surprisingly they are also the confidence resulting from the economic and financial meltdown. despite the sectors look different at a first glance, policies and programmes for its communication appear to move to the same direction, beyond the merely building of brand trust to ultimately achieve the highest level of customers’ confidence in their products and services. grocer retailers, for instance, address their offer that is price-sensitive but it has become somehow associated with a good cause in the field of environment, sustainability and humanitarian aid musso, risso, 2006). the banki with their investors and customers, by strengthening local presence on the territory, activities toward the community and the communication of them, in order to add value to their service proposition and face the challenge to accomplish the purpose of the research, a sample of twelve (12) companies among banking and grocery retailers considered and investigated by adopting the the sample has been investigated over the extent to which their csr strategic business model, related but independent on branding and communication the use of a comparative study has allowed the authors to compare different strategic settings referred to two geographical contexts where the conditions leading to a specific company’s attitude (“why”) and the behaviour and strategies put in place by a certai company (“how”) changes depending on the country (feagin it has been chosen to base the analysis on objective facts; concretely activities that companies within the sample currently implement and communicate to their audience. as a consequence, any information, documents and records over csr implementation and communication websites related to the company under investigation, companies’ (sustainability reports, social reports, code of ethics, international norms and standards, creation of ad-hoc ethical products and services, type and amount of cash and in donations to third sector organizations, description of initiatives of social relevance, partnership and sponsorship in the field of csr). the information have been collected at a single point in time in 2015 and gathered around and the relation between communication and csr. specifically, information on each company addressed to investigate the extent of csv implementation, have been gathered around: international journal of economic behavior, 5, n. 1, pp. 3-14, 201 companies included in the sample are developing a new business model, striv csr to csv, varying from retail sector and country. grocery and banking sectors are the object of the study, for three main reasons. first of all, more than other industrial sectors and especially nowadays, they have the duty r customers to respond responsibly to their increased expectations secondly, on one hand, these retailers get in touch with their customers constantly, both at a corporate level through communication and at local level through their products, services d employers. on the other hand, customers have nowadays the power and the capacity to monitor companies’ actions and judge the coherence between their communication and actual ale (grocery store or banks’ branches) and influence mouth advertising. transparency, in this sense, becomes the core and key word for grocery and banking retailers who want to establish long-term relationships. thirdly and eventually, these are the sectors most involved and top interestingly and not surprisingly they are also the ones most hit by a confidence resulting from the economic and financial meltdown. despite the sectors look different at a first glance, policies and programmes for its communication appear to move to the same direction, beyond the merely building of brand trust to ultimately achieve the highest level of customers’ confidence in their products and grocer retailers, for instance, address their offer and communication to a target ma it has become somehow accepting to pay higher prices for products associated with a good cause in the field of environment, sustainability and humanitarian aid . the banking sector has been forced to develop a onewith their investors and customers, by strengthening local presence on the territory, activities toward the community and the communication of them, in order to add value to their service sition and face the challenge deriving from customers’ mistrust. to accomplish the purpose of the research, a sample of twelve (12) companies among retailers, six (6) operating in italy and six (6) in the uk, has been nvestigated by adopting the comparative case studies method of research. the sample has been investigated over the extent to which their csr related but independent on branding and communication use of a comparative study has allowed the authors to compare different strategic settings referred to two geographical contexts where the conditions leading to a specific company’s attitude (“why”) and the behaviour and strategies put in place by a certai company (“how”) changes depending on the country (feagin et al., 1991). it has been chosen to base the analysis on objective facts; concretely activities that companies within the sample currently implement and communicate to their . as a consequence, any information, documents and records over csr implementation and communication accessible to the customers have been extracted from websites related to the company under investigation, companies’ websites and annual reports ility reports, social reports, code of ethics, international norms and standards, hoc ethical products and services, type and amount of cash and in donations to third sector organizations, description of initiatives of social relevance, partnership and sponsorship in the field of csr). the information have been collected at a single point in time in 2015 and gathered around the three dimensions of the and the relation between communication and csr. n on each company addressed to investigate the extent of csv have been gathered around: 111 14, 201 companies included in the sample are developing a new business model, striving to turn from grocery and banking sectors are the object of the study, for three main reasons. first of all, more than other industrial sectors and especially nowadays, they have the duty increased expectations. secondly, on one hand, these retailers get in touch with their customers constantly, both at a corporate level through communication and at local level through their products, services d employers. on the other hand, customers have nowadays the power and the capacity to monitor companies’ actions and judge the coherence between their communication and actual ale (grocery store or banks’ branches) and influence it through a mouth advertising. transparency, in this sense, becomes the core and key term relationships. p-spenders in csr. lack of customers’ despite the sectors look different at a first glance, policies and programmes for csr and its communication appear to move to the same direction, beyond the merely building of brand trust to ultimately achieve the highest level of customers’ confidence in their products and and communication to a target market to pay higher prices for products associated with a good cause in the field of environment, sustainability and humanitarian aid -to-one relationship with their investors and customers, by strengthening local presence on the territory, activities toward the community and the communication of them, in order to add value to their service to accomplish the purpose of the research, a sample of twelve (12) companies among , six (6) operating in italy and six (6) in the uk, has been method of research. the sample has been investigated over the extent to which their csr is becoming a new related but independent on branding and communication activities. use of a comparative study has allowed the authors to compare different strategic settings referred to two geographical contexts where the conditions leading to a specific company’s attitude (“why”) and the behaviour and strategies put in place by a certain it has been chosen to base the analysis on objective facts; concretely on the set of activities that companies within the sample currently implement and communicate to their . as a consequence, any information, documents and records over csr have been extracted from ites and annual reports ility reports, social reports, code of ethics, international norms and standards, hoc ethical products and services, type and amount of cash and in-kind donations to third sector organizations, description of initiatives of social relevance, partnership and sponsorship in the field of csr). the information have been collected at a the three dimensions of the csv framework n on each company addressed to investigate the extent of csv 112 strategic accountability: • the spread of csr communication messages and reports (including adherence to international standards) in accordance to the current issues (environmental, societal and economic mainly); • the level of csr strategy formalization concerning its governance and mechanisms of decision and control within the company; strategic philanthropy: • the level of formal implementation and accountability for philanthropy, with clear plans describing the nature of the donations or partnership with third sector organization that match with the mission and core business of the company and the publishing of reports to function both as financial evidence of the projects and communication of the achieved results; • the typology of adopted techniques in the field of philanthropy (such as employees volunteering and cause related marketing (crm) as targeted strategic donations) and the intent they are communicated to serve (branding purposes for instance); sustainable deliverables: • creation and implementation of sustainable processes, products/goods and services that respond to social needs while delivering a financial return (e.g. development of ethical funds for banking retailers and eco and environmental friendly products for groceries’ private labels); relation between communication and csr: • the extent to which certain csr activities are pursued and communicated to meet and serve mainly commercial goals rather than the merely ethical intent. in particular, six (6) companies have been picked up from the banking sector (3 operating in the uk and 3 players from italy); and the other six (6) companies competing in the retail grocery sector (3 in the uk market and 3 in italy). some precise criteria have been used to choose the companies part of sample within the sector and have varied depending on the industrial sector and the geographical context the company belongs to. uk banking sector. two criteria have been applied: the identification of the largest banks in the uk and – among the largest – the choice of the most involved in csr. as a result, according to the ranking of the largest european banks for the year 2012 reported on the website relbanks.com and to the “guide to uk company giving” (lillya, 2011) which ranks the top 25 uk companies most spenders in corporate philanthropy2, the sample is here composed by: royal bank of scotland, lloyds tsb group and barclays plc. italian banking sector. due to the lack of data investigating the proportion of investments in corporate philanthropy, the criterion of the largest corporates in the country has been used. as a result, according to the website relbanks.com the top 3 banks in italy part of the sample are: unicredit spa, intesa sanpaolo, and banca monte dei paschi di siena. uk retail grocery sector. two criteria have been applied: the identification of the largest retailers grocery in the uk (among the categories hypermarket and supermarket) and – among the largest – the choice of the most involved in corporate philanthropy. as a result, according to the rankings reported on retailindustry.com, the “guide to uk company giving” 2 cash investments: royal bank of scotland group uk (£ 34.7 million), lloyds tsb group uk (£ 33.5 million), and barclays plc uk (£ 19.3 million) international journal of economic behavior, 5, n. 1, pp. 3 (lillya, 2011) and “top 3000 charities 2012/2013” (caritas data, 2012) 200 donors per community investments, the sample is and co-operative group (food division). italian retail grocery sector. in corporate philanthropy, the three largest italian grocery retailers (in the category hypermarket and supermarket) according to the ranking reported by retailindustry.com have been analysed: coop italia ( nazionale dettaglianti soc. coop. s.r.l. (67 of 250 grocer retailers). table 1 – the uk and italian companies’ sample uk banking sector royal bank of scotland group lloyds tsb group barclays plc italian banking sector unicredit group spa intesa sanpaolo group banca monte dei paschi di siena source: personal processing 5. empirical analysis and discussion of results the qualitative methodology based on the case study development has helped the authors to collect the research findings around some relevant thematic areas within the topic of csr towards csv as new business model some differences and relevant similarities emerging from the comparison between the italian and uk retailer corporates. before deepening each of the analysed topics in relation to the countries and the retail sector, some general premises are n first of all, the research findings will mostly confirm the general characteristics of the countries when it comes to their attitude towards csr and the extent to which they are adopted as standardized strategies by to be still in the process of formalizing their csr strategy towards csv as brand enhancement and community wellbeing at the same time, both at an internal level (towards their employees) and at the external one (so as to approach th customers). on the other hand, retailer corporates in the uk appear overall more structured in their csr strategy definition and in the communication of concrete results, whether the implemented csr programme is directed to susta with certain international standards or to report on the impact of a specific philanthropic activity benefiting the community. secondly, being the aim of the paper to highlight the differences and similarities in the evolution of csr towards the strategic model of csv between italy and the uk, the findings 3 2011 worldwide community investments: tesco plc (£ 64.3 million), sainsbury’s (£ 25 million), and co operative group (£ 7 million cash donations) international journal of economic behavior, 5, n. 1, pp. 3-14, 201 (lillya, 2011) and “top 3000 charities 2012/2013” (caritas data, 2012)3 200 donors per community investments, the sample is composed by: tesco p operative group (food division). italian retail grocery sector. because of the lack of data over the top corporate spenders hilanthropy, the three largest italian grocery retailers (in the category rmarket) according to the ranking reported by retailindustry.com have been analysed: coop italia (47th position), conad consorzio nazionale dettaglianti soc. coop. s.r.l. (67th position), and esselunga spa (115 the uk and italian companies’ sample uk banking sector uk retail grocery sector tesco plc j sainsbury plc co-operative food ltd italian banking sector italian retail grocery sector coop italia conad consorzio nazionale dettaglianti banca monte dei paschi di siena esselunga spa 5. empirical analysis and discussion of results the qualitative methodology based on the case study development has helped the authors to collect the research findings around some relevant thematic areas within the topic of csr towards csv as new business model including communication strategies some differences and relevant similarities emerging from the comparison between the italian before deepening each of the analysed topics in relation to the countries and the retail sector, some general premises are needed. first of all, the research findings will mostly confirm the general characteristics of the countries when it comes to their attitude towards csr and the extent to which they are adopted as standardized strategies by corporates. indeed, on one hand, italian companies seem to be still in the process of formalizing their csr strategy towards csv as brand enhancement and community wellbeing at the same time, both at an internal level (towards their employees) and at the external one (so as to approach their existing and potential customers). on the other hand, retailer corporates in the uk appear overall more structured in their csr strategy definition and in the communication of concrete results, whether the implemented csr programme is directed to sustainable products development, to comply with certain international standards or to report on the impact of a specific philanthropic activity benefiting the community. secondly, being the aim of the paper to highlight the differences and similarities in the evolution of csr towards the strategic model of csv between italy and the uk, the findings 2011 worldwide community investments: tesco plc (£ 64.3 million), sainsbury’s (£ 25 million), and co group (£ 7 million cash donations) 113 14, 201 3 that ranks the top by: tesco plc, sainsbury’s, the top corporate spenders hilanthropy, the three largest italian grocery retailers (in the category rmarket) according to the ranking reported by the website position), conad consorzio position), and esselunga spa (115th position out uk retail grocery sector grocery sector conad consorzio nazionale dettaglianti the qualitative methodology based on the case study development has helped the authors to collect the research findings around some relevant thematic areas within the topic of csr including communication strategies and report on some differences and relevant similarities emerging from the comparison between the italian before deepening each of the analysed topics in relation to the countries and the retail first of all, the research findings will mostly confirm the general characteristics of the countries when it comes to their attitude towards csr and the extent to which they are italian companies seem to be still in the process of formalizing their csr strategy towards csv as brand enhancement and community wellbeing at the same time, both at an internal level (towards eir existing and potential customers). on the other hand, retailer corporates in the uk appear overall more structured in their csr strategy definition and in the communication of concrete results, whether the inable products development, to comply with certain international standards or to report on the impact of a specific philanthropic secondly, being the aim of the paper to highlight the differences and similarities in the evolution of csr towards the strategic model of csv between italy and the uk, the findings 2011 worldwide community investments: tesco plc (£ 64.3 million), sainsbury’s (£ 25 million), and co114 will be drawn to accomplish this purpose of countries comparison rather than sectors’. nevertheless, it is necessary to clarify that some intrinsic differences in the adoption of csr as standardized and formalized strategy belong to the specific retail sector besides the country: in italy, for instance, the retail groceries appear generally much less structured in the accountability of csr programmes and the use of certain tools for achieving philanthropic goals than banking retailers. eventually, both the retailer sectors, no matter the country, seemed to have understood the practical relevance of adopting csr policies and programmes and communicating them to their audience. reasons justifying this choice can be found in the higher amount of scandals that, in the past few years, have severely hit both banking and grocery retailers: from the food safety scandals related to their origin and production to the banking managers misconduct leading to a constant decreasing of public confidence. csr is a statement for companies and this is the starting point of the present paper; what varies between the countries is its level of formal implementation as innovative strategic business model towards csv and its mechanism of communication for meeting new customers’ expectations. each of the twelve (12) retailer corporates has been investigated over the extent to which their actions and behaviours around strategic accountability, strategic philanthropy, sustainable deliverables and relation between communication and csr meet the criteria of csv as new business model to accomplish. results are summarized in the table below and then explained. table 2: findings summary investigated areas italy united kingdom strategic accountability spread of csr policies and reports in accordance to the current issues b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 csr governance formalization b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 strategic philanthropy philanthropy for competitiveness – accountability and financial reports b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 employees volunteering b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 cause related marketing b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 sustainable deliverables development of sustainable deliverables b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 communication and csr csr – commercial purposes b1 b2 b3 g1 g2 g3 b1 b2 b3 g1 g2 g3 source: authors processing international journal of economic behavior, 5, n. 1, pp. 3 strategic accountability. the spread of csr policies and programmes within the analysed players appears to be homogeneous in both countries and retailer sectors, confirming an increasing tendency and consciousness in utilizing ethics, sustainable, responsi philanthropic activities as strategic responses to the current societal and economic challenges. evidence shows that all the investigated retailer corporates are making extensive use of csr as compulsory strategic tool by both publishing reports, c standardized programmes and communicating them within a set of values and certain responsible and ethic behaviours in response to challenging society’s needs. of the values within csr is put forth in companies’ press pr messages, confirming its relevance within the business activity. worthy of mention is the fact that three (3) players in the retail grocery sector (one in the uk and two in italy) operate in the market wi implies a responsible attitude mandatory within their core business. as far as the governance of csr is concerned strategic implications results show that both the retailer in italy provide an high level of formalization becoming pure business departments/functions working closely with the board of directors and/or the chairman directly the brand governance, which is supposed to reflect and balance the economic and social impact of a certain programme for csr. at the opposite, none of the italian and governance for csr, with activities spread within the marketing, communication and board departments indifferently. to conclude, the biggest step forward in the field of strategic accountability to create csv is being taken generally by represent a benchmark for the italian in charge of activating and managing a new business model that is connected to the marketing and communication departments but goes beyond them, to embed the whole company. strategic philanthropy. generally speaking, the policy for implementation and accountability for philanthropy appears to be more structured and standardized in the uk retailer corporat rather than the italian ones. in particular, the extent to which the development of clear plans showing the nature and the amount of investments in causes of social interest and measurement of the on one hand, banking sector their philanthropic activities by including such activity in their social reports as well as in financial plans. on the other hand, italian grocer retailers appear, once again, less structured and formalized: their support to third sector is mostl where the intent and the amount of philanthropic financial effort is concrete impact and measurement of achievements is not. this has, as consequence, a perception of lower transparency and impact on corporates’ business strategy, both at internal and external level. the investigation over the typologies of adopted te (such as employees volunteering and c above. all the uk players make a greater use of employees’ vo confirming and showing a philanthropic at all levels of responsibility, which is becoming as mandatory as any other core business international journal of economic behavior, 5, n. 1, pp. 3-14, 201 the spread of csr policies and programmes within the analysed players appears to be homogeneous in both countries and retailer sectors, confirming an increasing tendency and consciousness in utilizing ethics, sustainable, responsi philanthropic activities as strategic responses to the current societal and economic challenges. evidence shows that all the investigated retailer corporates are making extensive use of csr as compulsory strategic tool by both publishing reports, code of ethics or any other standardized programmes and communicating them within a set of values and certain responsible and ethic behaviours in response to challenging society’s needs. of the values within csr is put forth in companies’ mission statement, vision and press pr messages, confirming its relevance within the business activity. worthy of mention is the fact that three (3) players in the retail grocery sector (one in the uk and two in italy) operate in the market with the legal form of cooperative, which mandatory within their core business. governance of csr is concerned – another key aspect to investigate csr results show that both the retailer sectors in the uk level of formalization. in these sectors csr units or committee becoming pure business departments/functions working closely with the board of directors and handling strategic and operational duties even concerning the brand governance, which is supposed to reflect and balance the economic and social impact of a certain programme for csr. one of the italian grocer retailers adopt a formal mechanis and governance for csr, with activities spread within the marketing, communication and board departments indifferently. to conclude, the biggest step forward in the field of strategic accountability to create csv is being taken generally by banking retailers no matter the country. uk grocery retailers a benchmark for the italian, in building an independent governance system for csr in charge of activating and managing a new business model that is connected to the marketing nication departments but goes beyond them, to embed the whole company. generally speaking, the policy for implementation and accountability for philanthropy appears to be more structured and standardized in the uk retailer corporat in particular, the extent to which philanthropy is considered a proper strategic move with the development of clear plans showing the nature and the amount of investments in causes of social interest and measurement of their impact is higher within the uk retailers. on one hand, banking sector – no matter the country – is more likely to give evidence of their philanthropic activities by including such activity in their social reports as well as in ther hand, italian grocer retailers appear, once again, less structured and formalized: their support to third sector is mostly one-shot donations or random p where the intent and the amount of philanthropic financial effort is communicated concrete impact and measurement of achievements is not. this has, as consequence, a perception of lower transparency and impact on corporates’ business strategy, both at internal the investigation over the typologies of adopted techniques in the field of philanthropy (such as employees volunteering and crm as strategic partnership) confirms what described above. all the uk players make a greater use of employees’ volunteering than the italian confirming and showing a philanthropic attitude shared and spread inside the whole company, at all levels of responsibility, which is becoming as mandatory as any other core business 115 14, 201 the spread of csr policies and programmes within the analysed players appears to be homogeneous in both countries and retailer sectors, confirming an increasing tendency and consciousness in utilizing ethics, sustainable, responsible and philanthropic activities as strategic responses to the current societal and economic challenges. evidence shows that all the investigated retailer corporates are making extensive use of csr ode of ethics or any other standardized programmes and communicating them within a set of values and certain responsible and ethic behaviours in response to challenging society’s needs. also, the content mission statement, vision and on line and worthy of mention is the fact that three (3) players in the retail grocery sector (one in th the legal form of cooperative, which another key aspect to investigate csr sectors in the uk and banking sector units or committee, becoming pure business departments/functions working closely with the board of directors strategic and operational duties even concerning the brand governance, which is supposed to reflect and balance the economic and social adopt a formal mechanism of control and governance for csr, with activities spread within the marketing, communication and to conclude, the biggest step forward in the field of strategic accountability to create banking retailers no matter the country. uk grocery retailers , in building an independent governance system for csr in charge of activating and managing a new business model that is connected to the marketing nication departments but goes beyond them, to embed the whole company. generally speaking, the policy for implementation and accountability for philanthropy appears to be more structured and standardized in the uk retailer corporates hilanthropy is considered a proper strategic move with the development of clear plans showing the nature and the amount of investments in causes of ir impact is higher within the uk retailers. is more likely to give evidence of their philanthropic activities by including such activity in their social reports as well as in ther hand, italian grocer retailers appear, once again, less structured and shot donations or random partnerships communicated but the concrete impact and measurement of achievements is not. this has, as consequence, a perception of lower transparency and impact on corporates’ business strategy, both at internal chniques in the field of philanthropy as strategic partnership) confirms what described lunteering than the italian, attitude shared and spread inside the whole company, at all levels of responsibility, which is becoming as mandatory as any other core business 116 activity. having realized the relevance of restoring a trustful and transparent relationship with their customers that happens at a local level (grocery stores and bank branches for instance), the uk retailers are taking, in this field, a huge step forward toward csv creation. accordingly, philanthropic projects involving employees to volunteer and/or fundraise for charities at the point of sale or branch appear to be more structured with clear strategic plans. as far as cause related marketing (crm) is concerned, findings report a high and homogeneous level of use of such technique in both countries and retailer sectors, with consistent differences between the countries in relation to the way these partnerships are built and their reason why. uk retailers, for instance, implement projects with longer gestation and life-cycle that are highly-connected to the company’s core business and aim at enhancing business competitiveness and communities’ well-being at the same time. at the opposite, italian retailers still need to work on the strategic impact of their crm programmes: they appear to be not strategically connected with their core business yet and more addressed to merely increase the perception of corporates’ brands in a marketing-oriented process rather than having long-term strategic impact. to sum up, confirming an intrinsic attitude typical of the anglo-saxon world, the tendency suggests that uk players have turned philanthropy to a concrete strategy pursued with clear economic and social returns more than the italian ones, that are still more focused on the commercial implication of philanthropy. sustainable deliverables. all the retailers have understood the strategic importance of concretely developing processes, goods/products and services that meet environmental, sustainable and responsible requirements. no differences emerge between the investigated countries and retailer sectors, confirming a general will to move from the merely communication of sustainability and responsibility as principles to follow when doing business to the fulfilment of a strategic concrete business model. banking retailers in both countries, for instance, are highly involved in the development of social responsible funds and investments in green and renewable energy projects; grocer retailers are similarly putting in place and selling their private label fair trade products and activating training programmes for ethical trading. communication and csr. as shown above, it is clear that consistent efforts in creating a new business model for csr and strive towards the implementation of corporate shared value are being made by the majority of the companies part of the sample, with less structured programmes and plans for csr adopted by italian grocer retailers. the strategy for communication reflects the extent to which the investigated retailers are setting up their csv model. one of the changing element in the argumentation of csv is that the company becomes transparent and clear in its communication messages by admitting which kind of responsible, sustainable and philanthropic actions are undertaken with the aim of benefiting the society while impacting also on the brand perception enhancement. uk retailers seem to have taken a step forward in understanding this concept: the majority of the players clearly state and communicate to their stakeholders which csr activity (especially in the philanthropic dimension) is carried out primarily with a commercial intent and the purpose to strengthen their brands competitiveness. 6. conclusions and further implications it is possible to conclude that, overall, despite the common propensity among both countries and retailer sectors to build a new business model of csv as far as implementation of international journal of economic behavior, 5, n. 1, pp. 3 sustainable deliverables and compulsory accountability is concerned, the main differences emerge between the countries when it comes to the achievement of strategic philanthropy and its relation to brand communication. uk players seem to be more eff corporates in formulating a strategy that reaches simultaneously brand enhancement and social purposes, with positive repercussions on their competitiveness. all the analysed players appear to be to re core level, in a stakeholders’ perspective and have formally set up concrete responses to environmental and energy crises, financial crisis, pressure on innovation and fast development of information and communication technology, and eventually t stakeholders – which includes, of course, a change in their needs and expectations from business. the research reveals its usefulness to function as collection of best practices that might serve as example for the italian groce implementation -and to further the debate around shared value and its impacts for retailers competitiveness, society well customers’ perceptions and meeting their needs more appropriately. csr does no longer represent a driver of the brand; results show that the imperative is to build a coherent strategy embedded by the whole corporate at a global and local level that considers brand competitiveness and society’s improvement as linked parts of the same purpose: a sustainable and economic growth. the on-going adjustments creation of corporate shared value imposes continuous changes insi necessity to “share” those must be nowadays at the top of corporates’ occupations; csr are strictly connected in consumers are not in touch with just brands; they and behaviours and expect them to consistently and trustfully communication messages. increasing their power in upholding corporates’ good conduct, consumers’ point of view around the connectio forthcoming subject of investigation, to point out whether the creation of shared value correctly reflected through communication in customers’ perc new researches will keep focusing on references 1. aaker, d.a. 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warsaw school of economics, poland guest editors 1 _16-08_ chatzoudes examining the impact of corporate social responsibility practices on various measures of consumer received: august 1, 2015 accepted: corporate social responsibility (csr) is an extremely interesting research subject with numerous academic and practical implications. its empirical investigation raises valuable lessons, since the existing literature offers several research gaps. more spec of csr in economies under crisis has not been sufficiently investigated. in this context, the present study proceeds in developing and testing an original conceptual framework (research model), which explores the impact of csr practices behavior. more specifically, the proposed conceptual framework includes one independent factor (csr practices) and nine dependent factors (trust towards the organisation, company valuation, customer-company identification, r intention, customer loyalty, willingness to pay a premium price, perceived quality of services, company reputation). the proposed conceptual framework was tested, using a newly developed structured questionnaire, i equation modelling (sem) technique was used in order to test the research hypotheses. results underline the significance of csr practices in an economy under crisis, the effect of gender, and the shift from the classic paradigm of corporate social responsibility. keywords: corporate social responsibility; economic crisis; empirical study; structural equation modeling (sem); greece 1. introduction corporate social responsibility (csr) appears to have a significant impact on consumer behavior, since modern societies tend to pay an increasingly higher attention to the social interactions of business organisations (bhattacharya a korschun et al., 2014; maignan international journal of economic behavior, vol examining the impact of corporate social responsibility practices on various measures of consumer behavior dimitrios a. chatzoudes democritus university of thrace, greec prodromos d. chatzoglou democritus university of thrace, greece accepted: november 27, 2015 online published: abstract corporate social responsibility (csr) is an extremely interesting research subject with numerous academic and practical implications. its empirical investigation raises valuable lessons, since the existing literature offers several research gaps. more spec of csr in economies under crisis has not been sufficiently investigated. in this context, the present study proceeds in developing and testing an original conceptual framework (research model), which explores the impact of csr practices on various measures of consumer . more specifically, the proposed conceptual framework includes one independent factor (csr practices) and nine dependent factors (trust towards the organisation, company company identification, recommendation intention, repeat patronage intention, customer loyalty, willingness to pay a premium price, perceived quality of services, company reputation). the proposed conceptual framework was tested, using a newly developed structured questionnaire, in a sample of 473 greek consumers. the structural equation modelling (sem) technique was used in order to test the research hypotheses. results underline the significance of csr practices in an economy under crisis, the effect of the classic paradigm of corporate social responsibility. corporate social responsibility; economic crisis; empirical study; structural equation modeling (sem); greece. corporate social responsibility (csr) appears to have a significant impact on consumer , since modern societies tend to pay an increasingly higher attention to the social interactions of business organisations (bhattacharya and sen, 2004; cheng , 2014; maignan et al., 2005). despite that, there is a lack of empirical studies international journal of economic behavior, vol 6, n. 1, pp. 3-19 3 examining the impact of corporate social responsibility practices on various measures of consumer behavior dimitrios a. chatzoudes democritus university of thrace, greece chatzoglou democritus university of thrace, greece online published: june 22, 2016 corporate social responsibility (csr) is an extremely interesting research subject with numerous academic and practical implications. its empirical investigation raises valuable lessons, since the existing literature offers several research gaps. more specifically, the role of csr in economies under crisis has not been sufficiently investigated. in this context, the present study proceeds in developing and testing an original conceptual framework (research on various measures of consumer . more specifically, the proposed conceptual framework includes one independent factor (csr practices) and nine dependent factors (trust towards the organisation, company ecommendation intention, repeat patronage intention, customer loyalty, willingness to pay a premium price, perceived quality of services, company reputation). the proposed conceptual framework was tested, using a newlyn a sample of 473 greek consumers. the structural equation modelling (sem) technique was used in order to test the research hypotheses. results underline the significance of csr practices in an economy under crisis, the effect of the classic paradigm of corporate social responsibility. corporate social responsibility; economic crisis; empirical study; structural corporate social responsibility (csr) appears to have a significant impact on consumer , since modern societies tend to pay an increasingly higher attention to the social nd sen, 2004; cheng et al., 2014; , 2005). despite that, there is a lack of empirical studies 19, 2016 4 providing coherent evidence about the specific effects of scr practices on various measures of consumer behavior. moreover, according to numerous studies measuring consumer perceptions (e.g. csr europe, 2009; wpp, 2011), 87% of consumers expect companies to consider their effect on society while pursuing organisational goals and objectives, while 70% express the intention to purchase products from companies that have ethical values and demonstrate social responsibility. this seems to be an ongoing trend, since csr becomes an increasingly important part of the business environment around the globe (di giuli and kostovetsky, 2014). according to marin et al. (2009), the csr stream of empirical research is characterised by contradicting results. the same view is being supported by the literature review studies of schmitz and schrader (2015) and xu et al. (2014). more specifically, most empirical studies investigating consumer behavior are descriptive in nature, failing to recognise cause-andeffect relationships between research factors. additionally, the role of csr in economies under crisis has not been sufficiently investigated. the few recent studies investigating csr in economies under crisis (e.g. ducassy, 2013) are concerned with organisations, not citizens. the present study aims at developing and empirically testing an original conceptual framework (research model), exploring the impact of csr practices on various measures of consumer behavior (trust towards the organisation, company valuation, customer-company identification, recommendation intention, repeat patronage intention, customer loyalty, willingness to pay a premium price, perceived quality of services, company reputation). this framework was based on a critical synthesis of numerous previous empirical studies (e.g. bravo et al., 2009; choi and la, 2013; kalyar et al., 2013; lai et al., 2010; mandhachitara and poolthong, 2011; marin et al., 2009; martínez and del bosque, 2013; salmones et al., 2005; walsh and bartikowski, 2013). the examination of the proposed conceptual framework was made with the use of a newly-developed structured questionnaire that was distributed to a group of greek consumers. exploratory factor analysis (efa), confirmatory factor analysis (cfa), and the structural equation modelling (sem) technique were used in order to test the research hypotheses. the present study is empirical (it is based on primary data), explanatory (examines cause and effect relationships), deductive (tests research hypotheses) and quantitative (analyses quantitative data collected with the use of a structured questionnaire). its contribution lies in the following areas: � it adopts an explanatory methodological approach, investigating causal relationships between various research factors. on the other hand, the existing international literature is, mostly, descriptive in nature. � it is original, testing a conceptual framework that includes relationships that have never been collectively examined before by the relevant literature. nevertheless, its theoretical basis is coherent, since the proposed conceptual framework is a synthesis of previous empirical investigation. � it is conducted in an environment under economic crisis (greece). very few empirical studies have adopted the same approach. the recent studies of ducassy (2013), gangi and trotta (2013), herzig and moon (2013), and glavopoulos et al. (2013), also, examined economies under economic crisis, but their main focus was on organisations and not on consumers. hence, the present study enhances the international body of csr literature, offering information about the effect of csr practices on consumer behavior in an economy under crisis. � it uses primary data collected from consumers, and not from official financial statements. by doing so, it takes under consideration the “customers” of csr initiatives. after all, the success of csr practices in not determined by the amount of money spent, but on the real perceptions of consumers. moreover, using data from financial statements seems somewhat problematic, since their reliability is, usually, criticised. 2. the proposed conceptual framework the conceptual framework of relevant literature. more specifically, numerous previous studies investigating the effect of csr on consumer behavior were identified. the most important factors used in these studies were incorporated into the proposed conceptual framework (research model). the present study adopts a wider view than the one, usually, followed in the literature of the field, since previous studies have, mostly, focused on a limited number of factors capturing consumer behavior. on the other hand, the present study investigates the effect of csr practices on nine dimensions of consumer 2.1. trust towards the organisation according to godfrey (2005), csr is a basic parameter for building the ethical background of an organisation. the perception that a company is ethical and responsible develops trusting relationships that are not based on contracts, but on values and princi argue that trust is one of the most significant consequences of social initiatives undertaken by companies. thus, it is hypothesised: h1: csr practices have a positive effect on trust towards the organisation. 2.2. company valuation bhattacharya et al. (1998) argue that company valuation is being conducted upon the basis of the distinct characteristics of an organisation. csr practices can be perceived as an integrated part of the organisational profile, allowing consumers to increase their overall valu the company. on the same vein, berens corporate profile, thus affecting consumer perceptions. mohr and webb (2005) concluded that when consumers perceive a company as social responsible, their ov company is significantly strengthened. therefore, the following hypothesis is proposed: h2: csr practices have a positive effect on company valuation. 2.3. customer-company identification the attractiveness of corporate image h ingredients of customer-company identification (ahearne (1991), the similarity between the personality of the consumer and the perceived image of the organization is allowing consumers to consider themselves as an integrated part of the organizational entity. after all, people wish to belong in groups that have the same values as their own (tajfel and turner, 1985). consequently, consumers that are social responsible are more likely to identify themselves with companies that take part in csr initiatives. thus, it is hypothesised: h3: csr practices have a positive effect on customer 2.4. recommendation intention according to vlachos (2011) and wang (20 increases customer willingness to express their positive opinion about the implementing company in their immediate surrounding (friends, family, colleagues, etc). moreover, real perceptions of consumers. moreover, using data from financial statements seems somewhat problematic, since their reliability is, usually, criticised. 2. the proposed conceptual framework the conceptual framework of the present study was built after an extensive review of the relevant literature. more specifically, numerous previous studies investigating the effect of were identified. the most important factors used in these studies rporated into the proposed conceptual framework (research model). the present study adopts a wider view than the one, usually, followed in the literature of the field, since previous studies have, mostly, focused on a limited number of factors . on the other hand, the present study investigates the effect of csr practices on nine dimensions of consumer behavior. 2.1. trust towards the organisation according to godfrey (2005), csr is a basic parameter for building the ethical background of an organisation. the perception that a company is ethical and responsible develops trusting relationships that are not based on contracts, but on values and principles. pivato argue that trust is one of the most significant consequences of social initiatives undertaken by companies. thus, it is hypothesised: csr practices have a positive effect on trust towards the organisation. (1998) argue that company valuation is being conducted upon the basis of the distinct characteristics of an organisation. csr practices can be perceived as an integrated part of the organisational profile, allowing consumers to increase their overall valu the company. on the same vein, berens et al. (2005) support that csr builds a stronger corporate profile, thus affecting consumer perceptions. mohr and webb (2005) concluded that when consumers perceive a company as social responsible, their overall valuation about that company is significantly strengthened. therefore, the following hypothesis is proposed: csr practices have a positive effect on company valuation. company identification the attractiveness of corporate image has been considered as one of the most important company identification (ahearne et al., 2005). according to shamir (1991), the similarity between the personality of the consumer and the perceived image of the g consumers to consider themselves as an integrated part of the organizational entity. after all, people wish to belong in groups that have the same values as their own (tajfel and turner, 1985). consequently, consumers that are social responsible are likely to identify themselves with companies that take part in csr initiatives. thus, it is csr practices have a positive effect on customer-company identification. 2.4. recommendation intention according to vlachos (2011) and wang (2013), the implementation of csr practices increases customer willingness to express their positive opinion about the implementing company in their immediate surrounding (friends, family, colleagues, etc). moreover, 5 real perceptions of consumers. moreover, using data from financial statements seems the present study was built after an extensive review of the relevant literature. more specifically, numerous previous studies investigating the effect of were identified. the most important factors used in these studies rporated into the proposed conceptual framework (research model). the present study adopts a wider view than the one, usually, followed in the literature of the field, since previous studies have, mostly, focused on a limited number of factors . on the other hand, the present study investigates the effect of according to godfrey (2005), csr is a basic parameter for building the ethical background of an organisation. the perception that a company is ethical and responsible develops trusting ples. pivato et al. (2008) argue that trust is one of the most significant consequences of social initiatives undertaken by csr practices have a positive effect on trust towards the organisation. (1998) argue that company valuation is being conducted upon the basis of the distinct characteristics of an organisation. csr practices can be perceived as an integrated part of the organisational profile, allowing consumers to increase their overall valuation about (2005) support that csr builds a stronger corporate profile, thus affecting consumer perceptions. mohr and webb (2005) concluded that erall valuation about that company is significantly strengthened. therefore, the following hypothesis is proposed: as been considered as one of the most important , 2005). according to shamir (1991), the similarity between the personality of the consumer and the perceived image of the g consumers to consider themselves as an integrated part of the organizational entity. after all, people wish to belong in groups that have the same values as their own (tajfel and turner, 1985). consequently, consumers that are social responsible are likely to identify themselves with companies that take part in csr initiatives. thus, it is company identification. 13), the implementation of csr practices increases customer willingness to express their positive opinion about the implementing company in their immediate surrounding (friends, family, colleagues, etc). moreover, 6 bhattacharya and sen (2003) found that, even though consumers do not make their purchase decisions on the basis of corporate responsibility, they tend to recommend social responsible companies to their peers. therefore, it would be interesting to hypothesise: h4: csr practices have a positive effect on recommendation intention. 2.5. repeat patronage intention repeat patronage intention has very randomly been examined in the empirical literature of the field (bhattacharya and sen, 2003; folks and kamins, 1999). nevertheless, its empirical investigation has yielded contradictory results. mohr et al. (2001) found out a direct positive effect, salmones et al. (2005) concluded that the effect of csr on repeat patronage intention is mediated through service quality, while berens et al. (2005) identified corporate brand dominance as the only mediating factor. the present study posits that the relationship between csr practices and repeat patronage intention is direct: h5: csr practices have a positive effect on repeat patronage intention. 2.6. customer loyalty according to marketing experts (kotler and armstrong, 2008), customer loyalty is not only a significant marketing objective, but also contributes to building a coherent customer base and ensuring business survival. moreover, customer loyalty is considered as a cornerstone for building a sustainable competitive advantage (dick and basu, 1994). since the cost of gaining additional customers is quite significant (chiou and droge, 2006), retaining the existing customer base emerges as a major necessity. in that direction, it would be interesting to hypothesise whether csr practices have a direct effect of customer loyalty: h6: csr practices have a positive effect on customer loyalty. 2.7. willingness to pay a premium price willingness to pay a premium price is considered as another dimension of customer loyalty (pena et al., 2013; toufaily et al., 2013). the impact between csr practices and willingness to pay a premium price has not yet been investigated in the csr literature. despite that, such a relationship has found some theoretical support (visser and hollender, 2011; werther and chandler, 2011). castaldo et al. (2009), in an empirical study of an, almost, similar field, found that customer trust in stores selling fair trade products has an impact on their intention to pay a premium price. therefore, it would be reasonable to hypothesise that the more the csr initiatives undertaken by an organisation, the higher the intention of its customers to accept the payment of a premium price: h7: csr practices have a positive effect on willingness to pay a premium price. 2.8. perceived quality of services the international literature suggests that consumers are being influenced by the reputation of a company when evaluating the quality of its products and/or services (brown and dacin, 1997; souiden et al., 2006). additionally, in the field of csr, it has been found that social responsible initiatives have the ability to drive customer perceptions (bhattacharya and sen, 2003; folks and kamins, 1999; mcwilliams and siegel, 2001; mohr et al., 2001). moreover, it has been empirically supported that csr has an impact on various aspects of consumer behavior (berens et al., 2005, 2007). despite that, the influence of csr practices on perceived quality of services has not been sufficiently investigated. hence, i interesting to hypothesise: h8: csr practices have a positive effect on perceived quality of services. 2.9. company reputation company reputation is, often, consider 2000; fombrun, 1998). fombrun and shanley (1990), in their study about reputation and corporate strategy, argue that the social enhance company reputation. hooghiemstra (2000) supports that social reporting is a communication medium that aims at enhanced reputation. additionally, carroll company reputation are highly correlated. therefore, it is hypothesised: h9: csr practices have a positive effect on company reputation. 2.10. the impact of gender o’fallon and butterfield (2005), having reviewed more than 170 empirical studies of the ethical decision-making literature (1996 the perceptions about various ethical issues. nevertheless, in the empirical studies that revealed a statistically significant difference, women were found to be more ethical than men (o’fallon and butterfield, 2005). additionally, more ethical, sensitive towards social issues and tolerant than men (ameen borkowski and ugras, 1992; burton hoyt, 1996). even though there is extremel would be quite interesting to hypothesise: h10: women are more influenced, than men, by csr practices. 3. research methodology 3.1. population of the study the target population of the present study and 65. according to the most recent official data (hellenic statistical authority, 2014), there are 6.391.057 people between the ages of 21 and 65 currently residing in greece. the context of the greek econo under crisis, while csr is a well spread concept among its companies and consumers. 3.2. measurement a newly developed structured questionnaire was designed in order to collect the appropriate empirical data. the questionnaire was divided into two sections. the first section included demographic questions about the person answering the questionnaire ( the second section included questions (items) measuring the ten factor conceptual framework. the questionnaire is based on items that have been used by various previous studies of the field. the five point likert scale was used for the measurement of all ten research factors (from 1 = ‘strongly disagree’, to greek language and then back to english by another person, in order to detect and consequently improve possible discrepancies. perceived quality of services has not been sufficiently investigated. hence, i csr practices have a positive effect on perceived quality of services. company reputation is, often, considered a source of competitive advantage (deephouse, 2000; fombrun, 1998). fombrun and shanley (1990), in their study about reputation and corporate strategy, argue that the social image of an organisation can significantly hooghiemstra (2000) supports that social reporting is a communication medium that aims at enhanced reputation. additionally, carroll and buchholtz (2000) perceive that csr and company reputation are highly correlated. therefore, it is hypothesised: sr practices have a positive effect on company reputation. o’fallon and butterfield (2005), having reviewed more than 170 empirical studies of the making literature (1996-2003), concluded that gender does not differentiate the perceptions about various ethical issues. nevertheless, in the empirical studies that revealed a statistically significant difference, women were found to be more ethical than men (o’fallon and butterfield, 2005). additionally, other social studies argue that women are more ethical, sensitive towards social issues and tolerant than men (ameen borkowski and ugras, 1992; burton and hegarty, 1999; deshpande, 1997; okleshen and hoyt, 1996). even though there is extremely little research conducted in the field of csr, it would be quite interesting to hypothesise: women are more influenced, than men, by csr practices. 3. research methodology the target population of the present study included greek consumers between the ages of 21 and 65. according to the most recent official data (hellenic statistical authority, 2014), there are 6.391.057 people between the ages of 21 and 65 currently residing in greece. the context of the greek economy was selected because greece is a developed country under crisis, while csr is a well spread concept among its companies and consumers. a newly developed structured questionnaire was designed in order to collect the appropriate empirical data. the questionnaire was divided into two sections. the first section included demographic questions about the person answering the questionnaire (gender the second section included questions (items) measuring the ten factor the questionnaire is based on items that have been used by various previous studies of the field. the five point likert scale was used for the measurement of all ten research factors (from 1 = ‘strongly disagree’, to 5 = ‘strongly agree’). all items have been translated to the greek language and then back to english by another person, in order to detect and consequently improve possible discrepancies. 7 perceived quality of services has not been sufficiently investigated. hence, it would be csr practices have a positive effect on perceived quality of services. ed a source of competitive advantage (deephouse, 2000; fombrun, 1998). fombrun and shanley (1990), in their study about reputation building of an organisation can significantly hooghiemstra (2000) supports that social reporting is a communication medium that aims buchholtz (2000) perceive that csr and o’fallon and butterfield (2005), having reviewed more than 170 empirical studies of the does not differentiate the perceptions about various ethical issues. nevertheless, in the empirical studies that revealed a statistically significant difference, women were found to be more ethical than men other social studies argue that women are more ethical, sensitive towards social issues and tolerant than men (ameen et al., 1996; hegarty, 1999; deshpande, 1997; okleshen and y little research conducted in the field of csr, it included greek consumers between the ages of 21 and 65. according to the most recent official data (hellenic statistical authority, 2014), there are 6.391.057 people between the ages of 21 and 65 currently residing in greece. my was selected because greece is a developed country under crisis, while csr is a well spread concept among its companies and consumers. a newly developed structured questionnaire was designed in order to collect the appropriate empirical data. the questionnaire was divided into two sections. the first section included gender, age, etc.), while the second section included questions (items) measuring the ten factors of the proposed the questionnaire is based on items that have been used by various previous studies of the field. the five point likert scale was used for the measurement of all ten research factors 5 = ‘strongly agree’). all items have been translated to the greek language and then back to english by another person, in order to detect and 8 table 1 presents the ten factors of the study, the number of items used to measure each factor, and the sources for their measurement. 3.3. data collection primary data were collected from a random sample of internet users. the target population was consumers between the ages of 21 and 65. an online questionnaire was created and the participants of the survey completed the questionnaire online. more specifically, consumers were asked to answer all questions having in mind their main cell phone provider. table 1 – factor measurement factors number of items source trust towards the organisation 5 vlachos, 2011; martínez and del bosque, 2013; sparks et al., 2013 company valuation 4 marin et al., 2009 customer-company identification 4 mael and ashforth, 1992; marin et al., 2009; martínez and del bosque, 2013 recommendation intention 5 vlachos, 2011; wang, 2013 repeat patronage intention 4 bravo et al., 2009; mandhachitara and poolthong, 2011; vlachos, 2011 customer loyalty 5 arnold and reynolds, 2003; jin et al., 2013; marin et al., 2009; salmones et al., 2005; walsh and bartikowski, 2013 willingness to pay a premium price 4 castaldo et al., 2008; homburg et al., 2005 perceived quality of services 7 bayol, 2000; bravo et al., 2009; mandhachitara and poolthong, 2011; roy and eshghibc, 2013 company reputation 4 de leaniz and del bosque, 2013; hsu, 2011; lai et al., 2010 csr practices 15 choi and la, 2013; hsu 2011; mandhachitara and poolthong, 2011; sparks et al., 2013; salmones et al., 2005 the link containing the questionnaire of the survey was published in various sites and forums. the questionnaire was accessible to a significant number of internet users (it was published in quite few highly popular sites and forums), and, therefore, 926 questionnaires were finally returned. in order to verify that the final sample would be representative of the average greek consumer, 473 questionnaires were randomly selected by the members of the research team, so as all age groups of the original population were equally represented. the research period lasted one month (may 2014). table 2 provides some basic characteristics of the sample. the final sample (473 questionnaires) is considered to be quite representative of the population of the study (greek consumers between the ages of 21 and 65). more specifically, with a confidence level of 95% and a margin of error that equals 5%, the ideal sample for the given population (6.391.057 consumers) is 385 questionnaires (creswell, 2013; bryman and bell, 2015). moreover, according to kline (2011), an ideal sample “size-to-parameters ratio” for studies using the structural equation modeling (sem) technique is 20:1, meaning that every factor of the study should correspond to 20 questionnaires. the present study includes ten factors (10*20=200), therefore the sample “siz more that satisfactory. characteristics gender males females age between 21 between 31 between 41 between 50 education elementary school high school technical school bachelor master / phd 3.4. validity and reliability the validity and reliability of the questionnaire were thoroughly examined. the test for the content validity included: (a) consultation with academics, (b) consultation with practitioners, and (c) pilot testing. several questions were slightly modified before the final draft was developed, based on the remarks and instructions that emerge the above procedure. the construct validity test was conducted in two steps. each of the ten factors was evaluated (a) for its unidimensionality and reliability, (b) for the goodness of fit to the proposed research model. the examination of the unidimensionality of each of the research factors was conducted using explanatory factor analysis (efa) (using principal component analysis). moreover, the statistical measure ‘cronbach alpha’ was used for estimating the reliability of the same factors. moreover, the evaluation of the goodness of fit of the research factors (constructs) was conducted using confirmatory factor analysis (cfa). all tests concluded that the scales used for the measurement of the research factors are valid and reliable. the only modification that resulted from the explanatory factor analysis was the separation of ‘csr practices’, the only independent factor of the study, into three dimensions: (1) interest for the local community and the environment (5 items), (2) respect towards employees and customers (6 items), and (3) respect towards the law (5 items). nevertheless, the measurement of ‘csr practices’ with the use of one coherent structure was also possible, when examining the values provided by both efa and tables 3 and 4 present the main results of the construct validity test. 4. results and discussion the testing of the conceptual framework was made using the structural equation modeling (sem) technique. the estimation of the structural model was conducted likelhood estimation method. the covariance matrix was used as the table of entry and the ten factors (10*20=200), therefore the sample “size-to-parameters ratio” is considered to be table 2 – sample profile characteristics percentages gender males 47,6 females 52,4 between 21-30 years 25,6 between 31-40 years 27,9 between 41-50 years 25,8 between 50-65 years 20,7 education elementary school 7,5 high school 14,9 technical school 13,2 bachelor 43,8 master / phd 20,6 the validity and reliability of the questionnaire were thoroughly examined. for the content validity included: (a) consultation with academics, (b) consultation with practitioners, and (c) pilot testing. several questions were slightly modified before the final draft was developed, based on the remarks and instructions that emerge the construct validity test was conducted in two steps. each of the ten factors was evaluated (a) for its unidimensionality and reliability, (b) for the goodness of fit to the unidimensionality of each of the research factors was conducted using explanatory factor analysis (efa) (using principal component analysis). moreover, the statistical measure ‘cronbach alpha’ was used for estimating the reliability of the same reover, the evaluation of the goodness of fit of the research factors (constructs) was conducted using confirmatory factor analysis (cfa). all tests concluded that the scales used for the measurement of the research factors are modification that resulted from the explanatory factor analysis was the separation of ‘csr practices’, the only independent factor of the study, into three dimensions: (1) interest for the local community and the environment (5 items), (2) respect employees and customers (6 items), and (3) respect towards the law (5 items). nevertheless, the measurement of ‘csr practices’ with the use of one coherent structure was also possible, when examining the values provided by both efa and second ables 3 and 4 present the main results of the construct validity test. 4. results and discussion the testing of the conceptual framework was made using the structural equation modeling (sem) technique. the estimation of the structural model was conducted likelhood estimation method. the covariance matrix was used as the table of entry and the 9 parameters ratio” is considered to be the validity and reliability of the questionnaire were thoroughly examined. for the content validity included: (a) consultation with academics, (b) consultation with practitioners, and (c) pilot testing. several questions were slightly modified before the final draft was developed, based on the remarks and instructions that emerged from the construct validity test was conducted in two steps. each of the ten factors was evaluated (a) for its unidimensionality and reliability, (b) for the goodness of fit to the unidimensionality of each of the research factors was conducted using explanatory factor analysis (efa) (using principal component analysis). moreover, the statistical measure ‘cronbach alpha’ was used for estimating the reliability of the same reover, the evaluation of the goodness of fit of the research factors (constructs) all tests concluded that the scales used for the measurement of the research factors are modification that resulted from the explanatory factor analysis was the separation of ‘csr practices’, the only independent factor of the study, into three dimensions: (1) interest for the local community and the environment (5 items), (2) respect employees and customers (6 items), and (3) respect towards the law (5 items). nevertheless, the measurement of ‘csr practices’ with the use of one coherent structure was second-order cfa. the testing of the conceptual framework was made using the structural equation modeling with the maximum likelhood estimation method. the covariance matrix was used as the table of entry and the 10 extraction of the standardized completely solution was requested (barrett, 2007; bowen and guo, 2011; byrne, 2013; hair et al., 1995; kelloway, 1998). more specifically, the following measures have been examined (same measures were used in the cfa) (schumacker and lomax, 2010; smith and mcmillan, 2001): � χ2: it should be statistically insignificant (p>0,05). � normed χ2 (x2/df): values between 1 and 3 are desirable, while values between 1 and 5 are acceptable. � construct reliability (c.r.): it should higher than 0,7. � variance extracted (v.e.): it should higher than 50%. � rmsea: it should be less than 0,07. � cfi / gfi: they both should be higher than 0,9. table 3 – estimation of unidimensionality and reliability factors kaisermayerolkin bartlett’s test of sphericity eigenvalue % of variance cronbach alpha trust towards the organisation 0,824 717,032* 3,070 76,760% 0,898 company valuation 0,833 749,320* 3,109 77,729% 0,904 customer-company identification 0,779 531,173* 2,718 67,940% 0,832 recommendation intention 0,678 696,411* 2,503 83,427% 0,888 repeat patronage intention 0,771 852,481* 2,716 90,527% 0,947 customer loyalty 0,814 499,803* 2,792 69,791% 0,853 willingness to pay a premium price 0,713 502,290* 2,435 81,174% 0,883 perceived quality of services 0,854 925,635* 4,175 59,638% 0,885 company reputation 0,789 624,422* 2,816 70,405% 0,843 csr practices (one-factor solution) 0,719 746,123* 1,123 53,761% 0,709 csr practices: interest for the local community and the environment 0,726 545,143* 2,514 69,471% 0,854 csr practices: respect towards employees and customers 0,833 597,177* 3,458 72,471% 0,837 csr practices: respect towards the law 0,811 473,789* 2,471 62,458 0,855 * p<0,01. 4.1. first model initially, the original conceptual framework, with “csr practices” measured with one coherent construct (factor), was being analysed. the structural model fitted the data well, while all research hypotheses found empirical support. moreover, it seems that csr practices can explain a significant percentage of the variance of the nine dependent factors (see r2 indexes in figure 1). in order to evaluate the fit of the overall model the chi-square value (x2 = 167,11 with 83 degrees of freedom) and the p-value (p = 0,0541) were estimated. these values indicate a good fit of the data to the overall model. moreover, other measures of evaluating the overall and the measurement model were used ( produced satisfactory results. table 4 – estimation of the goodness of fit factors trust towards the organisation company valuation customer-company identification recommendation intention repeat patronage intention customer loyalty willingness to pay a premium price perceived quality of services company reputation csr practices: interest for the local community and the environment csr practices: respect towards employees and customers csr practices: respect towards the law csr practices (second-order cfa) * p<0,01. figure 1 demonstrates the overall structural model, along with the extracted path coefficients and the adjusted r hypotheses of the study. the main findings are summarised below: � the empirical verification of all research hypotheses underlines the significant impact of csr practices on various measures of consumer (path) coefficients between the independent and the dependent factors are considere be more that satisfactory, in most of the cases. � csr practices have the highest impact on ‘trust towards the organisation’ (r=0,75), ‘company valuation’ (r=0,71), and ‘perceived quality of services’ (r=0,70). � the lowest impact concerns the factors ‘cu ‘willingness to pay a premium price’ (r=0,47). despite that, these effects are statistically significant, and their values are higher than those extracted in other similar empirical studies (e.g. green and peloz � it seems that greek consumers, especially in an external environment of economic crisis, really appreciate the implementation of csr practices. therefore, they tend to adopt a positive attitude towards implementing organisations. their areas in significantly strengthened. consequently, it appears that csr practices constitute an important tool for enhancing and the measurement model were used (normed-x2, rmsea, cfi, gfi). all these measures estimation of the goodness of fit normed χ 2 c.r. v.e. rmsea 2,57 0,76 64,7% 0,041 2,19 0,79 75,2% 0,032 3,07 0,83 76,0% 0,035 3,31 0,84 73,2% 0,048 2,93 0,75 63,4% 0,052 3,13 0,85 58,6% 0,056 willingness to pay a premium price 2,84 0,72 72,8% 0,045 2,45 0,79 79,7% 0,036 2,12 0,81 77,4% 0,055 csr practices: interest for the local 3,74 0,91 67,3% 0,058 2,94 0,88 61,6% 0,061 csr practices: respect towards the law 2,11 0,78 64,8% 0,038 order cfa) 2,19 0,85 79,3% 0,057 figure 1 demonstrates the overall structural model, along with the extracted path coefficients and the adjusted r2 scores. table 5 shows the overall findings concerning the hypotheses of the study. the main findings are summarised below: the empirical verification of all research hypotheses underlines the significant impact of csr practices on various measures of consumer behavior. moreover, the correlation coefficients between the independent and the dependent factors are considere be more that satisfactory, in most of the cases. csr practices have the highest impact on ‘trust towards the organisation’ (r=0,75), ‘company valuation’ (r=0,71), and ‘perceived quality of services’ (r=0,70). the lowest impact concerns the factors ‘customer-company identification’ (r=0,37), and ‘willingness to pay a premium price’ (r=0,47). despite that, these effects are statistically significant, and their values are higher than those extracted in other similar empirical studies (e.g. green and peloza, 2011; kalyar et al., 2013; kotler and armstrong, 2008). it seems that greek consumers, especially in an external environment of economic crisis, really appreciate the implementation of csr practices. therefore, they tend to adopt a ards implementing organisations. their behavior areas in significantly strengthened. consequently, it appears that csr practices constitute enhancing the bonds between organisations and consumers. 11 , rmsea, cfi, gfi). all these measures rmsea cfi gfi 0,041 0,99 0,97 0,032 0,97 0,97 0,035 0,93 0,94 0,048 0,97 0,93 0,052 0,99 0,97 0,056 0,90 0,93 0,045 0,96 0,93 0,036 0,95 0,93 0,055 0,93 0,97 0,058 0,90 0,99 0,061 0,89 0,95 0,038 0,97 0,94 0,057 0,97 0,99 figure 1 demonstrates the overall structural model, along with the extracted path scores. table 5 shows the overall findings concerning the the empirical verification of all research hypotheses underlines the significant impact of . moreover, the correlation coefficients between the independent and the dependent factors are considered to csr practices have the highest impact on ‘trust towards the organisation’ (r=0,75), ‘company valuation’ (r=0,71), and ‘perceived quality of services’ (r=0,70). company identification’ (r=0,37), and ‘willingness to pay a premium price’ (r=0,47). despite that, these effects are statistically significant, and their values are higher than those extracted in other similar empirical , 2013; kotler and armstrong, 2008). it seems that greek consumers, especially in an external environment of economic crisis, really appreciate the implementation of csr practices. therefore, they tend to adopt a behavior in numerous vital areas in significantly strengthened. consequently, it appears that csr practices constitute the bonds between organisations and consumers. 12 figure 1 – main empirical results (first model) table 5 – results of hypotheses testing (first model) hypothesis path path coefficient remarks h1 csr practices → trust towards the organisation 0,75* accepted h2 csr practices → company valuation 0,71* accepted h3 csr practices → customer-company identification 0,37* accepted h4 csr practices → recommendation intention 0,57* accepted h5 csr practices → repeat patronage intention 0,56* accepted h6 csr practices → customer loyalty 0,62* accepted h7 csr practices → willingness to pay a premium price 0,47* accepted h8 csr practices → perceived quality of services 0,70* accepted h9 csr practices → company reputation 0,57* accepted * p<0,01. recommendation intention repeat patronage intention customer loyalty willingness to pay a premium price trust towards the organisation company valuation customer-company identification perceived quality of services company reputation csr practices 0,62 0,75 0,71 0,37 0,57 0,56 0,47 0,70 0,57 r2 = 56% r2 = 51% r2 = 14% r2 = 32% r2 = 31% r2 = 39% r2 = 22% r2 = 49% r2 = 33% 4.2. second model in the second model, it is investigated whether the role in the relationship between “csr practices” and consumer examination of the conceptual framework was conducted twice, once for men and once for women. as with the first analysis, the structural model fitted the data well, while all appropriate measures (x2, p-value, normed table 6 attempts a comparison between the results obtained from men and the ones obtained from women. it includes the path coefficients (r) and the adjusted r genders. the main findings are summarised below: � the impact of csr practices on the nine factors measuring consumer in the case of the greek male consumers. more s that every aspect of the behavior of csr practices. for example, the mean score of the effects of csr on consumer behavior is r=0,69 for men and r=0,50 for by the empirical data. � that specific finding is quite unexpected, since the previous literature (e.g. butterfield, 2005) has suggested that women are more ethical (socially responsible) than men. explaining that phenomenon is not an easy task, since the literature does not include relevant references. � a possible explanation may lie in the different level of pragmatism that is attributed in both genders. according to a simplistic definition (murray, 20 reasonable and logical way of thinking, that is based on dealing with specific situations and not on ideas or theories. men, being more pragmatists by their nature, may know that csr practices do not have pure motives, but ten (especially on a society under crisis). on the other hand, women, being less pragmatistic, pay more attention to the motives behind the implementation of csr practices, and are, thus, more sceptical against such in behavior of women consumers is less affected by various scr practices. � nevertheless, it seems that the effect of csr practices on the factors measuring consumer behavior is statistical significant, no m table 6 – results of hypotheses testing (second model)* h path h1 csr practices → trust towards the organisation h2 csr practices → company h3 csr practices → customerh4 csr practices → recommendation intention h5 csr practices → repeat patronage intention h6 csr practices → customer h7 csr practices → willingness to pay a premium price h8 csr practices → perceived quality of services h9 csr practices → company reputation mean score * all relationships are statistically significant at the p<0,01 level. in the second model, it is investigated whether the gender of the respondents plays a significant role in the relationship between “csr practices” and consumer behavior. in that direction, the examination of the conceptual framework was conducted twice, once for men and once for lysis, the structural model fitted the data well, while all appropriate value, normed-x2, rmsea, cfi, gfi) produced satisfactory results. table 6 attempts a comparison between the results obtained from men and the ones it includes the path coefficients (r) and the adjusted r . the main findings are summarised below: the impact of csr practices on the nine factors measuring consumer in the case of the greek male consumers. more specifically, the empirical results indicate behavior of male consumers is affected more from the implication of csr practices. for example, the mean score of the effects of csr on consumer is r=0,69 for men and r=0,50 for women. therefore, hypothesis 10 is rejected that specific finding is quite unexpected, since the previous literature (e.g. ) has suggested that women are more ethical (socially responsible) than laining that phenomenon is not an easy task, since the literature does not include a possible explanation may lie in the different level of pragmatism that is attributed in both genders. according to a simplistic definition (murray, 2014), pragmatism constitutes reasonable and logical way of thinking, that is based on dealing with specific situations and not on ideas or theories. men, being more pragmatists by their nature, may know that csr practices do not have pure motives, but tend to respect their real effect on society (especially on a society under crisis). on the other hand, women, being less pragmatistic, pay more attention to the motives behind the implementation of csr practices, and are, thus, more sceptical against such initiatives from business organisations. therefore, the of women consumers is less affected by various scr practices. nevertheless, it seems that the effect of csr practices on the factors measuring consumer is statistical significant, no matter what the gender of the respondents results of hypotheses testing (second model)* male female path path coefficient trust towards the organisation 0,80 0,68 company valuation 0,84 0,65 -company identification 0,52 0,34 recommendation intention 0,72 0,48 repeat patronage intention 0,68 0,47 customer loyalty 0,72 0,58 willingness to pay a premium price 0,55 0,36 perceived quality of services 0,74 0,56 company reputation 0,60 0,44 0,69 0,50 * all relationships are statistically significant at the p<0,01 level. 13 gender of the respondents plays a significant . in that direction, the examination of the conceptual framework was conducted twice, once for men and once for lysis, the structural model fitted the data well, while all appropriate , rmsea, cfi, gfi) produced satisfactory results. table 6 attempts a comparison between the results obtained from men and the ones it includes the path coefficients (r) and the adjusted r2 scores for both the impact of csr practices on the nine factors measuring consumer behavior is higher pecifically, the empirical results indicate of male consumers is affected more from the implication of csr practices. for example, the mean score of the effects of csr on consumer women. therefore, hypothesis 10 is rejected that specific finding is quite unexpected, since the previous literature (e.g. o’fallon and ) has suggested that women are more ethical (socially responsible) than laining that phenomenon is not an easy task, since the literature does not include a possible explanation may lie in the different level of pragmatism that is attributed in 14), pragmatism constitutes a reasonable and logical way of thinking, that is based on dealing with specific situations and not on ideas or theories. men, being more pragmatists by their nature, may know that d to respect their real effect on society (especially on a society under crisis). on the other hand, women, being less pragmatistic, pay more attention to the motives behind the implementation of csr practices, and are, itiatives from business organisations. therefore, the of women consumers is less affected by various scr practices. nevertheless, it seems that the effect of csr practices on the factors measuring consumer of the respondents is. male female r2 65% 46% 70% 42% 27% 12% 52% 23% 46% 22% 51% 34% 31% 13% 54% 31% 36% 19% 48% 27% 14 4.3. third model in the third model, the three-factor solution for the measurement of “csr practices” was taken under consideration. the analysis of the results was significantly enhanced, as a result of that consideration. once again, the structural model fitted the data well, while all appropriate measures (x2, p-value, normed-x2, rmsea, cfi, gfi) produced satisfactory results. table 7 presents the causal relationships between the three sub-dimension of csr (interest for the local community and the environment, respect towards employees and customers, respect towards the law) and the nine factors capturing various aspects of consumer behavior. more specifically, the path coefficients (r) and the adjusted r2 scores are included in the table. finally, the mean score of the effects between each sub-dimension of csr and the nine factors of consumer behavior is being calculated. table 7 – results of hypotheses testing (third model)* independent factors interest for the local community and the environment respect towards employees and customers respect towards the law dependent factors path coefficient r2 path coefficient r2 path coefficient r2 trust towards the organisation 0,45 20% 0,79 63% 0,61 37% company valuation 0,47 22% 0,74 55% 0,58 33% customer-company identification 0,30 9% 0,34 11% 0,29 8% recommendation intention 0,42 18% 0,53 28% 0,47 22% repeat patronage intention 0,36 13% 0,58 34% 0,41 17% customer loyalty 0,46 21% 0,62 38% 0,46 21% willingness to pay a premium price 0,43 18% 0,41 17% 0,29 8% perceived quality of services 0,48 23% 0,72 51% 0,58 33% company reputation 0,42 18% 0,55 30% 0,44 19% mean score 0,42 18% 0,59 36% 0,46 22% * all relationships are statistically significant at the p<0,01 level. the main findings are summarised below: � the effect of every csr dimension on the measures capturing consumer behavior is statistically significant. that finding was quite expected, in the light of the support that was established for all research hypotheses (see section 4.1). � empirical results indicate that ‘respect towards employees and customers’ has the highest effect on consumer behavior (mean effect score, r=0,59), ‘respect towards the law’ comes second (mean effect score, r=0,46) while, finally, ‘interest for the local community and the environment’ comes in the third place (mean effect score, r=0,42). � it seems that, nowadays, consumers tend to consider that corporate responsible initiatives towards employees and customers are the most important ingredients of a responsible behavior. after all, these two groups are amongst the most important stakeholders of an organisation. that finding may be attributed to the crisis of the greek economy. on the one hand, employees live in constant fear of losing their jobs, while, on the customers experience a significant company takes social responsible actions towards employees and customers, the public opinion tends to shift in its favour. summing up, it can be concluded that, in under crisis, people should be in the centre of csr practices. � moreover, keeping the law (e.g. paying taxes, avoid building unethical relationships with official bodies) seems quite important for consumers. � according to all the above, it seems since charities and actions for the improvement of the environment, while still significant, are not among the first priorities for greek consumers. 5. conclusions the present empirical study developed used in the international csr highlighting the impact of csr practices on various aspects of consumer contribution lies on its implemented conceptualisation (proposal of a novel research model), focus (consumer context (economy under crisis). the main results of the study are summarised below: � csr has the most significant impact on the following factors: customer trust towards the organization (r=0,75), company valuation (r=0,71), perceived quality of services (r=0,70) and customer loyalty (r=0,62). strategies as a measure of improving the perceptions of their customers. for example, companies operating in industries in which trust is a major factor influencing consumer behavior, should really place csr in the centre of their attention. � in contrary with previous studies was found that men are more sensitive to csr practices than women. initiatives especially aiming at male consumers should be among the strategic choices of business organisations. � when taking under consideration the separation of csr in three sub for the local community and the environment, respect towards employees and customers, respect towards the law), the empirical analysis revealed that th (‘respect towards employees and customers’) has a higher impact on consumer that the other two. ‘respect towards the law’ comes second, while ‘interest for the local community and the environment’ has the least strong impact on these empirical results shift the ‘classical’ model of csr, since consumers seem to place more importance on social actions towards employees and customers and not on charities and actions for the improvement of the environment. quite important in the mind of consumers. all these observations contribute to the understanding of the impact of csr under crisis. in a country under crisis, consumers prefer companies to be responsible to their employees (respect of work rights, offer of fair wages and a safe work environment) and their customers (ethical conduct, offer of quality services in a law price). additionally, consumers expect companies to respect the existing laws, regularly pay their taxes and intertwining interests with the government. these results urge companies, operating in economies under crisis, to redesign their csr strategy, focusing on employees, customers and respect towards the law. one hand, employees live in constant fear of losing their jobs, while, on the significant decrease in their family income. therefore, when a company takes social responsible actions towards employees and customers, the public opinion tends to shift in its favour. summing up, it can be concluded that, in under crisis, people should be in the centre of csr practices. moreover, keeping the law (e.g. paying taxes, avoid building unethical relationships with official bodies) seems quite important for consumers. according to all the above, it seems that there is a shift in the classical model of csr, since charities and actions for the improvement of the environment, while still significant, are not among the first priorities for greek consumers. study developed an original conceptual framework that has never been csr literature. future studies can adopt the same approach, further highlighting the impact of csr practices on various aspects of consumer implemented methodology (synthesis of various previous studies), conceptualisation (proposal of a novel research model), focus (consumer context (economy under crisis). the main results of the study are summarised below: most significant impact on the following factors: customer trust towards the organization (r=0,75), company valuation (r=0,71), perceived quality of services (r=0,70) and customer loyalty (r=0,62). companies facing problems in these areas can utilise csr trategies as a measure of improving the perceptions of their customers. for example, companies operating in industries in which trust is a major factor influencing consumer , should really place csr in the centre of their attention. h previous studies of similar fields (ethical decision-making literature was found that men are more sensitive to csr practices than women. initiatives especially aiming at male consumers should be among the strategic choices of when taking under consideration the separation of csr in three sub-dimensions (interest for the local community and the environment, respect towards employees and customers, respect towards the law), the empirical analysis revealed that the second dimension (‘respect towards employees and customers’) has a higher impact on consumer that the other two. ‘respect towards the law’ comes second, while ‘interest for the local community and the environment’ has the least strong impact on consumer these empirical results shift the ‘classical’ model of csr, since consumers seem to place more importance on social actions towards employees and customers and not on charities and actions for the improvement of the environment. moreover, keeping the law seems quite important in the mind of consumers. all these observations contribute to the understanding of the impact of csr under crisis. in a country under crisis, consumers prefer companies to be responsible to their employees (respect of work rights, offer of fair wages and a safe work environment) and their customers (ethical conduct, offer of quality services in a law price). additionally, consumers expect companies to respect the existing laws, regularly pay their taxes and intertwining interests with the government. these results urge companies, operating in economies under crisis, to redesign their csr strategy, focusing on employees, customers and 15 one hand, employees live in constant fear of losing their jobs, while, on the other, decrease in their family income. therefore, when a company takes social responsible actions towards employees and customers, the public opinion tends to shift in its favour. summing up, it can be concluded that, in an economy moreover, keeping the law (e.g. paying taxes, avoid building unethical relationships that there is a shift in the classical model of csr, since charities and actions for the improvement of the environment, while still significant, an original conceptual framework that has never been literature. future studies can adopt the same approach, further highlighting the impact of csr practices on various aspects of consumer behavior. its main methodology (synthesis of various previous studies), conceptualisation (proposal of a novel research model), focus (consumer behavior), and most significant impact on the following factors: customer trust towards the organization (r=0,75), company valuation (r=0,71), perceived quality of services (r=0,70) companies facing problems in these areas can utilise csr trategies as a measure of improving the perceptions of their customers. for example, companies operating in industries in which trust is a major factor influencing consumer making literature), it was found that men are more sensitive to csr practices than women. therefore, csr initiatives especially aiming at male consumers should be among the strategic choices of dimensions (interest for the local community and the environment, respect towards employees and customers, e second dimension (‘respect towards employees and customers’) has a higher impact on consumer behavior that the other two. ‘respect towards the law’ comes second, while ‘interest for the local consumer behavior. these empirical results shift the ‘classical’ model of csr, since consumers seem to place more importance on social actions towards employees and customers and not on charities moreover, keeping the law seems all these observations contribute to the understanding of the impact of csr under crisis. in a country under crisis, consumers prefer companies to be responsible to their employees (respect of work rights, offer of fair wages and a safe work environment) and their customers (ethical conduct, offer of quality services in a law price). additionally, consumers expect companies to respect the existing laws, regularly pay their taxes and avoid developing intertwining interests with the government. these results urge companies, operating in economies under crisis, to redesign their csr strategy, focusing on employees, customers and 16 references 1. ahearne, m., bhattacharya, c. b., & and gruen, t. w. 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(2014). research review and prospect of corporate social nth international conference 0 _15-01_ francioni editorial editorial of the 2015 issue of the international journal of since 1970s several authors (benton, 1976 interdisciplinary approach. according to brewer (1999) the appropriate combination of knowledge from many different specialities means to shed new light on an actual probl nissani (1997)4 identified ten advantages of adopting interdisciplinarity knowledge and research, and one of the most important is that several intellectual, social, and practical problems need interdisciplinary approaches. finally, during the last decade, the vast majority of call for papers, textbooks and research initiatives required or offered and interdisciplinary approach (knights and willmott, 1997) the international journal of economic behavior is multidisciplinary collected in this issue contribute in enhancing the adoption of interdisciplinarity, especially providing stimuli for future research of economic behavior and management perspectives. the first paper by amron mahmud explores the ro developing economy (i.e. indonesia), and particularly if smes’ learning orientation, marketing orientation and innovation have an impact on corporate performance. using a sample of 110 smes and adopting a structure equation relationship between learning orientation the second paper authored by simplice a. asongu presents theoretical justifications and empirical validity as to why, the conception and definition of the financial system by the informal financial sector from a macroeconomic perspective is anachronistic and antagonistic. in order to achieve this objective, the author presents recent findings on the weight of the results reveal that the informal financial sector can only be marginalized at the cost of misunderstanding current burgeoning trends in mobile phone penetration, knowledge economy and poverty. the main objective of the third paper by widuri investigate whether there is a relationship between corporate social responsibility, profitability and firm value. by using regression analysis, profitability and firm value. results also reveal that corporate social responsibility has no effect on firm value. 1 benton, d.a. (1976), ``management and effectiveness measures for interdisciplinary research'', spring, pp. 37-45. 2 dymsza, w. a. (1984), ``future international business research and multidiscplinary studies'', international business studies, spring/summer, pp. 9 3 brewer, g. d. (1999), "the challenges of interdisciplinarity and reality of in science, 32, pp. 327-337. 4 nissani, m. (1997), “ten cheers for interdisciplinarity: the case for interdisciplinary knowledge and research”, the social science journal 5 knights, d.,willmott, h. (1997), “the journal of management, 8, 9–22 the importance of interdisciplinarity editorial of the 2015 issue of the international journal of economic behavior since 1970s several authors (benton, 19761; dymsza, 19842) stressed the need for adopting an interdisciplinary approach. according to brewer (1999)3 “interdisciplinarity generally refers to the appropriate combination of knowledge from many different specialities means to shed new light on an actual problem”. identified ten advantages of adopting interdisciplinarity knowledge and research, and one of the most important is that several intellectual, social, and practical problems need interdisciplinary finally, during the last decade, the vast majority of call for papers, textbooks and research initiatives required or offered and interdisciplinary approach (knights and willmott, 1997) the international journal of economic behavior is multidisciplinary in nature and the papers collected in this issue contribute in enhancing the adoption of interdisciplinarity, especially providing stimuli for future research of economic behavior and management perspectives. the first paper by amron mahmud explores the role of corporate performance in a developing economy (i.e. indonesia), and particularly if smes’ learning orientation, marketing orientation and innovation have an impact on corporate performance. using a sample of 110 tructure equation model, the author demonstrate that learning orientation, market orientation and corporate performance the second paper authored by simplice a. asongu presents theoretical justifications and to why, the conception and definition of the financial system by the informal financial sector from a macroeconomic perspective is anachronistic and antagonistic. in order to achieve this objective, the author presents recent findings on the weight of the results reveal that the informal financial sector can only be marginalized at the cost of misunderstanding current burgeoning trends in mobile phone penetration, knowledge economy the main objective of the third paper by widuri kurniasari and yusni warastuti is to investigate whether there is a relationship between corporate social responsibility, profitability and firm value. by using regression analysis, the authors find a positive relationship between lue. results also reveal that corporate social responsibility has no effect benton, d.a. (1976), ``management and effectiveness measures for interdisciplinary research'', dymsza, w. a. (1984), ``future international business research and multidiscplinary studies'', , spring/summer, pp. 9-13. brewer, g. d. (1999), "the challenges of interdisciplinarity and reality of interdisciplinary research", nissani, m. (1997), “ten cheers for interdisciplinarity: the case for interdisciplinary knowledge and the social science journal, 34, 201-216. knights, d.,willmott, h. (1997), “the hype and hope of interdisciplinary management studies”. 1 the importance of interdisciplinarity editorial of the 2015 issue of the international journal of economic behavior the need for adopting an interdisciplinarity generally refers to the appropriate combination of knowledge from many different specialities especially as a identified ten advantages of adopting interdisciplinarity knowledge and research, and one of the most important is that several intellectual, social, and practical problems need interdisciplinary finally, during the last decade, the vast majority of call for papers, textbooks and research initiatives required or offered and interdisciplinary approach (knights and willmott, 1997)5. in nature and the papers collected in this issue contribute in enhancing the adoption of interdisciplinarity, especially providing stimuli for future research of economic behavior and management perspectives. le of corporate performance in a developing economy (i.e. indonesia), and particularly if smes’ learning orientation, marketing orientation and innovation have an impact on corporate performance. using a sample of 110 model, the author demonstrate that there is a positive and corporate performance. the second paper authored by simplice a. asongu presents theoretical justifications and to why, the conception and definition of the financial system by the informal financial sector from a macroeconomic perspective is anachronistic and antagonistic. in order to achieve this objective, the author presents recent findings on the weight of the sector. results reveal that the informal financial sector can only be marginalized at the cost of misunderstanding current burgeoning trends in mobile phone penetration, knowledge economy kurniasari and yusni warastuti is to investigate whether there is a relationship between corporate social responsibility, profitability the authors find a positive relationship between lue. results also reveal that corporate social responsibility has no effect benton, d.a. (1976), ``management and effectiveness measures for interdisciplinary research'', sra journal, dymsza, w. a. (1984), ``future international business research and multidiscplinary studies'', journal of terdisciplinary research", policy nissani, m. (1997), “ten cheers for interdisciplinarity: the case for interdisciplinary knowledge and hype and hope of interdisciplinary management studies”. british 2 the fourth paper written by lukman raimi, adeniyi olubunmi fadipe and morufu oladimeji shokunbi examines the possibility to make a case for responsible investment as an alternative funding mechanism for roads-bridges management in nigeria, through the adoption of a public-private partnership framework. adopting discursive approach, the paper provides an important implication for responsible investors in nigeria and emphasizes that the success of any tolls collection systems mainly depend on effectiveness of governance, probity and accountability. the fifth paper, written by wei-bin zhang, is focused on consumers’ wealth accumulation and consumption behavior. in detail, the author build a dynamic economic model of heterogeneous households in order to explain some economic mechanisms of how the richest one per cent of the population own 50% of national wealth. main results highlight that the main determinants of growth and inequality are endogenous wealth and human capital accumulation under perfectly competitive conditions. another quantitative research is undertaken by sulaimon olanrewaju adebiyi, emmanuel olateju oyatoye and bilqis bolanle amole. this sixth paper is focused on the application of a particular process, the analytic hierarchy process, for creating seven criteria for customers` churning of network and investigating the relative priorities of the criteria. using a sample of 408 mobile phone subscribers in lagos state, results reveal the utility of the model for marketing decisions. the eighth paper by john r. wingender, vasant raval and samantha j. schuett is based on an event study exploring the implementation of the balanced scorecard. the authors indicate and suggest how to implement balanced scorecard for aligning the business strategy with the short-term operations. the final paper by arthur tarasov is an experiment for testing whether people may consider equal outcomes unfair and willing to penalize the others for distributing money equally with them. results highlight that people’s fairness conceptions diverge and decisions to distribute money equally are considered fair about as often as decisions to maximize outcome. the managing editor wants to thank the editor-in-chief of international journal of economic behavior, fabio musso, all the reviewers and all the authors who submitted papers to this issue. i wish to give my thanks to the members of our editorial board, who contribute immensely to bringing this 2015 issue to this stage. barbara francioni managing editor 9 _15-22_ tarasov2 international journal of n. 1, pp. 3 received: july 19, 2015 this paper attempts to answer the question whether people consider equal outcomes fair. i find that this is not always the case. in an experiment where subjects are given equal opportunities to choose how to divide money between each other in a two player game, any strategy is perceived to be fair maximizing strategy. the equal divisions that lead to equal outcomes are sometimes considered unfair by both players. moreover, players frequently punished the others, whose decisions led to equal outcomes. i h have different conceptions of what a fair outcome and fair punishment are. keywords: fairness, equal outcomes, effort. 1. introduction this paper looks into people’s conceptions of fairness with regard to economic decision making. concern for fairness is important because it stimulates people to deviate from self interest and profit maximization if it leads to unfairness and punish others at the cos themselves (rabin, 1993; fehr and schmidt, 1999; 2000; falk and fischbacher, 2006). assumption that equal outcomes are fair or, at least, the less is the outcomes, the fairer they are. it is also assumed in many experiments that equal or the most equal outcome available is fair al, 2011; sheskin et al, 2014). the problems with equal outcomes not always being fair have been addressed as early as nash (1950). people may value things that they are dividing differently, have different beliefs about preferences of other people (yaari and bar and ideas of fairness (charness and rabin, 2002), or perceive intentions of others diff (falk et al, 2008). in their paper criticizing mainstream theories of fairness levine (2012) argue that what is fair for one person may not rewards are not certain. there are some empirical baumard et al (2012) build an experiment with young children where participants have to international journal of economic behavior, vol 5, n. 1, pp. 133 international journal of n. 1, pp. 3-14, 201 is equality arthur tarasov maria curie-sklodowska university, poland accepted: nov 2, 2015 online published: abstract this paper attempts to answer the question whether people consider decisions that lead to equal outcomes fair. i find that this is not always the case. in an experiment where subjects are given equal opportunities to choose how to divide money between each other in a two player game, any strategy is perceived to be fair more than half the time, including the profit maximizing strategy. the equal divisions that lead to equal outcomes are sometimes considered unfair by both players. moreover, players frequently punished the others, whose decisions led to equal outcomes. i hypothesize that such punishments occur because people have different conceptions of what a fair outcome and fair punishment are. outcomes, reciprocal punishment, fair division, looks into people’s conceptions of fairness with regard to economic decision making. concern for fairness is important because it stimulates people to deviate from self interest and profit maximization if it leads to unfairness and punish others at the cos fehr and schmidt, 1999; bolton and ockenfels, 2000; nowak et al, 2000; falk and fischbacher, 2006). most theories, including the ones cited above rely on an assumption that equal outcomes are fair or, at least, the less is the difference between outcomes, the fairer they are. it is also assumed in many experiments that equal or the most equal outcome available is fair (thaler, 1988; güth et al, 2001; henrich et al, 2010 . ith equal outcomes not always being fair have been addressed as early as nash (1950). people may value things that they are dividing differently, have different beliefs about preferences of other people (yaari and bar-hillel, 1984), have different social v and ideas of fairness (charness and rabin, 2002), or perceive intentions of others diff in their paper criticizing mainstream theories of fairness that what is fair for one person may not be fair for the other person if the some empirical studies where equality is not a direct measure an experiment with young children where participants have to ournal of economic behavior, vol 5, n. 1, pp. 133 133 quality fair? arthur tarasov sklodowska university, poland online published: nov 30, 2015 decisions that lead to equal outcomes fair. i find that this is not always the case. in an experiment where subjects are given equal opportunities to choose how to divide money between each other in a twomore than half the time, including the profitmaximizing strategy. the equal divisions that lead to equal outcomes are sometimes considered unfair by both players. moreover, players frequently punished the others, whose ypothesize that such punishments occur because people have different conceptions of what a fair outcome and fair punishment are. division, social values, looks into people’s conceptions of fairness with regard to economic decision making. concern for fairness is important because it stimulates people to deviate from selfinterest and profit maximization if it leads to unfairness and punish others at the cost to bolton and ockenfels, 2000; nowak et al, most theories, including the ones cited above rely on an difference between outcomes, the fairer they are. it is also assumed in many experiments that equal or the most (thaler, 1988; güth et al, 2001; henrich et al, 2010; lobue et ith equal outcomes not always being fair have been addressed as early as nash (1950). people may value things that they are dividing differently, have different beliefs hillel, 1984), have different social values and ideas of fairness (charness and rabin, 2002), or perceive intentions of others differently in their paper criticizing mainstream theories of fairness, fudenberg and be fair for the other person if the measure of fairness. an experiment with young children where participants have to ournal of economic behavior, vol 5, n. 1, pp. 133-148, 2015 134 make an effort before distributing rewards. dividing the rewards according to the participants’ contribution is considered fair. in another experiment with young children, castelli et al (2014) show that some participants consider advantageously inequitable offers fair. in their experiment on fairness and cheating involving the dictator game, houser et al (2012) measure fairness objectively and subjectively. the subjective measure of fairness is a survey where participants are asked how fair in their opinion the division of money was. the objective measure is based on empirical results of the ultimatum game previously played in other experiments (camerer, 2003). remarkably, many responders consider divisions below even split to be fair. i.e. some participants think it is fair for the other person to take most of the money. interesting debate about fairness takes place in the field of information technology where multiple resources can be allocated according to various criteria, many of which are fair from different perspectives (ghodsi et al, 2011). luckily, computer systems have no emotions (yet) and the fair outcome is simply the most efficient one. in another experimental study durante et al (2014) show that fair or preferred level of redistribution of wealth within a society depends on task performance. the authors find that inequality in income stemming from differences in knowledge or skill is often considered fair. roemer (1998) and devooght (2008) argue that inequality originating from factors like education or effort is fair, while inequality that stems from circumstantial factors like race, gender, or chance is unfair. yet, it is easy to imagine how in some social groups people would consider a certain race to be privileged and racial equality to be unfair and even unthinkable. using roemer’s (1998) and devooght’s (2008) ideas, figueiredo and netto (2014) in their macroeconomic study find that increased equality in brazilian society does not translate into increased fairness within the society. i conduct an experiment to specifically test whether people may consider equal outcomes unfair and willing to punish the others for dividing money equally with them. i designed a game where two players get to divide one money pool each and then have a chance to punish the other player by reducing the other player’s outcome at the cost of own outcome. the game contains loaded language and attempts to test how various settings affect fairness preferences of participants. section 2 describes the design of the game. formal models are moved to appendices at the end of the paper. the results show that people’s fairness conceptions vary considerably and decisions to divide money equally are considered fair about as often as decisions to maximize outcome. the results are discussed in detail in section 3. 2. experimental design subjects play a two-player game where each player is given a pool of money and has to decide how to divide it between herself and the other player. the other player makes the same decision simultaneously. both players observe each other’s decisions after the money pools are divided. in the second stage of the game, each player has an opportunity to impose a costly punishment upon the other player by reducing both players’ outcomes by the same percentage. 2.1. the game of division and punishment: stage 1 player 1 and player 2 divide their respective equal pools of money proportionally to one of the criteria that are relevant to real life situations. among these criteria can be any traits, merits, or efforts that people value. the criteria i chose are described in table 1. international journal of n. 1, pp. 3 table 1 – the criteria for division of money in the first stage of the game s pe ci fi c ex am pl es o f re al l if e si tu at io ns m en h av e hi gh er a ve ra ge s al ar ie s th an w om en ( k op cz u k et a l, 2 01 0) ; pe op le o f a ce rt ai n sk in c ol or a re t re at ed b et te r at w or k pl ac e or h av e a hi gh er c ha nc e of b ei ng h ir ed ( c as ti ll a, 20 08 ); ta ll er pe op le ar e m or e li ke ly to ge t a m an ag er ia l po si ti on in so m e so ci et ie s/ in du st ri es ( l in dq vi st , 2 01 2) . im m ig ra nt s ge t th e sa m e tr ea tm en t as n at iv es , or n ot . im m ig ra nt s m ay f ee l it i s un fa ir i f th ey a re n ot t re at l ik e th e re st o f th e po pu la ti on a nd m ay f ee l it i s ju st f or t he m t o ta ke o r st ea l fr om m or e fo rt un at e lo ca ls . l oc al s m ay f ee l it i s un fa ir t o tr ea t im m ig ra nt s eq ua ll y an d m ay f ee l an u rg e to p un is h th em b y di sc ri m in at in g an d li m it in g im m ig ra nt s’ a cc es s to r ea l li fe s it ua ti on p eo pl e di vi de r ew ar ds ac co rd in g to t he ir p hy si ca l tr ai ts a nd a tt ri bu te s. p eo pl e di vi de r ew ar ds ac co rd in g to t he ir ci ti ze ns hi p, n at io na li ty , pl ac e of o ri gi n or b el on gi ng c ri te ri on ( pr ox y va ri ab le ) h ei gh t1 p la ce o f bi rt h2 each criterion corresponds to its respective variable (strategy) in equations in appendix a: international journal of n. 1, pp. 3-14, 201 the criteria for division of money in the first stage of the game an d m ay f ee l an u rg e to p un is h th em b y di sc ri m in at in g an d li m it in g im m ig ra nt s’ a cc es s to go od s, s er vi ce s, a nd j ob s w he ne ve r po ss ib le . s tu de nt s w ho h av e be tt er g ra de s in s ch oo l ge t ac ce p te d to b et te r un iv er si ti es ; st ud en ts w ho gr ad ua te f ro m b et te r un iv er si ti es c an g et h ig he r pa yi ng j ob s; w or ke rs w it h m or e im pr es si ve re su m es g et b et te r jo bs . w ag e or s al ar y ca n be t ie d to p er fo rm an ce o r pr od uc ti vi ty o f a w or ke r. a w or ke r ca n re ce iv e bo nu se s fo r pe rf or m in g be tt er t ha n ot he r w or ke rs . t ha t m ay n ot b e co ns id er ed f ai r by e ve ry on e. f or e xa m pl e, a b an ke r re ce iv in g a m ul ti -m il li on b on us m ay f ee l li ke i t is f ai r, bu t ot he rs m ay f ee l li ke t he b an ke r’ s pe rf or m an ce d oe s no t m er it s uc h a hi gh b on us . e qu al a cc es s to p ri m ar y ed uc at io n fo r ev er yo ne , e qu al w ag es o r sa la ri es f or w or ke rs w it hi n a te am a re e xa m pl es o f ev en ly d is tr ib ut ed r ew ar ds t ha t ar e ge ne ra ll y co ns id er ed f ai r. e ve ry re w ar d th at c an b e di vi de d ac co rd in g to a ny o th er c ri te ri on c an a ls o be d iv id ed e ve nl y. a lt ho ug h eq ua l di vi si on s ar e as su m ed to be fa ir in m an y th eo ri es di sc us se d in th e pl ac e of o ri gi n or b el on gi ng to a c er ta in s oc ie ty . p eo pl e di vi de r ew ar ds ac co rd in g to t he e ff or t th ey pu t in i n th e pa st . p eo pl e di vi de r ew ar ds ac co rd in g to t he e ff or t th ey pu t in i m m ed ia te ly o r w it hi n th e cu rr en t sh if t, d ay , m on th , et c. p eo pl e di vi de r ew ar ds ev en ly . a ve ra ge g ra de 3 p ro bl em s ol vi ng ac cu ra cy 4 e qu al d iv is io n5 each criterion corresponds to its respective variable (strategy) in equations in appendix a: 135 a lt ho ug h eq ua l di vi si on s ar e as su m ed to be fa ir in m an y th eo ri es di sc us se d in th e in tr od uc ti on o f th is p ap er , it i s ea sy t o se e ho w e qu al it y ca n be p er ce iv ed u nf ai r in r ea l li fe . f or i ns ta nc e, e qu al r ig ht s an d ac ce ss t o th e co un tr y’ s in fr as tr uc tu re f or i m m ig ra nt s as w el l as f or l oc al s w il l se em u nf ai r to m an y. e qu al j ob p ro sp ec ts f or h ig h sc ho ol d ro pou ts a nd un iv er si ty g ra du at es c an e as il y se em u nf ai r. o n th e ot he r ha nd , if p oo rl y ed uc at ed w or ke rs or d is ad va nt ag ed i m m ig ra nt s ar e no t tr ea te d eq ua ll y (o r ev en f av or ab ly ), t he ir s en se o f un fa ir ne ss c an j us ti fy p un is hm en ts l ik e th ef t, f ra ud , a nd o th er c ri m es . each criterion corresponds to its respective variable (strategy) in equations in appendix a: 1h; 2c; 3g; 4k; 5e. 136 if player 1, for example, chooses to divide her money pool proportionally to the players’ height, then the taller player will get more money and the shorter player will get less money. if both players are of the same height, the money pool is divided equally. player 2 has the same decision to make and divides his money pool according to one of the criteria from the same set. after both players made their decisions, each will end up with a share of her money pool and a share of the other player’s money pool. the outcome for each player in this stage of the game will be a sum of these two shares. the game is formally presented in appendix a. the outcomes become a common knowledge after both players made their decisions. 2.2. the game of division and punishment: stage 2 players may end up with unequal outcomes after the first stage. in this case, they may feel that the outcomes are unfair, according to the theories of fairness (fehr and schmidt, 1999; bolton and ockenfels, 2000; falk and fischbacher, 2006). if one player believes her outcome is unfair, she is more likely to punish the other player. however, it is possible that a player may consider an unequal outcome to be fair. a common assumption is that all equal outcomes are fair, like in the ultimatum game or dictator game experiments (thaler, 1988; güth et al, 2001; henrich et al, 2010). my experiment challenges this assumption. in the second stage of the game, both players have an opportunity to punish each other by reducing the outcomes. each player can reduce both players’ outcomes by the same percentage. therefore, the punishment is costly to the punishing player unless the punishing player has the outcome of 0. neither player’s outcome can be reduced below 0. the players make their punishing decisions simultaneously. the game ends after both players made their punishing decisions. formal definitions of payoffs and strategies in the second stage of the game are in appendix b. 2.3. the experimental procedure twenty four subjects participated in the experiment. the subjects played the game described above three times. subjects were divided into two sections and randomly paired up in each of the three treatments. everyone was informed that they are very unlikely to face the same player in the next treatment. the experiment took place in a computer lab of maria curiesklodowska university in lublin and was programmed using z-tree software (fischbacher, 2007). the subjects were mostly second year students majoring in economic disciplines. the language of the experiment was english, the second language for all of the subjects. the subjects were not allowed to communicate, but they could call out a phrase if they did not understand it and someone would translate it into their native language. in the beginning of the experiment, participants entered their height, average grade, and answered whether they were born locally. then they received instructions about the rules of the first stage of the game: “now you will be grouped up with a random anonymous player. you will not know the identity of the other player and the other player will not know your identity neither during the experiment nor afterwards. you are given a money pool of 2 zloty. you have to divide this money pool between yourself and the other player proportionally to one of the criteria. you have to make a decision which criterion to use for the division of this money pool. the other player is also given a money pool of her own that also amounts to 2 zloty and will have to make the same decisions as you.” international journal of n. 1, pp. 3 then the subjects were asked to solve a mathematical problem: to approximate a square root of a randomly generated fraction in decimal form in 60 seconds. the calculators and mobile phones were not allowed. the accuracy of the solution from 0% to 100% appeared on the screen after the players entered their answers. the next screen contained the to make the decision. there was information below the list on the same screen about what outcome each decision would lead to, so the subjects did not have to do any calculations to figure out what decision would lead to what outcome. between the first and the second stages of the game, the subjects in each group were informed about what decision the other player made and the outcomes of both players. on the same screen they were explicitly asked money and the division of money by the other player fair. the next screen offered the players an opportunity to reduce the outcome of the other player and own outcome by the same percentage. i avoided th other loaded term in the instructions to the punishment stage. at the end of the treatment the players could see how much they earned and how much their winnings and the winnings of the other player were reduced. this treatment w observations in total. the subjects received the show up fee of 2 zloty in addition to money pools of 2 zloty per player per stage. the program code used in the experiment is available from author upon request. 3. results below, i show what players considered fair and unfair and what decisions the players tended to punish more. i provide my interpretation of the results and discuss possible implications of the results for theories of fairness and real life situations. 3.1. what is fair? “the just cause… is: we did it, therefore it’s a just cause.” i start this section with a caveat that the participants in this experiment are not native english speakers and may understand the word “fair” differently. th the word fairness, but about its economic content and consequences. out of 72 observations, each strategy, except for ‘division according to the place of birth’, was played at least 15 times. the players who made the di those divisions fair at least 72% of the time (table 2). interestingly, not all equal divisions were considered fair by either player. a little over 62% of the strategies played were dominant strategies, where the players max dominant strategies fair just as frequently as equal divisions: 73% of the time. each strategy was considered fair by the other player about three quarters of the time, even the dominant strategies. the only e was considered unfair by the other player more often. there are several ways of looking at the results. on one hand, divisions of money proportionally to effort either put in in the past or immediately are considered unfair by either player. however, divisions according to physical and social traits were still considered fair more than half of the time. these results should be taken cautiously because the subjects in this experime comfortable with decisions that maximize profits in experiments (rubinstein, 2006). international journal of n. 1, pp. 3-14, 201 then the subjects were asked to solve a mathematical problem: to approximate a square of a randomly generated fraction in decimal form in 60 seconds. the calculators and mobile phones were not allowed. the accuracy of the solution from 0% to 100% appeared on the screen after the players entered their answers. the next screen contained the list of criteria shown in table 1 where the participants had to make the decision. there was information below the list on the same screen about what outcome each decision would lead to, so the subjects did not have to do any calculations to t decision would lead to what outcome. between the first and the second stages of the game, the subjects in each group were informed about what decision the other player made and the outcomes of both players. on the same screen they were explicitly asked to state whether they consider their own division of money and the division of money by the other player fair. the next screen offered the players an opportunity to reduce the outcome of the other player and own outcome by the same percentage. i avoided the word “punishment” or any other loaded term in the instructions to the punishment stage. at the end of the treatment the players could see how much they earned and how much their winnings and the winnings of the other player were reduced. this treatment was repeated three times generating 72 observations in total. the subjects received the show up fee of 2 zloty in addition to money pools of 2 zloty per player per stage. the program code used in the experiment is available from author upon request. below, i show what players considered fair and unfair and what decisions the players tended to punish more. i provide my interpretation of the results and discuss possible implications of the results for theories of fairness and real life situations. “the just cause… is: we did it, therefore it’s a just cause.” i start this section with a caveat that the participants in this experiment are not native english speakers and may understand the word “fair” differently. this study is not about linguistics of the word fairness, but about its economic content and consequences. out of 72 observations, each strategy, except for ‘division according to the place of birth’, was played at least 15 times. the players who made the divisions considered each one of those divisions fair at least 72% of the time (table 2). interestingly, not all equal divisions were considered fair by either player. a little over 62% of the strategies played were dominant strategies, where the players maximized their outcome. players considered these dominant strategies fair just as frequently as equal divisions: 73% of the time. each strategy was considered fair by the other player about three quarters of the time, even the dominant strategies. the only exception was ‘division according to was considered unfair by the other player more often. there are several ways of looking at the results. on one hand, divisions of money proportionally to effort either put in in the past or immediately are slightly less likely to be considered unfair by either player. however, divisions according to physical and social traits were still considered fair more than half of the time. these results should be taken cautiously because the subjects in this experiment were economics students, who tend to be more comfortable with decisions that maximize profits in experiments (rubinstein, 2006). 137 then the subjects were asked to solve a mathematical problem: to approximate a square of a randomly generated fraction in decimal form in 60 seconds. the calculators and mobile phones were not allowed. the accuracy of the solution from 0% to 100% appeared on list of criteria shown in table 1 where the participants had to make the decision. there was information below the list on the same screen about what outcome each decision would lead to, so the subjects did not have to do any calculations to between the first and the second stages of the game, the subjects in each group were informed about what decision the other player made and the outcomes of both players. on the to state whether they consider their own division of the next screen offered the players an opportunity to reduce the outcome of the other e word “punishment” or any other loaded term in the instructions to the punishment stage. at the end of the treatment the players could see how much they earned and how much their winnings and the winnings of as repeated three times generating 72 observations in total. the subjects received the show up fee of 2 zloty in addition to money the program code used in the experiment is available from author upon request. below, i show what players considered fair and unfair and what decisions the players tended to punish more. i provide my interpretation of the results and discuss possible implications of “the just cause… is: we did it, therefore it’s a just cause.” – noam chomsky i start this section with a caveat that the participants in this experiment are not native english is study is not about linguistics of out of 72 observations, each strategy, except for ‘division according to the place of birth’, visions considered each one of those divisions fair at least 72% of the time (table 2). interestingly, not all equal divisions were considered fair by either player. a little over 62% of the strategies played were imized their outcome. players considered these dominant strategies fair just as frequently as equal divisions: 73% of the time. each strategy was considered fair by the other player about three quarters of the time, xception was ‘division according to height’, which there are several ways of looking at the results. on one hand, divisions of money slightly less likely to be considered unfair by either player. however, divisions according to physical and social traits were still considered fair more than half of the time. these results should be taken cautiously nt were economics students, who tend to be more comfortable with decisions that maximize profits in experiments (rubinstein, 2006). 138 table 2 – the number and percentage of divisions considered fair (unfair) and punished by each player d om in an t st ra te gy * 45 62 .5 33 73 .3 14 31 .1 27 60 .0 42 .4 (2 8. 6) t ot al 72 10 0. 0 56 77 .8 21 29 .2 43 59 .7 45 .5 (2 6. 7) c ri te ri on f or d iv is io n p ro bl em so lv in g ac cu ra cy (i m m ed ia te ef fo rt ) 18 25 .0 14 77 .8 4 22 .2 11 61 .1 41 .3 (2 7. 5) p la ce o f bi rt h (s oc ia l tr ai t) 4 5. 6 4 10 0. 0 1 25 .0 3 75 .0 30 .7 (3 4. 1) e qu al di vi si on 15 20 .8 11 73 .3 4 26 .7 12 80 .0 44 .0 (2 7. 9) a ve ra ge g ra de (p as t ef fo rt ) 17 23 .6 14 82 .4 4 23 .5 11 64 .7 49 .5 (3 1. 3) h ei gh t (p hy si ca l tr ai t) 18 25 .0 13 72 .2 8 44 .4 6 33 .3 56 .2 (2 5. 1) n um be r of t im es p la ye d n um be r of t im es p la ye d, % t im es c on si de re d fa ir t im es c on si de re d fa ir , % t im es co ns id er ed u n fa ir by th e ot he r pl ay er t im es co ns id er ed u n fa ir by th e ot he r pl ay er , % t im es p un is he d by t he o th er pl ay er t im es p un is he d by t he o th er pl ay er , % a ve ra ge pu ni sh m en t by th e ot he r pl ay er , ex cl ud in g 0% pu ni sh m en ts , % ( σ ) *the strategy leading to the highest outcome regardless of what the other player chooses. international journal of n. 1, pp. 3 we can conclude with a high degree of certainty that equal outcomes are not always considered fair. yet, we cannot tell exactly what people mean by the word “ meaning of the word itself is subjective. arguably the most important consequence of unfairness: punishment. humans are shown to punish unfairness in multiple experiments. mainstream theories o schmidt, 1999; bolton and ockenfels, 2000) and reciprocity (falk and fischbacher, 2006) show that punishment can be a direct consequence of the sense of unfairness. although, punishment may also be a way to reduce the advantage of the motivated by spite and anger induced by other factors (falk et al, 2005). in the design of the experiment, i make an assumption that the decision to punish must be positively correlated with the sense of unfairness. the interpretation punishments were on average twice as frequent as divisions that subjects considered unfair. some punishments were as small as 2% and could have been out of curiosity or mistake (appendix d). therefore, i also the frequency and size of punishments of equal divisions support the hypothesis that equal outcomes are not necessarily perceived as fair. this raises a question, however, of whether so many equal outcomes were punished due to concerns for fairness alone. it could have been that subjects did not understand the instructions correctly or wanted to test what happens if they punish. by looking at the results across each treatment in table 3, we can see that it is not the case. the frequency of punishments as well as the size of punishments only increases with each treatment. table 3 – divisions considered fair (unfair) and punished across treatments number of observations times the strategy played considered fair times the strategy played considered fair, % times the strategy played considered unfair by the other player times the strategy played considered unfair by the other times the strategy played punished by the other player times the strategy played punished by the other player, % average punishment by the other player, excluding 0% punishments, % (σ) a possible explanation is that the players who got a smaller outcome tried to reduce their disadvantage by reducing both players’ outcomes. falk et al (2005) observed such behavior in their experiment where participants eagerly punished other player. i measured how many punishments decreased disadvantage for the punishing player and it was around half of all punishments (table either decreased advantage or did n international journal of n. 1, pp. 3-14, 201 we can conclude with a high degree of certainty that equal outcomes are not always considered fair. yet, we cannot tell exactly what people mean by the word “ meaning of the word itself is subjective. in the second stage of the experiment, i arguably the most important consequence of unfairness: punishment. humans are shown to punish unfairness in multiple experiments. mainstream theories of fairness ( bolton and ockenfels, 2000) and reciprocity (falk and fischbacher, 2006) show that punishment can be a direct consequence of the sense of unfairness. although, punishment may also be a way to reduce the advantage of the opponent or be purely motivated by spite and anger induced by other factors (falk et al, 2005). in the design of the experiment, i make an assumption that the decision to punish must be positively correlated with the sense of unfairness. the interpretation of the results are based on this assumption. punishments were on average twice as frequent as divisions that subjects considered unfair. some punishments were as small as 2% and could have been out of curiosity or mistake (appendix d). therefore, i also measured the average size of punishments (table 2). the frequency and size of punishments of equal divisions support the hypothesis that equal outcomes are not necessarily perceived as fair. this raises a question, however, of whether so es were punished due to concerns for fairness alone. it could have been that subjects did not understand the instructions correctly or wanted to test what happens if they punish. by looking at the results across each treatment in table 3, we t is not the case. the frequency of punishments as well as the size of punishments only increases with each treatment. divisions considered fair (unfair) and punished across treatments i treatment treatment 24 times the strategy played considered fair 18 times the strategy played considered fair, % 75.0 times the strategy played considered unfair by the other player 6 times the strategy played considered unfair by the other player, % 25.0 times the strategy played punished by the other player 12 times the strategy played punished by the other player, % 50.0 average punishment by the other player, excluding 0% 37.5 (18.4) a possible explanation is that the players who got a smaller outcome tried to reduce their disadvantage by reducing both players’ outcomes. falk et al (2005) observed such behavior in their experiment where participants eagerly punished if punishments were more costly to the other player. i measured how many punishments decreased disadvantage for the punishing player and it was around half of all punishments (table 4). the other half of the punishments either decreased advantage or did not change the difference between outcomes. 139 we can conclude with a high degree of certainty that equal outcomes are not always considered fair. yet, we cannot tell exactly what people mean by the word “fair”, as the in the second stage of the experiment, i measure arguably the most important consequence of unfairness: punishment. humans are shown to f fairness (fehr and bolton and ockenfels, 2000) and reciprocity (falk and fischbacher, 2006) show that punishment can be a direct consequence of the sense of unfairness. although, opponent or be purely motivated by spite and anger induced by other factors (falk et al, 2005). in the design of the experiment, i make an assumption that the decision to punish must be positively correlated are based on this assumption. punishments were on average twice as frequent as divisions that subjects considered unfair. some punishments were as small as 2% and could have been out of curiosity or a measured the average size of punishments (table 2). the frequency and size of punishments of equal divisions support the hypothesis that equal outcomes are not necessarily perceived as fair. this raises a question, however, of whether so it could have been that subjects did not understand the instructions correctly or wanted to test what happens if they punish. by looking at the results across each treatment in table 3, we t is not the case. the frequency of punishments as well as the size of divisions considered fair (unfair) and punished across treatments ii treatment iii treatment 24 24 21 16 87.5 66.7 6 9 25.0 37.5 15 16 62.5 66.7 41.9 (28.9) 54.8 (29.2) a possible explanation is that the players who got a smaller outcome tried to reduce their disadvantage by reducing both players’ outcomes. falk et al (2005) observed such behavior in if punishments were more costly to the other player. i measured how many punishments decreased disadvantage for the punishing 4). the other half of the punishments ot change the difference between outcomes. 140 table 4 – relative frequency and size of punishments that decreased disadvantage between players’ outcomes i treatment ii treatment iii treatment total number of punishments by the other player 12 15 16 43 average punishment by the other player (excluding 0% punishments), % 37.5 41.9 54.8 45.5 number of punishments that decreased disadvantage 7 10 10 27 % of punishments that decreased disadvantage 58.3 66.7 62.5 62.8 average punishment that decreased disadvantage, % (σ) 36.4 (18.9) 47.2 (29.4) 55.7 (33.2) 47.6 (28.7) total number of situations where one player had a disadvantage 10 12 12 34* *34 players had advantage, while 4 players had equal outcomes. 3.2. why punish equal outcomes? one possible explanation why 80% of equal divisions were punished lies in the design of the game. in ultimatum game experiments the punisher goes last in the sequence and the player who proposes the division cannot punish the punisher. here, if we assume that each player has her own idea of what is a fair outcome, we must consider that each player also has her own idea of what punishment is fair and what punishment is unjust. if a player perceives the punishment as unfair, logically, she would enjoy punishing the punisher to restore fairness as she sees it. of course, this would be unfair from the perspective of the other player (initial punisher), who would want to punish again. this string of reciprocal punishments could go on forever unless both players eventually converged on what to consider a fair outcome. consider a situation where player e chooses equal outcome and player m chooses to maximize her outcome, yet each player believes that her decision is fair. both players need to decide simultaneously whether to punish or not. since each player thinks that her decision is fair, they both will perceive any punishment by the other player as unfair and unjust. if player m believes that player e’s punishment is likely, then player m can punish in advance to mitigate the feeling of being unjustly punished. i describe this idea mathematically in appendix c. in a famous quote often ascribed to oscar wilde: “no good deed goes unpunished”, a good deed can be perceived as not a good deed by the punisher, while the punisher may think that she is not a punisher at all, but doing a good (or at least a fair) deed instead. 3.3. implications for economic experiments and real life situations many experiments rely on the assumption that equal outcomes are considered fair by all players. the results obtained in our experiment do not necessarily make the experiments that rely on such assumption inaccurate, but provide a warning that different conceptions of fairness may influence the decisions of subjects. consider a classic ultimatum game, where player 1 has to divide a sum of money between herself and player 2 and player 2 can either accept or reject the division. rejection results in both players getting nothing. a vast body of empirical research shows that offers below 40% are often rejected (fehr and schmidt, 1999; nowak et al, 2000; henrich et al, 2001; sanfey et al, 2003). the decisions to reject are commonly attributed to the player’s desire to punish the unfairness of inequitable outcomes. by the same reasoning, the players who accept inequitable outcomes are assumed to have international journal of n. 1, pp. 3 lower preference for fairness. our experiment shows that some of the players who accept (do not punish) unequal outcomes may in fact consider the unequal outcomes perfectly fair. if a player is able to put herself money in her favor and consider this division fair, then it is possible that she views the proposer’s unequal division as fair as well. situations where concerns for fairness and equality play ubiquitous in human society. below i discuss several cliché situations where fairness and equality may come in conflict. 3.3.1. immigrant employee versus local employee in an increasingly globalized and unequal world, the iss remain acute. is it fair for the immigrant employees to have equal rights and benefits as the local employees? one of the criteria for dividing money in our experiment is being born locally (table 2). despite having very low chose this criterion consider it fair, while some non given the opportunity. it is also interesting that it was a very infrequent decision. the four players who chose being local as a criterion for money division did not have a better strategy to play. any other division (according to height, average grade, or problem solving accuracy) led to a worse outcome for these players. 3.3.2. capitalism versus socialism arguably, the most hotly debated issue in politics is what is fairer: capitalism or socialism. logically, this debate exists because populations are divided on the issue. socialists advocate more equal division of outcomes and opportunities least outcomes is not fair at all. our experiment shows that fairness is hardly an argument in debates for equality. equal outcome was chosen only in 15 out of 72 observations, was considered unfair approximate was punished 80% of the time (table 2). perhaps, if this experiment were conducted in one of the communist states, the results would differ dramatically. 3.3.3. large territory versus large g in geopolitics, countries divide various resources, spheres of influence, and many other benefits. these benefits can be divided equally, like voting rights in the united nations general assembly, or proportionally to one of the criteria, like spheres o between superpowers. consider two hypothetical superpowers, one geographically larger but poorer state, and the other is a smaller state with much higher gdp. both states are looking to divide spheres of political influence and have t to the geographical size of the countries, or proportionally to their gdps. one should be cautious extrapolating results of a small experiment with individual subjects onto large states, but there are plenty leader is in a position to individually make geopolitical decisions. the results of our experiment suggest that dividing the powers equally would be the worst possible decision. such decision will not lead to the other decisions, and may still be followed by a punishment. it is also naïve to assume that the other side will perceive any one state’s decision as fair. for example, dividing the power according to gdp may seem like a fair choice to one state, but the other state’s leadership should not be expected to share the same fairness conceptions. international journal of n. 1, pp. 3-14, 201 lower preference for fairness. our experiment shows that some of the players who accept (do not punish) unequal outcomes may in fact consider the unequal outcomes perfectly fair. if a player is able to put herself in the proposer’s shoes and realize that she would divide the money in her favor and consider this division fair, then it is possible that she views the proposer’s unequal division as fair as well. situations where concerns for fairness and equality play a role in decision making are ubiquitous in human society. below i discuss several cliché situations where fairness and equality may come in conflict. 3.3.1. immigrant employee versus local employee n an increasingly globalized and unequal world, the issues of migration and employment remain acute. is it fair for the immigrant employees to have equal rights and benefits as the local employees? one of the criteria for dividing money in our experiment is being born locally (table 2). despite having very low number of observations, it is clear that those who chose this criterion consider it fair, while some non-locals consider it unfair and punish locals given the opportunity. it is also interesting that it was a very infrequent decision. the four chose being local as a criterion for money division did not have a better strategy to play. any other division (according to height, average grade, or problem solving accuracy) led to a worse outcome for these players. 3.3.2. capitalism versus socialism (or communism) arguably, the most hotly debated issue in politics is what is fairer: capitalism or socialism. logically, this debate exists because populations are divided on the issue. socialists advocate more equal division of outcomes and opportunities, while capitalists argue that equality of at least outcomes is not fair at all. our experiment shows that fairness is hardly an argument in debates for equality. equal outcome was chosen only in 15 out of 72 observations, was considered unfair approximately by a quarter of subjects on either side of the division, and was punished 80% of the time (table 2). perhaps, if this experiment were conducted in one of the communist states, the results would differ dramatically. 3.3.3. large territory versus large gdp in geopolitics, countries divide various resources, spheres of influence, and many other benefits. these benefits can be divided equally, like voting rights in the united nations general assembly, or proportionally to one of the criteria, like spheres of political influence between superpowers. consider two hypothetical superpowers, one geographically larger but poorer state, and the other is a smaller state with much higher gdp. both states are looking to divide spheres of political influence and have three choices: to divide equally, proportionally to the geographical size of the countries, or proportionally to their gdps. one should be cautious extrapolating results of a small experiment with individual subjects onto large states, but there are plenty of countries in the world where one autocratic leader is in a position to individually make geopolitical decisions. the results of our experiment suggest that dividing the powers equally would be the worst possible decision. such decision will not lead to the highest outcome, about as likely to be perceived unfair as the other decisions, and may still be followed by a punishment. it is also naïve to assume that the other side will perceive any one state’s decision as fair. for example, dividing the power ccording to gdp may seem like a fair choice to one state, but the other state’s leadership should not be expected to share the same fairness conceptions. 141 lower preference for fairness. our experiment shows that some of the players who accept (do not punish) unequal outcomes may in fact consider the unequal outcomes perfectly fair. if a in the proposer’s shoes and realize that she would divide the money in her favor and consider this division fair, then it is possible that she views the a role in decision making are ubiquitous in human society. below i discuss several cliché situations where fairness and ues of migration and employment remain acute. is it fair for the immigrant employees to have equal rights and benefits as the local employees? one of the criteria for dividing money in our experiment is being born number of observations, it is clear that those who locals consider it unfair and punish locals given the opportunity. it is also interesting that it was a very infrequent decision. the four chose being local as a criterion for money division did not have a better strategy to play. any other division (according to height, average grade, or problem solving accuracy) arguably, the most hotly debated issue in politics is what is fairer: capitalism or socialism. logically, this debate exists because populations are divided on the issue. socialists advocate , while capitalists argue that equality of at least outcomes is not fair at all. our experiment shows that fairness is hardly an argument in debates for equality. equal outcome was chosen only in 15 out of 72 observations, was ly by a quarter of subjects on either side of the division, and was punished 80% of the time (table 2). perhaps, if this experiment were conducted in one of in geopolitics, countries divide various resources, spheres of influence, and many other benefits. these benefits can be divided equally, like voting rights in the united nations f political influence between superpowers. consider two hypothetical superpowers, one geographically larger but poorer state, and the other is a smaller state with much higher gdp. both states are looking to hree choices: to divide equally, proportionally one should be cautious extrapolating results of a small experiment with individual of countries in the world where one autocratic leader is in a position to individually make geopolitical decisions. the results of our experiment suggest that dividing the powers equally would be the worst possible decision. the highest outcome, about as likely to be perceived unfair as the other decisions, and may still be followed by a punishment. it is also naïve to assume that the other side will perceive any one state’s decision as fair. for example, dividing the power ccording to gdp may seem like a fair choice to one state, but the other state’s leadership 142 3.3.4. thief versus rich person there is a very common situation where equal outcomes are often punished. consider a decision by a poor person to steal from a rich person. the motivation of a poor person is to take enough from a rich person to enjoy equal lifestyle with the rich person. assuming both players had equal chance of being born rich or poor and put the same amount of effort throughout their lives, the resulting outcomes of such theft can be perceived as equal. most societies throughout human history considered such “equal outcome” to be unfair and punished a person, a thief, whose decision led to this equal outcome. yet some thieves and even social groups consider the inequality-reducing outcome resulting from theft to be fair and deserving of praise rather than punishment. a testament to this paradox is the popularity of the tale of robin hood, who notoriously steals from the rich and gives to the poor. 4. conclusions the concept of fairness revolves around the notion of equality. the difference between outcomes is easy to measure mathematically and it is often used as a measure of fairness in different theories and experiments. however, not everyone may consider equal outcomes fair. i conduct an experiment using a two-player game where players have to divide two equal pools of money. then players are given an opportunity to impose a costly punishment upon each other. in the experiment the subjects are also asked whether they consider own decision and the decision of the other player fair. the results show that subjects do not always consider equal outcomes fair. in addition, equal divisions of money in the experiment are followed by punishment 80% of the time. due to a low sample size, we cannot definitively conclude that equal outcomes are punished with a specific frequency, but we certainly observe that such punishments occur. given a symmetric game structure where players have equal opportunities, the maximization of profit appears to be just as fair of a strategy as splitting money equally. the players who played the dominant (profit maximizing) strategy did not face the punishment more often than those who decided to divide the money equally. such punishment pattern may influence the decisions of players in the simpler ultimatum and dictator games, although it cannot be directly observed in these games. results of my research are generally consistent with empirical observations (baumard et al (2012); houser et al (2012); castelli et al (2014); durante et al (2014); figueiredo and netto (2014)) and theories (roemer (1998); devooght (2008); fudenberg and levine (2012)) that take into account multiple factors and circumstances when defining fairness. studies that assume fair outcomes to be equal or the most equal of all available options are shown to have a drawback. a participant in such study may actually have strong aversion to unfairness, but still choose an inequitable outcome because she perceives it to be perfectly fair. conducting a similar experiment with a larger sample using other criteria for division, such as race, gender, religion, and various performance and contribution measures, can be an interesting avenue for future research. also, a more in-depth study of each trait and circumstance as a criterion for fair division of rewards between individuals, at a workplace, or within a society can provide useful insights into economic behavior. acknowledgements i gratefully acknowledge support and funding of this research by the faculty of economics of maria curie-sklodowska university. i would like to thank anna rakowska, zbigniew pastuszak, taras bondarenko, pawel pasierbiak, and magdalena kondas for their assistance in organizing the experiment. international journal of n. 1, pp. 3 appendix a there are two players in the game, player 1 and player 2. both players divide their respective money pools granted to them: player 1 divides money are of equal size: π� � the strategy set of player 1 is �� � ���, �, �,��,�� . descriptions o the outcome of each strategy for player 1 consists of two parts: money from player 1’s division of her money pool and money from player 2’s division of his money pool allocated to player 1. the set of outcomes for p that are added together: ����,�� ���� is a share of player 1’s money pool strategies from her strategy set ���� � ����� ���� is a share of player 2’s money pool of the strategies from his strategy set ���� � ����� note that the superscript indicates the player who receives the share of the money pool, not the power. for example, if player 1 chooses the strategy divided proportionally to each players’ height between player 1 and player 2 according to equation (a.4). each element of sets ���� equations are followed by comments ���� � ��� �� 0 π� π� 2⁄ � �� �!"#��$�� ��!"# %� is player 1’s height, %� player who may take part in the experiment. i set the purpose of the minimum parameters is to increase the dispersion of outcomes when the players have similar height or another trait. special cases for %� � %� are to avoid division by zero. ���� � ��� �� 0 π� π� 2⁄ � �� �!"#��$�� ��!"# international journal of n. 1, pp. 3-14, 201 there are two players in the game, player 1 and player 2. both players divide their respective money pools granted to them: player 1 divides π� and player 2 divides � π�. the strategy set of player 1 is �� � ���, �, �,��,�� and the strategy set of player 2 is descriptions of each strategy can be found in table 1. the outcome of each strategy for player 1 consists of two parts: money from player 1’s division of her money pool and money from player 2’s division of his money pool allocated to player 1. the set of outcomes for player 1 is ����,��& and it consists of subsets �& � ���� ' ���� layer 1’s money pool π� that she receives for choosing one of her strategies from her strategy set ��: �,�(�� ,�)�� ,�*�� ,�+�� , is a share of player 2’s money pool π� that player 2 gives to player 1 by playing one of the strategies from his strategy set ��: �,�(�� ,�)�� ,�*�� ,�+�� , note that the superscript indicates the player who receives the share of the money pool, for example, if player 1 chooses the strategy h, her money pool will be ionally to each players’ height between player 1 and player 2 according to � and ���� are defined by equations below (a.4 equations are followed by comments for easier interpretation. -. %� � %/01 234 %� 5 %/01 -. %� � %/01 234 %� 5 %/01 -. %� � %� !"#6π� -. %� 7 %�,%� 7 %/01,%� 7 %/01 8 is player 2’s height, and %/01 the lowest possible height of any player who may take part in the experiment. i set %/01 arbitrarily at %/01 the purpose of the minimum parameters is to increase the dispersion of outcomes when the players have similar height or another trait. special cases for %� � %/01 are to avoid division by zero. -. %� � %/01 234 %� 5 %/01 -. %� � %/01 234 %� 5 %/01 -. %� � %� !"#6π� -. %� 7 %�,%� 7 %/01,%� 7 %/01 8 143 there are two players in the game, player 1 and player 2. both players divide their respective and player 2 divides π�. the pools of and the strategy set of player 2 is f each strategy can be found in table 1. the outcome of each strategy for player 1 consists of two parts: money from player 1’s division of her money pool and money from player 2’s division of his money pool allocated and it consists of subsets ���� and ���� (a.1) that she receives for choosing one of her (a.2) that player 2 gives to player 1 by playing one (a.3) note that the superscript indicates the player who receives the share of the money pool, , her money pool will be ionally to each players’ height between player 1 and player 2 according to are defined by equations below (a.4-a.13). some 8 (a.4) the lowest possible height of any � 100 centimeters. the purpose of the minimum parameters is to increase the dispersion of outcomes when the /01, %� � %/01, and 8 (a.5) 144 �(�� � : 0.25π� -. =� = 0 234 =� = 1 0.75π� -. =� = 1 234 =� = 0 ?�� -. =� = =� 8 (a.6) =� and =� are discrete variables. =�,=� ∈ �0,1 . if player 1 possesses a certain social trait (born local in this case), then =� = 1, if not then =� = 0. the same pattern applies to =� for player 2. �(�� = : 0.25π� -. =� = 0 234 =� = 1 0.75π� -. =� = 1 234 =� = 0 π� 2⁄ -. =� = =� 8 (a.7) �)�� = ��� �� 0 -. a� = a/01 234 a� > a/01 π� -. a� = a/01 234 a� > a/01 π� 2⁄ -. a� = a� � b� b!"#b�$b� �b!"#6π� -. a� ≠ a�,a� ≠ a/01,a� ≠ a/01 8 (a.8) a� and a� are average grades of player 1 and player 2 respectively on the scale from 60 to 100. they represent efforts put in by the players in the past. the minimum average grade is a/01 = 60. it is the minimum passing grade for the subjects. �)�� = ��� �� 0 -. a� = a/01 234 a� > a/01 π� -. a� = a/01 234 a� > a/01 π� 2⁄ -. a� = a� � b� b!"#b�$b� �b!"#6π� -. a� ≠ a�,a� ≠ a/01,a� ≠ a/01 8 (a.9) �*�� = ��� �� 0 -. d� = d/01 234 d� > d/01 π� -. d� = d/01 234 d� > d/01 π� 2⁄ -. d� = d� � e� e!"#e�$e� �e!"#6π� -. d� ≠ d�,d� ≠ d/01,d� ≠ d/01 8 (a.10) d� and d� show the accuracy of solutions to the mathematical problem presented to the students during the experiment. it represents the immediate effort put in by the students. d/01 is the minimum possible accuracy and it equals to zero. d�,d� ∈ f0,1g. �*�� = ��� �� 0 -. d� = d/01 234 d� > d/01 π� -. d� = d/01 234 d� > d/01 π� 2⁄ -. d� = d� � e� e!"#e�$e� �e!"#6π� -. d� ≠ d�,d� ≠ d/01,d� ≠ d/01 8 (a.11) �+�� = π� 2⁄ (a.12) �+�� = π� 2⁄ (a.13) international journal of n. 1, pp. 3 �+�� and �+�� are parts of the player 1’s outcome of the eq player 1 and player 2 respectively. the game is symmetrical so the outcomes for player 2 are given by the same functions where players are reversed. appendix b stage 2 of the game is a subgame that takes place right after s two players in the game: player 1 and player 2. player 1 chooses to reduce both players’ outcomes by any amount from 0 to 100%. player 2 makes the same decision simultaneously. payoffs in the entire game for player 1 and player respectively: h����i�,��i h����i�,��i where: ����,��& is the outcome of the first stage of the game for player 1, who plays a strategy from strategy set �� against player 2’s strategy from her strategy set i� and i� are punishments hj� is utility of fairness of player 1, hj� and hk� are non-monetary terms, which we cannot directly observe but i as exist. players are also assumed to be rational and maximizing their payoffs appendix c appendix c logically stems out of appendix a and appendix b and shares the same variables. utility of fairness (hj�) is a function of outcomes of average of their outcomes (�l schmidt (1999), bolton and ockenfels (2000), and falk and fischbacherhj����,��,�l&, where �� � � the utility of punishment ( preference for spiteful punishment (falk et al, 2005) when it reduces the di the smaller outcome of player 1 and bigger outcome of player 2: the preference for spiteful punishment of player 1. i also include preference for in our experiment, both players have an opportunity to punish, but they have to do it simultaneously. in case when players’ conceptions of fairness differ and player 1 perceives the punishment by the player 2 as unfair, wh perfectly fair, player 1 may enjoy reciprocating with the punishment of her own. the preference for reciprocal punishment is: international journal of n. 1, pp. 3-14, 201 are parts of the player 1’s outcome of the equal division of money pools by player 1 and player 2 respectively. the game is symmetrical so the outcomes for player 2 are given by the same functions stage 2 of the game is a subgame that takes place right after stage one. there are the same two players in the game: player 1 and player 2. player 1 chooses to reduce both players’ outcomes by any amount from 0 to 100%. player 2 makes the same decision simultaneously. payoffs in the entire game for player 1 and player 2 are h����i�,��i�& i�& � ����,��&�1mi�&�1m i�&' hj� ' hk i�& � ����,��&�1m i�&�1m i�&' hj� ' hk is the outcome of the first stage of the game for player 1, who plays a strategy against player 2’s strategy from her strategy set ��; are punishments of player 1 and player 2 respectively and i�, is utility of fairness of player 1, hk� is utility of punishment of player 1. monetary terms, which we cannot directly observe but i as exist. players are also assumed to be rational and maximizing their payoffs appendix c logically stems out of appendix a and appendix b and shares the same ) is a function of outcomes of both players (��l) in line with theories of fairness and reciprocity by fehr and schmidt (1999), bolton and ockenfels (2000), and falk and fischbacher���,��& and �� � ����,��& as defined in (a.1). the utility of punishment (hk�) is positively influenced by unfairness (negative preference for spiteful punishment (falk et al, 2005) when it reduces the di the smaller outcome of player 1 and bigger outcome of player 2: n� � �� the preference for spiteful punishment of player 1. i also include preference for reciprocal punishment (o�) in hk�: hk��hj�,n�,o�& in our experiment, both players have an opportunity to punish, but they have to do it simultaneously. in case when players’ conceptions of fairness differ and player 1 perceives the punishment by the player 2 as unfair, while the player 2 perceives this punishment as perfectly fair, player 1 may enjoy reciprocating with the punishment of her own. the preference for reciprocal punishment is: 145 ual division of money pools by the game is symmetrical so the outcomes for player 2 are given by the same functions tage one. there are the same two players in the game: player 1 and player 2. player 1 chooses to reduce both players’ outcomes by any amount from 0 to 100%. player 2 makes the same decision simultaneously. & and h����i�,��i�& k� k� is the outcome of the first stage of the game for player 1, who plays a strategy , i� ∈ f1,0g; is utility of punishment of player 1. monetary terms, which we cannot directly observe but i assume they appendix c logically stems out of appendix a and appendix b and shares the same �� and ��) and the ) in line with theories of fairness and reciprocity by fehr and schmidt (1999), bolton and ockenfels (2000), and falk and fischbacher (2006): as defined in (a.1). ) is positively influenced by unfairness (negative hj�) and preference for spiteful punishment (falk et al, 2005) when it reduces the difference between � m ��, where n� is in our experiment, both players have an opportunity to punish, but they have to do it simultaneously. in case when players’ conceptions of fairness differ and player 1 perceives ile the player 2 perceives this punishment as 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(2003), le relazioni con i mercati esteri delle imprese produttrici di mobili. sistemi distrettuali e canali distributivi, edizioni goliardiche, trieste. 5 _15-12_ zhang international journal of economic behavior, 5, n. 1, pp. 3 how do the richest 1% own 50% of the national wealth in an integrated walrasian equilibrium and neoclassical growth model received: feb 23, 2015 this paper proposes a dynamic economic model of heterogeneous households to explain economic mechanisms of how the richest one per cent of the population own 50% of national wealth. we explain inequality in a purely wealth and human capital accumulation. the production technologies and economic structure follow the uzawa two-sector model. traditional disposable income after taxes and transfers in the solow model and many empirical studies) plus the value of the household’s wealth. by applying zhang’s concept of disposable income and utility function, we describe consumers’ wealth accumulation and consumption behavior. we show how accumulation, human capital accumulation, and division of labor, and time distribution interact with each other under perfect competition. people, the rich, the middle, and the poor %, 69%, and 20%. we demonstrate own more than half of the national wealth and the poo wealth. the rich household works only 4 hours a day and the poor household 11 hours a day. we show how the system moves to the equilibrium from an initial state and confirm that the equilibrium point is stable. we also d the capital goods sector, the rich learning through consuming, and the rich’s propensities to save, leisure, affect growth and inequality keywords: inequality and growth; heterogeneous households. 1. introduction it has been reported that the richest 1% of the world population is owning almost half o world’s wealth. moreover, it does seem that inequality be enlarged in the near future in tandem with rapid economic globalization. there is a need to know international journal of economic behavior, vol 5, n. 1, pp international journal of economic behavior, 5, n. 1, pp. 3-14, 201 how do the richest 1% own 50% of the national wealth in an integrated walrasian equilibrium and neoclassical growth model wei ritsumeikan asia pacific university, japan accepted: march 24, 2015 online published: abstract this paper proposes a dynamic economic model of heterogeneous households to explain economic mechanisms of how the richest one per cent of the population own 50% of national wealth. we explain inequality in a purely competitive economic environment with endogenous wealth and human capital accumulation. the production technologies and economic structure sector model. in this study a household’s disposable income is the (which is the income that a household earns each period of time after taxes and transfers in the solow model and many empirical studies) plus the value of the household’s wealth. by applying zhang’s concept of disposable income and utility function, we scribe consumers’ wealth accumulation and consumption behavior. we show how accumulation, human capital accumulation, and division of labor, and time distribution interact under perfect competition. we simulate the model with three g the rich, the middle, and the poor whose shares of the population are demonstrate the existence of an equilibrium point at which the rich 1% own more than half of the national wealth and the poor 20% less than 10% of the national wealth. the rich household works only 4 hours a day and the poor household 11 hours a day. we show how the system moves to the equilibrium from an initial state and confirm that the we also demonstrate how changes in the total factor productivity of he rich’s human capital utilization efficiency, the rich’s efficiency of learning through consuming, and the rich’s propensities to save, to consume, and to enjoy growth and inequality. inequality and growth; learning by consuming; wealth and income distribution; it has been reported that the richest 1% of the world population is owning almost half o world’s wealth. moreover, it does seem that inequality be enlarged in the near future in tandem with rapid economic globalization. there is a need to know determinants international journal of economic behavior, vol 5, n. 1, pp. 59-80 59 14, 201 how do the richest 1% own 50% of the national wealth in an integrated walrasian equilibrium and neoclassical growth model wei-bin zhang ritsumeikan asia pacific university, japan published: august 10, 2015 this paper proposes a dynamic economic model of heterogeneous households to explain economic mechanisms of how the richest one per cent of the population own 50% of national competitive economic environment with endogenous wealth and human capital accumulation. the production technologies and economic structure in this study a household’s disposable income is the (which is the income that a household earns each period of time after taxes and transfers in the solow model and many empirical studies) plus the value of the household’s wealth. by applying zhang’s concept of disposable income and utility function, we scribe consumers’ wealth accumulation and consumption behavior. we show how wealth accumulation, human capital accumulation, and division of labor, and time distribution interact with three groups of the whose shares of the population are, respectively, the 1 at which the rich 1% r 20% less than 10% of the national wealth. the rich household works only 4 hours a day and the poor household 11 hours a day. we show how the system moves to the equilibrium from an initial state and confirm that the the total factor productivity of ’s human capital utilization efficiency, the rich’s efficiency of to consume, and to enjoy ; wealth and income distribution; it has been reported that the richest 1% of the world population is owning almost half of the world’s wealth. moreover, it does seem that inequality be enlarged in the near future in tandem determinants of inequality and 80, 2015 60 dynamics of inequality. this need is emphasized by forbes (2000) as follows: “careful reassessment of the relationship between these two variables (growth rate and income inequality) needs further theoretical and empirical work evaluating the channels through which inequality, growth, and any other variables are related.” surprisingly theoretical economics still has little to say about determinants and dynamics of economic growth and inequality. in a systematic review on the literature of economic growth and inequality of income and wealth, zhang (2006) points out that although the importance of issues related to growth and inequality was well recognized long time ago by economists such as marx and kaldor, modern theoretical economics has failed in providing a proper analytical framework to analyze relations between growth and inequality. without a proper analytical framework, economics can hardly analyze extremely complicated dynamic issues with nonlinear interactions among many variables over time. even mathematically it had been hopeless for any theoretical economists to deal with the issues in free market economies in an insightful and comprehensive manner even a few decades ago before computer was available for simulating high dimensional nonlinear dynamic models. the purpose of this study is to re-address issues related to growth and inequality with zhang’s concept of disposable income and utility function. we are especially interested in a phenomenon of contemporary free-market economies where the richest 1% of the population own more than almost half of wealth. by comparative dynamic analysis we also demonstrate some possibilities that inequalities will not be shrunk but will be enlarged in free market economies with rapid technological changes and connected markets. in order to analyze these issues, we introduce endogenous human capital and human capital externalities into the general equilibrium theory with heterogeneous households and endogenous wealth. this study is based on zhang’s integrated walrasian general equilibrium and neoclassical growth theory (zhang, 2006, 2014). both the walrasian general equilibrium theory and neoclassical growth theory have played a key role in the development of formal economic theories in modern times. the walrasian general equilibrium theory was initially developed by walras (walras, 1874). the theory was further developed and refined mainly in the 1950s by arrow, debreu and others (e.g., arrow and debreu, 1954; gale, 1955; nikaido, 1956, 1968; debreu, 1959; mckenzie, 1959; arrow and hahn, 1971; arrow, 1974; and mas-colell et al., 1995). the theory solves equilibrium of pure economic exchanges with heterogeneous supplies and households. from the perspective of modern economies the theory has a serious shortcoming which is failures of properly including endogenous wealth (and other factors such as environment, resources, human capital and knowledge) irrespective many attempts done by many economists. walras failed in developing a general equilibrium theory with endogenous saving and capital accumulation (e.g., impicciatore et al., 2012). over years many economists attempted to further develop walras’ capital accumulation within walras’ framework (e.g., morishima, 1964, 1977; diewert, 1977; eatwell, 1987; dana et al. 1989; and montesano, 2008). as it lacks proper economic mechanisms for determining wealth accumulation, the traditional walrasian general equilibrium theory is not proper for addressing issues related to growth and inequality. on the other hand, the neoclassical growth theory deals with endogenous wealth accumulation with microeconomic foundation (e.g., ramsey model). nevertheless, the theory is not successful in dealing with growth with heterogeneous households. almost all of the neoclassical growth models are built for a homogenous population. some neoclassical growth models with endogenous wealth accumulation consider heterogeneous households. nevertheless, the heterogeneity in these studies is by the differences in the initial endowments of wealth among different types of households rather than in preferences (see, for instance, chatterjee, 1994; caselli and ventura, 2000; maliar and maliar, 2001; penalosa and turnovsky, 2006; and turnovsky and penalosa, 2006). different households are essentially homogeneous in the sense that all the households international journal of economic behavior, 5, n. 1, pp. 3 have the same preference utility function in the traditional ramsey approach. in our approach we consider different ethnic groups have different utility functions. analyzing growth and inequality. zhang (2006, 2014) integrates with the walrasian general equilibrium theory function. this study is based on zhang’s approach to discuss growth and inequality. noted that economists made efforts in equilibrium analysis (e.g., jensen and larsen, 2005). as far as the walrasian general equilibrium theory and the traditional capital theory are concerned, the issues examined by approach with heterogeneous capital and heterogeneous households ( bewley, 1982; amir and evstigneev, 1999 main difference between polterovich modeling of household behavior. ramsey model, while this study is based on zhang take account of endogenous human capital. both physical wealth and human c inequality. wealth differs between households partly because people have different propensities to save and human capital differs between people partly because they have different abilities and preferences in accumulating human capital. model in describing economic generalized and extended in different ways over years (see, diamond, 1965; stiglitz, 1967; mino, 1996; and drugeon and venditti, 2001). with the walrasian general equilibrium theory for studying dynamic interactions among growth, wealth and income distribution, and economic structures. treat human capital accumulation as an endogenous process of economic growth. in economic theory there are only a few theoretical models which endogenous wealth and human capital accumulation is influenced by arrow and zhang’s learning through consuming (leisure creativity). paper on economic growth with heterog difference between this study and zhang (2012) is that this study treats human capital as endogenous process while the previous study by zhang considers human capital fixed. the main difference between this study and zhang (2014) is that this study treats time distribution as endogenous and the previous study by zhang neglects time distribution issues. the two studies have different human capital accumulation equations. the rest of this paper is organized a households neoclassical growth model with capital accumulation and accumulation. section 3 shows that the dynamics of the economy with can be described by j2 -dime system is too complicated, we demonstrate some of the dynamic properties by simulation when the economy consists of three types of households. section 4 carries analysis with regard to the total factor productivity of the capital goods sector, t capital utilization efficiency, the rich’s efficiency of learning through consuming, and the rich’s propensities to save, to consum 2. the basic model the economy consists of one capital good production sectors are similar to the burmeister and dobell 1970; azariadis, 1993 international journal of economic behavior, 5, n. 1, pp. 3-14, 201 tility function in the traditional ramsey approach. in our approach we consider different ethnic groups have different utility functions. it implies its limited power in analyzing growth and inequality. zhang (2006, 2014) integrates the neoclassical growth with the walrasian general equilibrium theory with his concept of disposable income and utility this study is based on zhang’s approach to discuss growth and inequality. economists made efforts in integrating the neoclassical growth theory with the general equilibrium analysis (e.g., jensen and larsen, 2005). as far as the walrasian general equilibrium theory and the traditional capital theory are concerned, the issues examined by geneous capital and heterogeneous households (polterovich, 1977, 1983; amir and evstigneev, 1999) are quite similar to the model in this study. polterovich’s model and our approach is human capital dynamics the of household behavior. polterovich’s approach to household is mainly based on the ramsey model, while this study is based on zhang’s approach. polterovich’ take account of endogenous human capital. both physical wealth and human capital are the determinants of economic growth and inequality. wealth differs between households partly because people have different propensities to save and human capital differs between people partly because they have different abilities and in accumulating human capital. this study follows uzawa’s two sector growth model in describing economic structure (uzawa, 1961). uzawa’s two-sector model has been generalized and extended in different ways over years (see, diamond, 1965; stiglitz, 1967; mino, 1996; and drugeon and venditti, 2001). we will integrate the neoclassical growth theory with the walrasian general equilibrium theory for studying dynamic interactions among growth, wealth and income distribution, and economic structures. a unique feature of our approach is to treat human capital accumulation as an endogenous process of economic growth. in economic theory there are only a few theoretical models which study inequality and growth wealth and human capital accumulation. our approach to human capital is influenced by arrow’s learning by doing, uzawa’s learning formal education, and zhang’s learning through consuming (leisure creativity). this paper also extends a recent paper on economic growth with heterogeneous households by zhang (2012 difference between this study and zhang (2012) is that this study treats human capital as endogenous process while the previous study by zhang considers human capital fixed. the main study and zhang (2014) is that this study treats time distribution as endogenous and the previous study by zhang neglects time distribution issues. the two studies have different human capital accumulation equations. the rest of this paper is organized as follows. section 2 defines the heterogeneous households neoclassical growth model with capital accumulation and . section 3 shows that the dynamics of the economy with j types of households ensional differential equations. as mathematical analysis of the system is too complicated, we demonstrate some of the dynamic properties by simulation when the economy consists of three types of households. section 4 carries out comparative dynamic the total factor productivity of the capital goods sector, t capital utilization efficiency, the rich’s efficiency of learning through consuming, and the rich’s to consume, and to enjoy leisure. section 5 concludes the study. the economy consists of one capital goods and one consumer goods sectors. are similar to the standard two-sector growth model by uzawa (uzaw azariadis, 1993; barro and sala-i-martin, 1995 61 14, 201 tility function in the traditional ramsey approach. in our approach we it implies its limited power in the neoclassical growth theory with his concept of disposable income and utility this study is based on zhang’s approach to discuss growth and inequality. it should be neoclassical growth theory with the general equilibrium analysis (e.g., jensen and larsen, 2005). as far as the walrasian general equilibrium theory and the traditional capital theory are concerned, the issues examined by polterovich’s polterovich, 1977, 1983; ) are quite similar to the model in this study. the model and our approach is human capital dynamics the approach to household is mainly based on the ’s approach does not apital are the determinants of economic growth and inequality. wealth differs between households partly because people have different propensities to save and human capital differs between people partly because they have different abilities and s two sector growth sector model has been generalized and extended in different ways over years (see, diamond, 1965; stiglitz, 1967; the neoclassical growth theory with the walrasian general equilibrium theory for studying dynamic interactions among growth, ature of our approach is to treat human capital accumulation as an endogenous process of economic growth. in economic study inequality and growth with both . our approach to human capital , uzawa’s learning formal education, this paper also extends a recent eneous households by zhang (2012, 2014). the main difference between this study and zhang (2012) is that this study treats human capital as endogenous process while the previous study by zhang considers human capital fixed. the main study and zhang (2014) is that this study treats time distribution as endogenous and the previous study by zhang neglects time distribution issues. the two studies s follows. section 2 defines the heterogeneous households neoclassical growth model with capital accumulation and human capital types of households nsional differential equations. as mathematical analysis of the system is too complicated, we demonstrate some of the dynamic properties by simulation when out comparative dynamic the total factor productivity of the capital goods sector, the rich’s human capital utilization efficiency, the rich’s efficiency of learning through consuming, and the rich’s . section 5 concludes the study. and one consumer goods sectors. most aspects of the by uzawa (uzawa, 1965; 1995). households own 62 assets of the economy and distribute their incomes to consume and to save. firms use labor and physical capital inputs to supply goods and services. exchanges take place in perfectly competitive markets. factor markets work well and the available factors are fully utilized at every moment. saving is undertaken only by households. all earnings of firms are distributed in the form of payments to factors of production, labor, managerial skill and capital ownership. the population is classified into j groups. each group has a fixed population, ,jn ( jj ...,,1= ). let prices be measured in terms of the commodity and the price of the commodity be unit. let ( )tp denote the price of consumer goods at time .t we denote wage and interest rates by ( )tw j and ( ),tr respectively. we use ( )th j to stand for group j ’s level of human capital. it should be noted that although we call it human capital, the variable ( )th j may consist of not only human capital such as skills and knowledge but also intangible assets such as social status, reputation, and social relations. we use subscript index i and s to respectively stand for capital goods and consumer goods. we use ( )tn m and ( )tk m to stand for the labor force and capital stocks employed by sector .m let ( )tt j stand for the work time of a typical worker in group .j the variable ( )tn represents the total qualified labor force. a worker’s labor force is ( ) ( ),thtt jmjj where jm is a parameter measuring utilization efficiency of human capital by group .j the labor input is the work time by the effective human capital. a group’s labor input is the group’s population by each member the labor force, that is, ( ) ( ) .j m jj nthtt j as the total qualified labor force is the sum of all the groups’ labor forces, we have ( )tn as follows ( ) ( ) ( ) , 1 ∑ = = j j j m jj nthtttn j .,...,1 jj = (1) full employment of labor and capital the total labor force is employed by the two sectors. the condition of full employment of labor force implies ( ) ( ) ( ).tntntn si =+ (2) the total capital stock ( )tk is allocated between the two sectors. as full employment of capital is assumed, we have ( ) ( ) ( ).tktktk si =+ (3) let ( )tk j denote per capita wealth of group j at .t group j ’s wealth is ( ) .jj ntk as wealth is held by the households, we have ( ) ( ) . 1 ∑ = = j j jj ntktk (4) international journal of economic behavior, 5, n. 1, pp. 3 the capital goods sector let ( )tfm stand for the producti the capital goods sector is specified as follows ( ) ( ) ( ),= iiiii tntkatf ii αβα where ,ia ,iα and iβ are positive parameters. factors, capital and labor force. marginal conditions for the capita ( ) ( )( ) ( ), twtk tf tr i ii k α δ ==+ the consumer goods sector the production function of the ( ) ( ) ( ),= ssss tntkatf ss αβα where ,sa ,sα and sβ are ( ) ( ) ( ) ( ) , tk tftp tr s ss k α δ =+ consumer behaviors and wealth dynamics consumers make decisions on choice of leisure time, consumption levels of services and commodities as well as on how much to save. ( ) ( ) ( ) ,1, jthtwtw jmjj == per capita current income from the interest ( ) ( )twtt jj is ( ) ( ) ( ) ( ) (wtttktrty jjjj += we call ( )ty j the current income in the sense that it comes from consumers human capital and efforts and consumers value of wealth that consumers c can be conducted instantaneously without any transac is given by ( ) ( ) ( ) (1ˆ tktyty jjj +=+= international journal of economic behavior, 5, n. 1, pp. 3-14, 201 stand for the production function of sector ,m ., sim = the production function of is specified as follows ,1,0, =+> iiii βαβ are positive parameters. the capital goods sector labor force. we assume that all the markets are perfectly competitive. capital goods sector are ( ) ( ) .tn tf i iiβ= he production function of the consumer goods sector is specified as follows ,0,,1 >=+ ssss βαβα are technological parameters. the marginal conditions are ( ) ( ) ( ) ( ) . tn tftp tw s ssβ= consumer behaviors and wealth dynamics consumers make decisions on choice of leisure time, consumption levels of services and commodities as well as on how much to save. we note that the wage rate of g .,, jl income from the interest payment ( ) ( )tktr j and the wage payment ( ).t the current income in the sense that it comes from consumers an capital and efforts and consumers’ current earnings from ownership of wealth. the total value of wealth that consumers can use is ( ).tk j here, we assume that selling and buying wealth can be conducted instantaneously without any transaction cost. the per capita disposable income ( )) ( ) ( ).twtktr jj ++ 63 14, 201 the production function of (5) capital goods sector employs two input we assume that all the markets are perfectly competitive. the (6) (7) the marginal conditions are (8) consumers make decisions on choice of leisure time, consumption levels of services and we note that the wage rate of group j is (9) and the wage payment the current income in the sense that it comes from consumers’ payment for current earnings from ownership of wealth. the total here, we assume that selling and buying wealth per capita disposable income (10) 64 where ( ) ( ) ( )twtttw jjj ≡ is the wage income. the disposable income is used for saving, consumption, and education. it should be noted that the value, ( ),tk j (i.e., ( ) ( )tktp j with ( ) 1=tp ), in (10) is a flow variable. under the assumption that selling wealth can be conducted instantaneously without any transaction cost, we may consider ( )tk j as the amount of the income that the consumer obtains at time t by selling all of his wealth. hence, at time t the consumer has the total amount of income equaling ( )ty jˆ to distribute between saving and consumption. it should be noted that in the traditional neoclassical growth theory and most empirical studies disposable income is defined as the income that a household earns each period of time after taxes and transfers. it is supposed to be the money available to the household for spending on goods and services. indeed, when wealth plays minor role in analyzing behavior of households the traditional concept is not misleading. nevertheless, when wealth is large and plays an important role in affecting household behavior, the omission in the money available for spending may be misleading. obviously, a rich man with the net value of wealth us$70 billions will save a lot even if he had no current income (no pension and wealth earning a net zero rate of return) as common sense tells us. according to the neoclassical growth theory (such as the most well-known solow model in growth theory), the rich man makes neither consumption nor saving as his disposable income is zero. in our model, the man’s disposable income is 0 + 70 = 70. if his consumption annually is 0.1 billions, his saving is 70 – 0.1 = 69.9 billions us dollars. his actual saving rate is saving/(disposable income) = 69.9/70, rather than 0 as in a national statistical record. in our approach rich people have a high propensity to save than poor people partly as the extremely rich have too much to spend. as our approach accumulated wealth will play another important role in protecting the social status as wealth helps the rich to accumulate more physical capital (due to interest returns of wealth) as well as human capital (due to easy access to best education, for instance), to build more useful social networks, and maintain reputation of being rich. the typical consumer distributes the total available budget between saving ( ),ts j consumption of consumer goods ( ).tc j the budget constraint is ( ) ( ) ( ) ( ) ( )( ) ( ) ( ) ( ),1ˆ tttwtktrtytstctp jjjjjj ++==+ (11) the time constraint for everyone ( ) ( ) ,0ttttt jj =+ (12) where ( )tt j is the leisure time of the representative household and 0t is the total available time. substituting (12) into (11) yields ( ) ( ) ( ) ( ) ( ) ( ) ( )( ) ( ) ( ).1 0 twttktrtytstctptttw jjjjjjj ++≡=++ (13) the variable ( )ty j is the disposable income when the household spends all the available time on work. we assume that the consumer’s utility function is dependent on ( ),tt j ( ),tc j and ( )ts j as follows international journal of economic behavior, 5, n. 1, pp. 3 ( ) ( ) ( ) (000= j tstctttu jjj λξσ where 0jσ is the propensity to use leisure time, the propensity to own wealth. this utility function different economic problems. maximizing ( ) ( ) ( ) ( ), tc tw ty tt j j jj j σ == where , 000 jjjjj ρξσρσ ≡≡ change in the household wealth according to the definitions of group j is given by ( ) ( ) ( ).tktstk jjj −=& this equation simply states that the change in wealth is equal to saving minus dissaving. dynamics of human capital in economic theory there are “learning by producing”, and doing into growth theory. the basic idea is that people accumulate more skills and have more ideas when they are engaged in economic production. between investment in education and capital accumulation the basic idea is that education uses social resources but enable people to have more skills and knowledge. zhang (2007) introduced impact of consumpti the so-called creative leisure) into growth theory. knowledge can be obtained mainly through working experiences. his idea has narrow implications as there are many othe which are classified neither as formal education as in the uzawa model nor as production as in the arrow model, such as playing computer games, having social parties, being brought up by rich and educated parents, living in a decent society, touring different parts of the world, and being extremely rich, may have strong effects on human capital. influencing by the three approaches just mentioned and being concerned with providing a case of richest 1 wealth, we propose that the human capital accumulation is described as follows ( ) ( ) ( ) ( ) ~ th ttktc th j jj a jj j j jjjυ π θυ =& international journal of economic behavior, 5, n. 1, pp. 3-14, 201 ) ,0,,, 000 >jjj λξσ is the propensity to use leisure time, 0jξ is the propensity to consume, and the propensity to own wealth. this utility function proposed by zhang (1993) maximizing ( )tu j subject to (13) yields ( ) ( ) ( ) ( ),, tyts tp ty jjj s jj λ ξ = . 1 ,, 000 000 jjj jjjjj λξσ ρλρλξ ++ ≡≡ wealth finitions of ( ),ts j the wealth accumulation of the representative household in this equation simply states that the change in wealth is equal to saving minus dissaving. n economic theory there are three sources of improving human capital, through education , and “learning by leisure”. arrow (1962) first introduced learning by . the basic idea is that people accumulate more skills and have more ideas when they are engaged in economic production. uzawa (1965) took account of between investment in education and capital accumulation in his well-known two the basic idea is that education uses social resources but enable people to have more skills and zhang (2007) introduced impact of consumption on human capital accumulation (via called creative leisure) into growth theory. arrow’s idea of learning by doing is that useful knowledge can be obtained mainly through working experiences. his idea has narrow implications as there are many other sources of accumulating skills and knowledge. activities which are classified neither as formal education as in the uzawa model nor as production as in the arrow model, such as playing computer games, having social parties, being brought up by ducated parents, living in a decent society, touring different parts of the world, and being extremely rich, may have strong effects on human capital. influencing by the three approaches just mentioned and being concerned with providing a case of richest 1 wealth, we propose that the human capital accumulation is described as follows ( ) ( ),tht jhjδ− 65 14, 201 (14) is the propensity to consume, and 0jλ proposed by zhang (1993) is applied to (15) of the representative household in (16) this equation simply states that the change in wealth is equal to saving minus dissaving. sources of improving human capital, through education, arrow (1962) first introduced learning by . the basic idea is that people accumulate more skills and have more uzawa (1965) took account of trade-offs known two-sector model. the basic idea is that education uses social resources but enable people to have more skills and on on human capital accumulation (via arrow’s idea of learning by doing is that useful knowledge can be obtained mainly through working experiences. his idea has narrow r sources of accumulating skills and knowledge. activities which are classified neither as formal education as in the uzawa model nor as production as in the arrow model, such as playing computer games, having social parties, being brought up by ducated parents, living in a decent society, touring different parts of the world, and being extremely rich, may have strong effects on human capital. influencing by the three approaches just mentioned and being concerned with providing a case of richest 1% owing 50% wealth, we propose that the human capital accumulation is described as follows (17) 66 where hjδ is the depreciation rates of human capital, .10 << hjδ in (17), , ~ jυ ,ja ,jυ and jθ are non-negative parameters, and jπ is a parameter. in our approach different groups may have different depreciation rates of human capital. the human capital accumulation in this study is influenced by different approaches to human capital accumulation in the literature of endogenous human capital. we now interpret the items in ./~ jjjj jjj a jj htkc πθυυ the item jajc which implies a positive relation between human capital accumulation and consumption is influenced by uzawa’s learning through education and zhang’s learning through consumption. as education is classified as the consumption of services, a higher level of consumption may imply a higher investment in education. on the other hand, a higher consumption also implies that the household may accumulate more through other consumption activities. the item jjk υ which implies a positive relation between wealth and human capital accumulation can be interpreted that more wealth means, for instance, a higher social status. more wealth may also help one to maintain professional reputation. the specification of jjt θ is influenced by arrow’s learning by doing. more work accumulates more human capital. the term jjh π implies that more human capital makes it easier (more difficult) to accumulate knowledge in the case of 0<jπ ( 0>jπ ). demand of and supply for consumer goods the output of the consumer goods sector is consumed only by the households. the demand for consumer goods from a group is ( ) .jj ntc the condition that the total demand is equal to the total supply implies ( ) ( ). 1 tfntc s j j jj =∑ = (18) demand of and supply for capital goods as output of the capital goods sector is used only as capital goods, the output equals the depreciation of capital stock and the net savings. that is ( ) ( ) ( ) ( ). 1 tftktknts ik j j jj =+−∑ = δ (19) we completed the model. the model is structurally general in the sense that some wellknown models in theoretical economics can be considered as its special cases. for instance, if we fix wealth and human capital and allow the number of types of households equal the population, then the model is a walrasian general equilibrium model. if the population is homogeneous, our model is structurally similar to the neoclassical growth model by solow (1956) and uzawa (1961). it is structurally similar to the multi-class models by pasinetti and samuelson (e.g., samuelson, 1959; pasinetti, 1960, 1974). we now examine dynamics of the model. international journal of economic behavior, 5, n. 1, pp. 3 3. the dynamics and its properties as the system consists of any number of types of households, its dynamics dimensional. the following lemma shows that the economic dynamics is represented by dimensional differential equations. ( ) ( ) ( ) . tw tr tz k δ+ ≡ lemma the dynamics of the economy equations system with ( ),tz {k ( ) ( )( ),,,1 thth jl as the variables ( ) ( ) ( )( ) ({( ,,1 kthtztz jjλ=& ( ) ( ) ( )( ) {( ,, kthtztk jjjj λ=& ( ) ( ) ( )( ) {( ,, thtzth jjj ω=& in which jλ and jω are unique functions of defined in the appendix. for given determined at any point in time by the following procedure: (a4) → ( )tp by (a5) → (tk1 (a8) → ( )ty j by (a6) → k ( ),tt j ( ),tc j and ( )ts j by (15) following the lemma, we have a computational program to follow the motion of the dynamic economic system by simulating households. as the system is nonlinear and is of high dimension, it is difficul analyze behavior of the system. 0 .0 0 , 20 69 1 3 2 1 3 2 1      =                     =           m m m n n n 1.0 2.0 3.0 , 1.0 4.0 8.0 3 2 1 3 2 1      =                     =           a a a v v v 32.0,9.0,1 === isi aa α .05.0,08.03 == kh δδ group 2,1 and s'3 populations are respectively population. the capital goods sector and international journal of economic behavior, 5, n. 1, pp. 3-14, 201 dynamics and its properties as the system consists of any number of types of households, its dynamics e following lemma shows that the economic dynamics is represented by dimensional differential equations. first we introduce a variable economy is governed by the following j2 dimensional differential ( )},tk j and ( )( ),th j where ( ){ } ( )( ktktk j ,,2 l≡ as the variables ( )}),t ( )}) ,,...,2, jjtj = ( ){ }) ,,...,1, jjtk j = are unique functions of ( ),tz ( ){ },tk j and ( )( )th j at any p ppendix. for given ( ),tz ( ){ },tk j and ( )( ),th j the other variables are uniquely time by the following procedure: ( )tr and ( )tw by (a3) )t by (a18) → ( )tni by (a12) → ( )tn by (a11) ( )tki and ( )tk s by (a1) → ( )tfi and ( )tfs by the definitions ) → ( )tk by (4). following the lemma, we have a computational program to follow the motion of the dynamic economic system by simulating the dynamic equations with any number of types of he system is nonlinear and is of high dimension, it is difficul analyze behavior of the system. for illustration, we specify the parameters as follows: , 6.0 56.0 49.0 , 2.0 18.0 1.0 , 1.0 51. 7.0 30 20 10 30 20 10 30 20 10                     =                     =                σ σ σ λ λ λ ξ ξ ξ 0 0 0 , 4.0 35.0 3.0 , 1.0 1.0 2.0 , 1 2 3 3 2 1 3 2 1 3 2 1      =                     =                     =                π π π θ θ θ v v v 0,04.0,24,34.0,32 210 ==== hhs t δδα populations are respectively 69,1 and .20 group the capital goods sector and consumer goods sector’s total productivities are 67 14, 201 as the system consists of any number of types of households, its dynamics is highly e following lemma shows that the economic dynamics is represented by j2 dimensional differential ( ))tk j and ( )( ) ≡th j at any point in time, the other variables are uniquely by (a3) → ( )tw j by by (a11) → ( )tn s by by the definitions → following the lemma, we have a computational program to follow the motion of the the dynamic equations with any number of types of he system is nonlinear and is of high dimension, it is difficult to generally the parameters as follows: , 2.0 2.0 25.0           =      , 4.0 2.0 1.0      ,06.0 (20) group 2 has the largest s total productivities are 68 respectively 1 and .9.0 group 2,1 and s'3 utilization efficiency parameters, ,jm are respectively ,7.0 15.0 and .1.0 group 1 utilizes human capital mostly effectively; group 2 next and group 3 lest effectively. we call the three groups respectively as the rich, the middle, and the poor. we we specify the values of the parameters, ,jα in the cobb-douglas productions approximately equal to .3.0 the rich’s learning by doing parameter, ,1v is the highest. the returns to scale parameters, ,jπ are all positive, which implies that human capital accumulation exhibits decreasing returns to scale in human capital. the depreciation rates of human capital are specified in such a way that the rich has lowest rate. the rich’s propensity to save is 94.0 and the rich’s propensity to save is .6.0 it is assumed that the rich is most effective in learning through consuming and working. the value of the middle’s propensity is between the rich and the poor. in figure 1, we plot the motion of the system with the following initial conditions ( ) ( ) ( ) ( ) ( ) ( ) .30,170,4600,450,730,135.00 32132 ====== hhhkkz (21) in figure 1, the national output ,y the share of each group’s wealth in the national wealth jwθ , and the ratio between group 1’s and another group’s wealth ,jϕ are respectively defined as ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) .3,2,1,,, 1 =≡≡+= j tk tk t tk tk ttftptfty j j j jwsi ϕθ figure 1 – the motion of the economic system. with different initial conditions, the economy experiences different paths of development. under (21), the national output and wealth experience negative growth over time. the rich’s human capital is increased and the middle’s and poor’s human capital fall over time. a rich household works more hours and a household from the other two groups works less. the rich own more than half of the national wealth with 1 percent of the population and the poor own less 10 per cent of the national wealth with the 20 percent of the national population. the representative household from the rich owns more than 160 times wealth than the household from the poor. 0 20 40 60 0.1 0.35 0.6 0 20 40 60 100 140 180 0 20 40 60 9000 12 800 16 600 0 20 40 60 3300 3400 3500 0 20 40 60 2540 2580 2620 0 20 40 60 800 1250 1700 0 20 40 60 0.02 0.0215 0.023 0 20 40 60 1.0616 1.0623 1.063 0 20 40 60 580 620 660 0 20 40 60 100 260 420 0 20 40 60 2.3 2.65 3 0 20 40 60 52 54 56 0 20 40 60 14 18 22 0 20 40 60 17 18 19 0 20 40 60 12 16 20 t t t t t t t t t i f y 1h 2c ik sk r 1w 2w 3w 1k 2k 3k 1c 3c t t t k n sf sn i n 2h p r w3θ 2t 3t 3h 1t t t t 2θ w1θ 3ϕ 2ϕ international journal of economic behavior, 5, n. 1, pp. 3 we start with different initial states not far aw system approaches to an equilibrium point. under ( equilibrium. the equilibrium values are listed in (2 highest wage income. the rich household spends lest hours on working and t spends longest time on working. the much higher than the household from the two other groups. ,373.0,559.0 21 == ww θθ ,6.804,4.1708 == i ffn ,06.1,023.0 1 === wpr ,9.591,13.17 13 == hhw ,66.22,7.629 321 == ccc it is straightforward to calculate the ,18.0,32.0,83.0 −−−− as all the eigenvalues are negative, we see that the equilibrium point is locally stable. 4. comparative dynamic analysis we simulated the motion of the dynamic system. change in one group’s propensity to save or t inequality and each class’s wealth and consumption. analysis, we introduce a variable percentage due to changes in a the rich applying human capital more effectively different people in society have different opportunities to expected that the rich has more opportunities to util human capital. there are many possible determinants of inequality of income and wealth in modern societies. it is expected that the rich get richer in the near future. for instance, if the society is developed toward such a direction that enables the rich (and successful ones) to apply their human capital more effectively, one may expect changes in inequality between the rich and the poor. we now increase the .71.07.0:1 ⇒m as the rich increases their efficiency in applying human capital, the inequality between the rich and the poor is greatly enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor and rich and between the middle and rich are increased. the improved efficiency by the rich benefits the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate o tandem with rising national wealth. the price of consumer goods falls. the rich’s human capital as well as the poor and the middle are all enhanced, with the rich’s human capital being increased much higher than the poor and middle’s. i rich’s human capital utilization efficiency increases not only the rich’s per household wealth, consumption level of services and wage income, but also the middle’s and the poor’s. in summary, an improvement in international journal of economic behavior, 5, n. 1, pp. 3-14, 201 we start with different initial states not far away from the equilibrium point and find that the system approaches to an equilibrium point. under (21) we find that the system has a unique equilibrium. the equilibrium values are listed in (22). the rich has highest human capital and the rich household spends lest hours on working and t longest time on working. the rich household’s consumption level and wealth are also much higher than the household from the two other groups. 3503,7.162,4.103,069.0 323 ==== yw ϕϕθ ,3.12566,3526,2.2539 === isis nkkf ,4.462,48.1,04.2,9.118 132 ==== www ,23.8988,28.2,47.14 2132 ==== kkhh 43.12,15.13,11.20,31.17 3213 ==== ttt it is straightforward to calculate the six eigenvalues as follows .03.0,07.0,11.0 −−− e eigenvalues are negative, we see that the equilibrium point is locally stable. comparative dynamic analysis we simulated the motion of the dynamic system. it is important to ask questions such as how a s propensity to save or to obtain education affects the economic growth, s wealth and consumption. before carrying out comparative dynamic a variable ( )tx j∆ to stand for the change rate of the variable, parameter. applying human capital more effectively different people in society have different opportunities to apply their human capital. it is expected that the rich has more opportunities to utilize and tends to be more capable of applying human capital. there are many possible determinants of inequality of income and wealth in modern societies. it is expected that the rich get richer in the near future. for instance, if the oward such a direction that enables the rich (and successful ones) to apply their human capital more effectively, one may expect changes in inequality between the rich and we now increase the rich’s human capital utilization efficiency as follows as the rich increases their efficiency in applying human capital, the inequality between the rich and the poor is greatly enlarged. the rich get higher share of the national wealth and the ratios of per household wealth he poor and rich and between the middle and rich are increased. the improved efficiency by the rich benefits the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate o tandem with rising national wealth. the price of consumer goods falls. the rich’s human capital as well as the poor and the middle are all enhanced, with the rich’s human capital being increased much higher than the poor and middle’s. it should be noted that an improvement in the rich’s human capital utilization efficiency increases not only the rich’s per household wealth, consumption level of services and wage income, but also the middle’s and the poor’s. in summary, an improvement in the rich’s human capital utilization efficiency enlarges the gaps 69 14, 201 ay from the equilibrium point and find that the ) we find that the system has a unique has highest human capital and the rich household spends lest hours on working and the poor household s consumption level and wealth are also ,3.16092,5.3503 =k ,9.1306,4.401 == sn ,1.222 =w ,19.55,96.86 3 == k .43 (22) e eigenvalues are negative, we see that the equilibrium point is locally stable. it is important to ask questions such as how a the economic growth, before carrying out comparative dynamic stand for the change rate of the variable, ( ),tx j in their human capital. it is ize and tends to be more capable of applying human capital. there are many possible determinants of inequality of income and wealth in modern societies. it is expected that the rich get richer in the near future. for instance, if the oward such a direction that enables the rich (and successful ones) to apply their human capital more effectively, one may expect changes in inequality between the rich and human capital utilization efficiency as follows: as the rich increases their efficiency in applying human capital, the inequality the rich get higher share of the national wealth and the ratios of per household wealth he poor and rich and between the middle and rich are increased. the improved efficiency by the rich benefits the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate of interest falls in tandem with rising national wealth. the price of consumer goods falls. the rich’s human capital as well as the poor and the middle are all enhanced, with the rich’s human capital being t should be noted that an improvement in the rich’s human capital utilization efficiency increases not only the rich’s per household wealth, consumption level of services and wage income, but also the middle’s and the poor’s. in the rich’s human capital utilization efficiency enlarges the gaps 70 between the rich and the poor and the rich and middle, and benefits everyone in society (except everyone working longer hours). by the way it should be remarked that the impact of human capital is currently a main topic in economic theory and empirical research (e.g., easterlin, 1981, hanushek and kimko, 2000; barro, 2001; krueger and lindahl, 2001; bandyopadhyay and tang, 2011; castelló-climent and hidalgo-cabrillana, 2012). there are different empirical conclusions about inequalities and human capital (e.g., tilak, 1989; could et al. 2001; tselios, 2008; fleisher et al. 2011). our study addresses issues related to dynamic interactions among growth, inequality and distribution by assuming heterogeneity in preferences and human capital utilization efficiencies among different types of people. our conclusion with regard to the rich’s human capital change is that it benefits everyone and worsen equality. figure 2 – the rich applying human capital more effectively the rich’s propensity to save being augmented if the rich has become too rich to spend their wealth and become less interested in showing off with wealth, their propensity to save tends to be enhanced. we now increase the rich’s propensity to save in the following way: .95.049.0:01 ⇒λ the simulation results are plotted in figure 3. the effects caused by the rise in the rich’s propensity to save are quite similar to the effects of an improvement in the rich’s human capital utilization efficient. as the rich increases their propensity to save, the inequality between the rich and the poor is enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor and rich and between the middle and rich are increased. the national wealth, gdp and total labor supply are augmented. the output levels and two input factors of the two sectors are increased. the rate of interest and the price of consumer goods are lowered. the rich’s human capital as well as the poor and the middle are all enhanced. it should be noted that although the rich’s consumption of consumer goods is reduced in the short term, it is enhanced in the long term. this occurs as in the short term the increased propensity to save makes the rich consume less from the disposable income. but their consumption is increased in the long term as more wealth enables the rich to accumulate more human capital and the rich work long hours due to the change in the preference. we see that in the long term any household’s per household wealth, consumption level of services and wage income are augmented. in summary, a rise in the rich’s propensity to save benefits the national economic variables, enlarges the gaps between the rich and the poor and the rich and middle, and benefits everyone in society (except everyone working longer hours). 20 40 60 5 0.5 6 0 20 40 60 6.9 8.2 9.5 0 20 40 60 2 4 6 0 20 40 60 2.3 3 3.7 0 20 40 60 2.2 2.5 2.8 0 20 40 60 1 3.5 6 0 20 40 60 4 6.3 8.6 0 20 40 60 1 3 5 20 40 60 6 3 0 20 40 60 0.06 0.03 0 0 20 40 60 0 2.1 4.2 0 20 40 60 0 7 14 0 20 40 60 0 5 10 0 20 40 60 0 5 10 20 40 600.4 0.3 1 t t t t t t 1h∆ y∆ 3h∆ sn∆ 2w∆ 2h∆ 3k∆ if∆ 1c∆ t t t t t t n∆ k∆ sf∆ in∆ r∆ w1θ∆ ik∆ sk∆ 2k∆ 1k∆ 1w∆ 3w∆ 1t∆ 2t∆ 3t∆ 2c∆ 3c∆ p∆ t t t w2θ∆ w3θ∆ 3ϕ∆ 2ϕ∆ international journal of economic behavior, 5, n. 1, pp. 3 figure 3 – the rich’s propensity to save being augmented the rich’s propensity to consume we now increase the rich’s propensity simulation results are plotted in figure rich’s preference change. in the short term the inequalities are “improved” as the share of the rich in the national wealth falls and the ratios of the per household’s wealth levels are shrunk. in the long term the inequalities are “deteriorated” as the share of the r and the ratios of the per household’s wealth levels are enhanced. this occurs partly because in our approach working experiences, owning wealth and consuming experiences all can affect human capital accumulation. as the ric opportunities, learn more about business and build more productive/useful human relations. the rich’s human capital is thus enhanced. as they earn more income, their share of national wealth will be increased more rapidly than the other two groups. the rich work more hours and the middle and the poor work less hours. the rich get more wage income and the other two groups less. the national wealth is reduced and the national gdp and labor supply are augmented. the rate of interest and price of consumer goods rise. the output of the consumer goods sector is enhanced and the output of the capital goods sector is reduced. figure 4 – the rich’s propensity to consume being increased 20 40 60 0.8 0.1 0.6 0 20 40 0.7 1 1.3 20 40 60 0 0.5 1 0 20 40 0.6 1 1.4 0 20 40 60 0 0.2 0.4 0 20 40 0 0.4 0.8 20 40 60 1 0 1 20 2 0.7 0.6 20 40 60 3 0.3 2.4 20 4.4 1.7 1 20 40 60 0 2.5 5 20 40 0 8 16 t t 1h∆ 3h∆ ∆2h∆ if∆ t sf∆ w1θ∆ ik∆ 1w∆ w2θ∆ w3θ∆ ∆ t t 1h∆ 3h∆ 2h∆ if∆ t sf∆ ∆ w1θ∆ 1w∆ w2θ∆ w3θ∆ 2ϕ∆ international journal of economic behavior, 5, n. 1, pp. 3-14, 201 the rich’s propensity to save being augmented consume being increased propensity to consume in the following way: 01ξ simulation results are plotted in figure 4. per household of all the households is reduced by the rence change. in the short term the inequalities are “improved” as the share of the rich in the national wealth falls and the ratios of the per household’s wealth levels are shrunk. in the long term the inequalities are “deteriorated” as the share of the rich in the national wealth rises and the ratios of the per household’s wealth levels are enhanced. this occurs partly because in our approach working experiences, owning wealth and consuming experiences all can affect human capital accumulation. as the rich consume more, they may grasp more business opportunities, learn more about business and build more productive/useful human relations. the rich’s human capital is thus enhanced. as they earn more income, their share of national re rapidly than the other two groups. the rich work more hours and the middle and the poor work less hours. the rich get more wage income and the other two national wealth is reduced and the national gdp and labor supply are rate of interest and price of consumer goods rise. the output of the consumer goods sector is enhanced and the output of the capital goods sector is reduced. the rich’s propensity to consume being increased 40 60 0 20 40 60 0.2 0.55 0.9 0 20 40 60 0.16 0.29 0.42 0.185 40 60 20 40 60 0 0.4 0.8 20 40 60 1.5 0.75 0 40 60 0 20 40 60 0 0.75 1.5 20 40 60 0.4 0 0.4 40 60 20 40 60 1.6 0.8 0 0 20 40 60 0 1 2 40 60 20 40 601 1.5 4 0 20 40 60 0 4 8 40 60 20 40 60 2.5 1 0.5 20 40 60 0 6 12 t t t y∆ sn∆ 2w∆ 3k∆ 1c∆ t t t k∆ in∆ r∆ sk∆ 2k∆ 1k∆ 1 3w∆ 2c∆ 3c∆ 3ϕ∆ 2ϕ∆ t t t y∆ sn∆ 2w∆ 3k∆ 1c∆ t t t k∆ in r∆ ik∆ sk∆ 2k∆ 1k∆ 1 3w∆ 2c∆ 3c∆ 3ϕ∆ 71 14, 201 .08.007.0: ⇒ the per household of all the households is reduced by the rence change. in the short term the inequalities are “improved” as the share of the rich in the national wealth falls and the ratios of the per household’s wealth levels are shrunk. in the ich in the national wealth rises and the ratios of the per household’s wealth levels are enhanced. this occurs partly because in our approach working experiences, owning wealth and consuming experiences all can affect h consume more, they may grasp more business opportunities, learn more about business and build more productive/useful human relations. the rich’s human capital is thus enhanced. as they earn more income, their share of national re rapidly than the other two groups. the rich work more hours and the middle and the poor work less hours. the rich get more wage income and the other two national wealth is reduced and the national gdp and labor supply are rate of interest and price of consumer goods rise. the output of the consumer goods sector is enhanced and the output of the capital goods sector is reduced. 0 20 40 60 0.16 0.185 0.21 20 40 60 0.014 0.007 0 20 40 60 0.4 0.2 0 0 20 40 60 0 1.5 3 0 20 40 60 0 0.04 0.08 20 40 60 2.5 1 0.5 t t t n∆ 1t∆ 2t∆ 3t∆ p∆ t t t t t t n∆ 1t∆ 2t∆ 3t∆ p∆ t t t 72 the rich’s propensity to enjoy leisure being increased another change in the rich’s preference is that they prefer more consuming leisure. to examine the impact of their preference change, we now increase the rich’s propensity to enjoy leisure as follows: .26.025.0:01 ⇒σ the simulation results are plotted in figure 5. the inequalities are improved as the share of the rich in the national wealth falls and the ratios of the per household’s wealth levels are shrunk. as the rich spend more time leisure, their human capital fall. the national wealth, gdp and labor supply all fall. the rate of interest and price of consumer goods rise. the output levels of the two sectors and each sector’s two inputs are enhanced. the household from any group has lower human capital, works less hours, consumes less goods, and owns less wealth. in summary as the rich tend to enjoy more leisure, the inequalities are reduced but everyone worsens off (except having more leisure hours). figure 5 – the rich’s propensity to enjoy leisure being increased a rise in the total factor productivity of the capital goods sector another important question is what will happen to different people and the national economy if the total factor productivity of the capital goods sector is increased. we increase the total productivity in the following way: .05.11: ⇒ia the simulation results are plotted in figure 6. the rise in the productivity increases human capital and wage incomes of all the groups. the rate of interest rises initially and falls in the long term. the price of consumer goods rises. the distribution of the total labor force is slightly affected. the two sectors increase the output levels in the long term. the wealth and consumption levels of all the groups are increased in the long term. the national wealth, gdp and total labor supply are all increased. the inequality between the rich and the poor is enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor and rich and between the middle and rich are increased. it should be further noted that economists have been concerned with relations between wealth and income distribution and growth have long time ago. kaldor (1956) argues that as income inequality is enlarged, growth should be encouraged as savings are promoted. this positive relation between income inequality and growth is also observed in studies, for instance, by bourguignon (1981), forbes (2000), and frank (2009). there are other studies which find negative relations between income inequality and economic growth. some mathematical models which predicate negative relations are referred to, for instance, galor and zeira (1993) and galor and moav (2004), and benabou (2002). some empirical studies by, for instance, persson and tabellini (1994), also confirm negative relations. from our simulation, we see that relations between inequality and economic growth are complicated in the sense that these relations are determined by many factors. the relation are 20 40 60 2.2 0.4 3 0 20 40 60 5 3.8 2.6 0 20 40 60 3.1 1.8 0.5 0 20 40 60 2 1.3 0.6 0 20 40 60 1.3 0.95 0.6 0 20 40 60 3.1 1.8 0.5 0 20 40 60 4.4 2.7 0 20 40 60 2.7 1.6 0.5 20 40 60 0 1.8 3.6 20 40 60 0.005 0.02 0.035 20 40 60 3 1.5 0 20 40 60 7 3.5 0 20 40 60 5.4 2.7 0 20 40 60 5.4 2.7 0 20 40 60 0 0.8 1.6 t t t t t t 1h∆ y∆ 3h∆ sn∆ 2w∆ 2h∆ 3 k∆ if∆ 1c∆ t t t t t t n∆ k∆ sf∆ in∆ r∆ w1θ∆ ik∆ sk∆ 2k∆ 1k∆ 1w∆ 3w∆ 1t∆ 2t∆ 3t∆ 2c∆ 3c∆ p∆ t t t w2θ∆ w3θ∆ 3ϕ∆ 2ϕ∆ international journal of economic behavior, 5, n. 1, pp. 3 expectably ambiguous or development negative relations according the development. we already demonstrated that if the rich increase their human capital utilization efficiency or the total factor productivity of the capital goods sector is increased, the economy experiences positive growth and inequalities are enlarged. it is also straightfor if either the poor or the middle increase their human capital utilization efficiency, the economy will experience positive growth and inequalities between are shrunk. figure 6 – a rise in the total factor productivity of the capital goods sector the rich’s learning through consuming being strengthened we now strengthen the impact of accumulation as follows: :1a accumulation more strongly, the wealth gap between the rich and the poor is enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor and rich and between the middle and rich are enhanced. the rich’s human capital is augmented, which also increases the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate of interest of consumer goods fall. we see that the parameter change enlarges the gaps between the rich and the poor and the rich and middle, and benefits everyone in society (except everyone working longer hours). figure 7 – the rich’s learning through consuming being strengthened 20 40 602 1.5 5 0 20 40 0 3 6 20 40 60 0 5.5 11 0 20 40 1.8 5.1 8.4 0 20 40 60 0 1.25 2.5 0 20 40 4 7 10 20 40 60 3 0.5 2 0 20 40 0 2.5 5 0 20 40 60 0 2 4 0 20 40 0 2.5 5 0 20 40 60 0 4 8 0 20 40 0 4 8 t t 1h∆ 3h∆ w∆ 2h∆ if∆ t sf∆ n∆ w1θ∆ ik∆ ∆ w2θ∆ w3θ∆ 2ϕ∆ t t 1h∆ 3h∆ ∆2h∆ if∆ t s f∆ w1θ∆ ∆ w2θ∆ w3θ∆ 2ϕ∆ international journal of economic behavior, 5, n. 1, pp. 3-14, 201 expectably ambiguous or development-dependent in the sense that one may observe positive or negative relations according the parameter values combinations and state of economic ready demonstrated that if the rich increase their human capital utilization efficiency or the total factor productivity of the capital goods sector is increased, the economy experiences positive growth and inequalities are enlarged. it is also straightfor if either the poor or the middle increase their human capital utilization efficiency, the economy will experience positive growth and inequalities between are shrunk. a rise in the total factor productivity of the capital goods sector ’s learning through consuming being strengthened strengthen the impact of the rich’s learning through consuming upon human capital .31.03.0: ⇒ as the rich’s consumption affects human capital strongly, the wealth gap between the rich and the poor is enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor een the middle and rich are enhanced. the rich’s human capital is augmented, which also increases the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate of interest of consumer goods fall. we see that the parameter change enlarges the gaps between the rich and the poor and the rich and middle, and benefits everyone in society (except everyone working the rich’s learning through consuming being strengthened 40 60 0 20 40 60 2 5 8 0 20 40 60 7 7.6 8.2 40 60 20 40 602 3 8 20 40 60 0 4 8 40 60 0 20 40 60 0 4 8 20 40 602 1 4 40 60 0 20 40 60 0 1.5 3 0 20 40 60 0 1 2 40 60 20 40 60 0 1.3 2.6 20 40 60 3 1.5 0 40 60 0 20 40 60 0 2.6 5.2 0 20 40 60 0 3 6 t t t y∆ sn∆ 2w 3k∆ 1c∆ t t t k∆ in r∆ sk∆ 2k∆ 1 k∆ 1w∆ 3w∆ 2 c∆ 3c∆ 3ϕ∆ t t t t y∆ sn∆ 2w∆ 3k∆ 1c∆ t t t k∆ in∆ r∆ ik∆ sk∆ 2k∆ 1k∆ 1 w∆ 3w∆ 2c∆ 3c∆ 3ϕ∆ 73 14, 201 dependent in the sense that one may observe positive or values combinations and state of economic ready demonstrated that if the rich increase their human capital utilization efficiency or the total factor productivity of the capital goods sector is increased, the economy experiences positive growth and inequalities are enlarged. it is also straightforward to show that if either the poor or the middle increase their human capital utilization efficiency, the economy a rise in the total factor productivity of the capital goods sector learning through consuming upon human capital affects human capital strongly, the wealth gap between the rich and the poor is enlarged. the rich get higher share of the national wealth and the ratios of per household wealth between the poor een the middle and rich are enhanced. the rich’s human capital is augmented, which also increases the growth of the national wealth, gdp and total labor supply. the output levels and two input factors of the two sectors are augmented. the rate of interest and the price of consumer goods fall. we see that the parameter change enlarges the gaps between the rich and the poor and the rich and middle, and benefits everyone in society (except everyone working 0 20 40 60 0.4 1.2 2 0 20 40 60 4.84 4.92 5 20 40 60 3 1 1 0 20 40 60 0 0.8 1.6 20 40 60 0.03 0.015 0 20 40 60 0.4 0.2 0 t t t n∆ 1t∆ 2t∆ 3t∆ p∆ t t t t t t n∆ 1t∆ 2t∆ 3t∆ p∆ t t t 74 5. concluding remarks this paper built a dynamic economic model of heterogeneous households to explain some economic mechanisms of how the richest one per cent of the population own 50% of national wealth. the main determinants of growth and inequality are endogenous wealth and human capital accumulation under perfectly competitive conditions. the production technologies and economic structure follow the uzawa two-sector model. in this study a household’s disposable income is the traditional disposable income (which is the income that a household earns each period of time after taxes and transfers in the solow model and many empirical studies) plus the value of the household’s wealth. by applying zhang’s concept of disposable income and utility approach, we describe consumers’ wealth accumulation and consumption behavior. we showed how wealth accumulation, human capital accumulation, and division of labor, and time distribution interact with each other under perfect competition. we simulated the model with three groups of the population, the rich 1 %, the middle 69%, and the poor 20%. we demonstrated the existence of an equilibrium point at which the rich 1% do own more than half of the national wealth and the poor 20% less than 10% of the national wealth. we showed how the system moves to the equilibrium from an initial state and confirm that the equilibrium point is stable. we also demonstrated how changes in the total factor productivity of the capital goods sector, the rich’s human capital utilization efficiency, the rich’s efficiency of learning through consuming, and the rich’s propensities to save, to consume, and to enjoy leisure, affect growth and inequality. although our comparative dynamic analysis does not find a situation of ‘the rich get richer and the poor get poorer’, we show that inequalities can be enlarged in tandem with economic growth, for instance, when the total factor productivity of the capital goods sector is increased. the study has many obvious limitations when we look at real economic systems. for instance, we assume that there is no social mobility in the economic system. although for a “mature” social and economic system, it is rate for the poor to become rich. in a case like china, about three decades ago there was almost no rich in the entire country. the educated and rich could rarely survive during the mao period. today there are so many really rich people who had never dreamt of becoming rich even two decades ago. our model does not explain this kind of phenomena. this study does not consider the role of the government in redistributing wealth and income. it is important to see how the government can affect distribution with various policies. we carried out comparative dynamic analysis only with respect change in a single parameter. it is more insightful to allow multiple parameters to be changed simultaneously. another important issue is how to introduce endogenous change in preferences of different people. we may extend the model in some other directions. we may introduce education and allow some kind of government intervention in education. in this study, we don’t consider public provision or subsidy of education. acknowledgements: the author thanks the anonymous referees and editor fabio musso for the constructive comments. the author would also like to extend his appreciation to the financial support from the grants-in-aid for scientific research (c), project no. 25380246, japan society for the promotion of science. international journal of economic behavior, 5, n. 1, pp. 3 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individuals are committed to the new social game and keeping companies under non wom (electronic-word of mouth) of individuals through a netn crowd-sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and r duce the distance between market and society keywords: co-advertising; consumer communication; consumer behavior 1. introduction following the digital revolution, production, distribution and consumption are no longer lin ar steps in a supply chain. in the past, companies made proposal consumers purchased – exchange value the three phases of “proposition quence in time and space. pre of sale, which was usually the scene of the dialogue, and the ferent time. now, the continuity work and can reduce the distance between individuals and companies. in this context, the r cent attempt by companies to promote, interm is opening up a new ideological debate: is the new social game bringing new value for the gamers? are we seeing a truly new form of value co ward the idea of a “value-crea international journal of economic behavior, vol advertising, e-wom and social responsibility davide pellegrini university of parma, italy francesca de canio university of parma, italy accepted: november 27, 2015 online published: abstract following the digital revolution, the traditional divide between value creation and value distribution and consumption – sales, use and post blurring. individuals and companies are called to exchange multiple inputs and outputs b fore, during and after sale. the new contemporarity of value processes is gradually leading to a new convergence among parties. companies are enabled to promote, inte tercept the customers conversation; individuals are committed to the new social game and keeping companies under non-contractual observation. this study researches the effects of e word of mouth) of individuals through a netnography on 20 worldwide sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and r duce the distance between market and society. advertising; e-wom; co-value chain; social responsibility; consumer behavior; netnography. revolution, production, distribution and consumption are no longer lin ar steps in a supply chain. in the past, companies made proposal – value proposition exchange value – and used products and services – the three phases of “proposition – sale – use” followed a clear logical and chronological s quence in time and space. pre-sale data collection logistically implied being present at point of sale, which was usually the scene of the dialogue, and the phase of use took place at a di ferent time. now, the continuity of conversations is remodeling the value processes fram work and can reduce the distance between individuals and companies. in this context, the r cent attempt by companies to promote, intermediate and intercept the customer’s conversation is opening up a new ideological debate: is the new social game bringing new value for the gamers? are we seeing a truly new form of value co-creation? in 2002, gummesson put fo creation network society” which implies a science or discipline with international journal of economic behavior, vol 6, n. 1, pp. 41 41 wom and social responsibility davide pellegrini university of parma, italy francesca de canio university of parma, italy online published: june 22, 2016 following the digital revolution, the traditional divide between value creation r&d, prosales, use and post-useis blurring. individuals and companies are called to exchange multiple inputs and outputs before, during and after sale. the new contemporarity of value processes is gradually leading to a new convergence among parties. companies are enabled to promote, intermediate and intercept the customers conversation; individuals are committed to the new social game and contractual observation. this study researches the effects of eography on 20 worldwide sourcing platforms. findings demonstrate that the new overlapping of dialogue and sale can generate a positive loop between companies and individuals responsibility and reresponsibility; companyrevolution, production, distribution and consumption are no longer linevalue proposition – while – value in use and use” followed a clear logical and chronological sesale data collection logistically implied being present at point phase of use took place at a difof conversations is remodeling the value processes framework and can reduce the distance between individuals and companies. in this context, the reediate and intercept the customer’s conversation is opening up a new ideological debate: is the new social game bringing new value for the creation? in 2002, gummesson put fortion network society” which implies a science or discipline with 41-58, 2016 42 “new foundation, new values, new assumptions or new methods”. in 2004, lusch and vargo propose their service dominant logic model in which the consumer is always the protagonist in creating value. in 2008 grönroos stated: “…accepting value in use as a foundational value creation concept, customers are the value creators (…) the supplier can become a co-creator of value with its customers”. value is interactively co-created by companies and consumers, rather than merely exchanged (leavy, 2004). more recently, gummesson (2011) suggests substituting the old b2b or b2c acronyms with the new a2a interaction: actors to actors, interacting in many-to-many networks. in 2008, an issue of the european journal of marketing entitled bridging the divide and focused on the new opportunities for cooperation between company and customer. in 2009, schau, muñiz and arnould clustered 52 articles from international marketing journals: all of them explicitly claim to examine collective customer behavior and its positive implication for the companies. there has been however less interest in the implications for customers. despite the over-optimism of the new service-marketing mainstream, many authors suggest cautioun. prosumption is more than an economic activity (holt, 1995; xie et al., 2008; firat, 1991), consequently, the theoretical debate requires a multidisciplinary approach. many authors claim that new technologies are not reducing the distance between individuals and companies, which maintain their separate and complementary roles. humphreys and grayson (2008), argue that when consumers take over steps that create use value (e.g., when they dispense their own soft drink at a fast-food restaurant or they assemble their own furniture for ikea) their fundamental role in the economic system does not change. they suggest considering use value and exchange value separately, as in fact the situation is different when consumers produce something that they themselves do not use but can be sold to others (exchange value). imagine a digital newspaper with free content supplied by readers and advertising revenues (exchange value) collected by the editor. in this example, who is driving the value creation process? it was not by chance that recently, thousands of bloggers promoted a class action against the huffington post, claiming the publisher refused to make fair payments despite profiting from their advertising revenues. at a first glance, the exploitation risk is doubled by the fact that the customer is the co-producer but in the same time is the co-user of contents and, as potential reader; he is the indirect buyer of advertising. as bowen (1990) suggests “it is one thing to leave assembly and transport to the customer, in return for a substantial cost advantage, like ikea; but another thing to use the consumer’s knowledge and give no cost advantage”. following bowen’s original criticism, many researchers emphasize the risk of exploitation (kelley et al., 1990; faranda, 1994; brodie et al., 1997; ballantyne & varey 2008; humphreys & grayson, 2008; dujarier m.a., 2009; salmon c., 2008). these researchers claim that exploitation no longer takes place in factories but is moving into the home, where individuals generate production but are not rewarded by the distribution of the value they have created. fortunately, the consumer has a unique ability to defend him or herself against firms, which reduce his or her role to a sort of “part-time employee” of the service provider or as a “human resource at its disposal (mills & morris, 1986; bowen & schneider, 1988; bateson, 1983; keh & teo, 2001; kelley et al., 1992; zeithaml & bitner, 2000) starting from the concept of countervailing power many authors open new perspectives. in 2006, arnould et al. write “consumer groups have a greater voice in the co-creation of value…and exhibit a sense of moral responsibility”. in practice, individuals take part in peer-topeer conversation with a mixture of narcissism and altruism in order to feel they belong to a community, gain recognition and continue their process of identity building. since identity is built on differences, in many cases the new collective conversations are driven by a reaction against market power (dholakia n. et al. 2009). in this, context chia (2012) analyzes how advertising is one of the most important element of discussion between people, and also how exposure to advertising influences their interaction. many authors demonstrate that individuals’ conversations are strongly social desire to share personal experiences, knowledge and opinions about who they interact with, in other words, companies or brands. conversations are often based on the perception that “…there are things that the firm cannot tell you of exploitation is sometimes a feeling, “a social construct dangerous for firms can feed on collective suggestion. increasingly through blogs, forums and others web pla forms consumers gather to talk about brands, products and services, both in positive advertising, and in negative terms appropriate or unexpected use of the available resources in an interaction co-destruction for at least one of the parties”. wom and e-wom, many topics of research are influenced by organizational and psycholo ical theory. in 2003 bendapud tivity. more recently, gilde et al. cretionary response of a customer to external events, which require him or her to carry out functions other than consumption. if customers act as citizens, every opening by companies on social topics production, safety in the workplace, training, valorization of immigration, equal opportunities, etc. represents a new opportunity for dialogue and convergence. it i conversation about these topics can lead to effective results when the company is aware of b ing under non-contractual type of observation by the crowd. this means that the company a cepts a new mechanism of collective indirect con people’s ethical control of the topic on ate and buttgen (2008) introduce the concept of a sentiment, which can influence the mood of conversation bet in fact, customers’ contributions are, in this light, a form of iour, which can be clearly affected by cultural atmosphere (bettencourt, 1997; kendrick, 1985; goudarzi, 2009). in this perspective, and the socialization of their work 1990; leary-kelly et al., 1994; manolis, 2001; vijiande new social space belonging to the digital conversation is a new middle ground for the matc ing or tuning between market and society. in the new digital space, individuals talk as cu tomers and citizens in the same time. cova and dalli (2007, 2009) suggest that the new co lective conversations can be epitomized by the concept of within communities, individuals are inspired by fend society. the authors ask whether this type of meta in itself, separate from the market and capable of from the same perspective, other authors focus on the concept of ‘sharing’, as a fundamental consumer behavior that is similar to 2010). starting from the idea of new gence come into being. market and society do not coincide, companies and customer act as counterparts playing different roles but their interests new concepts like reciprocity wiertz, & de ruyter, 2008; uzoamak, 1999; paulin, 2006; feldman, 1981; buttgen, 2008; fisher, 1986, jeong & lee, 2013). in many cases, prosumerism can tween company and consumer responsibility, and consumers can commit to this game of being customer and citizen at work. advertising is one of the most important element of discussion between people, and also how exposure to advertising influences their interaction. many authors demonstrate that individuals’ conversations are strongly social desire to share personal experiences, knowledge and opinions about who they interact with, in other words, companies or brands. conversations are often based on the perception there are things that the firm cannot tell you” (firat a. et al., 2005). the phenomenon of exploitation is sometimes a feeling, “a social construct dangerous for firms can feed on collective suggestion. increasingly through blogs, forums and others web pla forms consumers gather to talk about brands, products and services, both in positive , and in negative termsco-destruction. as stated by plè and caceres (2010) “i appropriate or unexpected use of the available resources in an interaction destruction for at least one of the parties”. due to this fragile management of consumer wom, many topics of research are influenced by organizational and psycholo bendapudi and leone highlight the psychological implication of intera et al. (2011) describe customer citizenship behaviour cretionary response of a customer to external events, which require him or her to carry out functions other than consumption. customers act as citizens, every opening by companies on social topics production, safety in the workplace, training, valorization of immigration, equal opportunities, represents a new opportunity for dialogue and convergence. it is important to note that conversation about these topics can lead to effective results when the company is aware of b contractual type of observation by the crowd. this means that the company a cepts a new mechanism of collective indirect control or “public scrutiny”, in other words, people’s ethical control of the topic on-line (kozinets, 2002). ate and buttgen (2008) introduce the concept of customer orientation to the company a sentiment, which can influence the mood of conversation between customer and company. in fact, customers’ contributions are, in this light, a form of organizational citizenship beha , which can be clearly affected by cultural atmosphere (bettencourt, 1997; kendrick, 1985; goudarzi, 2009). in this perspective, the working customers can be seen as employees socialization of their work implies strong commitment to the company (bowers , 1994; manolis, 2001; vijiande et al., 2009). what is clear is that the longing to the digital conversation is a new middle ground for the matc ing or tuning between market and society. in the new digital space, individuals talk as cu tomers and citizens in the same time. cova and dalli (2007, 2009) suggest that the new co tive conversations can be epitomized by the concept of communities. individuals are inspired by linking value or gift logic ask whether this type of meta-market can be considered as an entity tself, separate from the market and capable of protect citizens from the risk of exploitation. from the same perspective, other authors focus on the concept of ‘sharing’, as a fundamental consumer behavior that is similar to gift giving (bergquist & ljiungberg, 2001; belk, r. 2010). starting from the idea of new-shared collective conversation, a new type of conve come into being. market and society do not coincide, companies and customer act as counterparts playing different roles but their interests are converging. reciprocity and social trust enter the marketing dictionary (mathwick, wiertz, & de ruyter, 2008; uzoamak, 1999; paulin, 2006; feldman, 1981; buttgen, 2008; fisher, 1986, jeong & lee, 2013). in many cases, prosumerism can generate a new loop b tween company and consumer responsibility, and consumers can commit to this of being customer and citizen at work. 43 advertising is one of the most important element of discussion between people, and also how many authors demonstrate that individuals’ conversations are strongly influenced by the social desire to share personal experiences, knowledge and opinions about who they interact with, in other words, companies or brands. conversations are often based on the perception , 2005). the phenomenon of exploitation is sometimes a feeling, “a social construct dangerous for firms” and as such can feed on collective suggestion. increasingly through blogs, forums and others web platforms consumers gather to talk about brands, products and services, both in positive – co. as stated by plè and caceres (2010) “inappropriate or unexpected use of the available resources in an interaction will result in value due to this fragile management of consumer wom, many topics of research are influenced by organizational and psychologchological implication of interaccustomer citizenship behaviour, or the discretionary response of a customer to external events, which require him or her to carry out customers act as citizens, every opening by companies on social topics pollution free production, safety in the workplace, training, valorization of immigration, equal opportunities, s important to note that conversation about these topics can lead to effective results when the company is aware of becontractual type of observation by the crowd. this means that the company actrol or “public scrutiny”, in other words, customer orientation to the company as ween customer and company. organizational citizenship behav, which can be clearly affected by cultural atmosphere (bettencourt, 1997; kendrick, the working customers can be seen as employees implies strong commitment to the company (bowers et al., 2009). what is clear is that the longing to the digital conversation is a new middle ground for the matching or tuning between market and society. in the new digital space, individuals talk as customers and citizens in the same time. cova and dalli (2007, 2009) suggest that the new colgift logic and aim to demarket can be considered as an entity protect citizens from the risk of exploitation. from the same perspective, other authors focus on the concept of ‘sharing’, as a fundamental berg, 2001; belk, r. shared collective conversation, a new type of convercome into being. market and society do not coincide, companies and customer act as enter the marketing dictionary (mathwick, wiertz, & de ruyter, 2008; uzoamak, 1999; paulin, 2006; feldman, 1981; buttgen, 2008; generate a new loop between company and consumer responsibility, and consumers can commit to this new social 44 2. the new co-value chain model at the light of the theoretical debate, we now assess whether the new digital conversation represents a new common ground of convergence. the logical framework of our empirical test starts from the numerous attempts, which have been made to conceptualize the processes of working customer. several classification schemes have been proposed to analyze consumer inputs. chase (1978) distinguishes services according to the extent of “physical presence of the customer in the system”; mills and morris (1986) also based their classification system on the extent of interaction, a more useful way to characterize participation-intensive services than the extent of simple customer contact (faranda, 1994, payne 2008). more recently, buttgen (2008) tests a model implying different phases of co-production; michel et al. (2008) identify three different roles for the working consumer and three different techniques used by suppliers to encourage consumer involvement. recently etgar m. (2008) and maglio et al. (2008) propose a descriptive model of the consumer co-production process. in 2012, seraj analyzes three specific online communities identifying the users’ desire for social action and their participation in the value creation. duque et al. (2009) explore hedonic and social benefit; ravald (2010) suggests “there is no value without enjoyment”; helkkula et al. (2009) discuss the difficulties in measuring different levels of enjoyment; chu & kim (2011); thota et al. (2012) analyze the increase in new types of technology platforms which has led to the growth in customizable content. the literature explores the e-word of mouth as a new pattern. in 1993, moorman introduce ewom as the “willingness to rely on an exchange partner in whom one has confidence”. ten years later hennig-thurau et al. (2004) describe ewom as a more complex concept ascribable to “any positive or negative statement made by potential, actual, or former customers about a product or company, which is made available to a multitude of people and institutions”. individual who take part in collective conversation are talking as an individual -me and/or as a plural -us-. chu & kim (2011) suggest analyzing ewom behaviors in depth with the goal of identifying particular influential individuals. kilambi, laroche and richard (2013) emphasize the fact that “all members of a community know and understand themselves as a collective”. in this perspective, the contribution of peer-to-peer communication in co-creation of value becomes important especially with respect to its viral-like advertising (strutton et al., 2011). in the light of so many different approaches, we develop a new simplified matrix of consumer input to the firm and related output (figure 1). of course, input for the consumer constitutes output for the firm and vice versa, and convergence can take place only if the results are positive for both parties. there are essentially three types of value input made by the consumer: 1) value in co-proposition the consumer gives his/her opinion independently before sale and use (co-advertising, co-planning, and co-production); 2) value in co-selling the consumer interacts when buying the good, collaborating in the sale and logistics; 3) value in co-use the consumer interacts in use of the service and post-sales assistance. at the same time, individuals receive two types of value inputs: a) functional benefits represented by their cognitive and affective perception of economic advantages like price, quality and time saving; b) social benefits classified as personalme/identity-, relational – us/friendsand social – us/society -. the arrows going in different directions are the key feature of the diagram and indicate that these benefits are the result of more than one type of investment. for example, social benefit can accrue in all three phases of dialogue, figure 1 the co-value model source: own in order to test the robustness of the logic of the model, we develop four research hypot eses. h1 contemporarity: conversations enable the actors (companies and individuals) to exchange multiple inputs and outputs means that the traditional divide between value creation advertising and value distribution and consumption blurring. h2 co-advertising relevance: highest level of consumer involvement since individuals conversations are strongly influenced by the social desire to share personal experiences, knowledge and opi ions about the companies or brands they interact wi h3 collective responsibility: plural topics –us/friends– mechanism of social or collective control h4 convergence: actors conversations are fitsprice quality and time ciety. this leads to a new equilibrium or convergence between the customer pe spectivelogic of money ng in different directions are the key feature of the diagram and indicate that these benefits are the result of more than one type of investment. for example, social benefit can accrue in all three phases of dialogue, pre-sale, sale and post-sale value model in order to test the robustness of the logic of the model, we develop four research hypot conversations enable the actors (companies and individuals) to exchange multiple inputs and outputs before, during and after the sale. this means that the traditional divide between value creation r&d, production and and value distribution and consumption – sale, use and post use advertising relevance: co-advertising is the co-creation construct with the highest level of consumer involvement since individuals conversations are strongly influenced by the social desire to share personal experiences, knowledge and opi ions about the companies or brands they interact with. collective responsibility: conversations are often focussed on collective or –us/society. this requires the company to accept a new mechanism of social or collective control. actors conversations are focussed not only on customers’ ben price quality and timebut also on citizens’ benefitsidentity, friends, and s ciety. this leads to a new equilibrium or convergence between the customer pe and the citizen perspective -logic of gift-. 45 ng in different directions are the key feature of the diagram and indicate that these benefits are the result of more than one type of investment. for example, social sale. in order to test the robustness of the logic of the model, we develop four research hypothconversations enable the actors (companies and individuals) before, during and after the sale. this r&d, production and sale, use and post useis creation construct with the highest level of consumer involvement since individuals conversations are strongly influenced by the social desire to share personal experiences, knowledge and opinconversations are often focussed on collective or us/society. this requires the company to accept a new focussed not only on customers’ beneidentity, friends, and society. this leads to a new equilibrium or convergence between the customer per46 3. methodology in order to test our hypotheses, we divide the individual benefits into two categories: economic benefit and social benefit. both inputs and outputs are measured through semantic mining of the key words used in online conversations. we aim to identify web sentiment through netnography analysis based on a sample of 20 crowd-sourcing platforms, like innocentive, quora, tripadvisor, amazon turk, etc.. netnography analysis as defined by kozinets “provides information on the symbolism, meaning, and consumption patterns of online consumer groups… it is an online marketing research technique for providing consumer insight”. we thus opt to use pure observational online ethnography to measure the normal flow of information that users exchange, without any kind intermediation from sources as used in consumer behaviour analysis. analyzing this “social game” we intend to identify factors that affect online community usage like usability and sociability as defined by preece (2001), or as we understand them in our perspective of market value, money and gift. conversation among participants from three sources: facebook, twitter and google blog is monitored (see appendix). the web voice was first monitored may-june 2012 and in a second phase may-june 2013. for each of 21 platforms we gathered a total of 600 texts (12,600 texts) and from these we excluded: • impersonal descriptions which give no information about the user’s experience; • all messages from bloggers who belonged to the company; • all messages which were too brief to decipher objectively. this left us with 4,601 texts and a total of over 250,000 words in about 2,000 pages of word scripts describing sentiment of consumers in the 21 online communities. initially we tested open software for preliminary linguistic screening, like t-lab, but the absence of a calibrated search engine for a web monitoring of very different case histories showed the limits of automatism1. therefore, we opted for a manual check of contents. researchers were divided into 4 groups and a cross-linked system of control of words and phrases was used so that if observers in one group were not unanimous in interpreting a message it was submitted to a group of specialists. for each of the 4,601 texts, a deep semantic analysis was conducted. the following examples briefly illustrate the workings of text mining. a simplified matrix of consumer inputs to the firm and related outputs is helpful to show the result of this first conceptual screening (figure 2) the example shows how consumers’ posts were decoded. the frequency of occurrence of the concepts is expressed as relative to a total of 100, but the original data-set, contains multiple frequencies. 4. results as show in figure 3, the contemporarity is confirmed (h1). in fact, several case histories show actors co-acting at the same time in more than one process (table 1). the overview shows that co-advertising is the process with the highest level of consumer involvement (28.2%) followed by co-planning of goods and services (16.4%), use (12.8%), co-selling (12.7%), co-production (12.5%), co-post-sales (9.7%) and co-logistic (7.8%). 1 see appendix for methodological details figure 2 – the co-value chai tripadvisor) source: own also the co-advertising relevance is the co-creation construct with the highest lev important to analyze the relation between this process and the individual benefit perception. co-advertising proves to be closely correlated to 0.695 at 0.01 significance. this relationship is explained by original” and the emotive involvement of individuals using their own creativity. moreover, co-advertising appears closely correlated to at 0.05 significance. lastly, co pearson correlation of r2: 0.498 at 0.05 significance. this last functional benefit can be e plained by the “time saving” benefit for individuals who are collecting information about the products, which they are going to purchase. table 1 – findings of web monitoring of 4.601 texts c o -p la n n in g a n d r es ea rc h c o -p ro d u ct io n c o -a d v er ti si n g & c o m m u n ic at io n c o s el li n g co-planning (collective research & innovation) innocentive co-research & prize contest 41.0 27.5 23.2 1.1 city 2.0 knowledge sharing 88.2 11.8 value chain key words: a conceptual framework advertising relevance is confirmed (h2). as we have seen, co creation construct with the highest level of consumer involvement (table 2 important to analyze the relation between this process and the individual benefit perception. proves to be closely correlated to me/identity with a pearson correlation of r2: 0.695 at 0.01 significance. this relationship is explained by the individual wishing to “ the emotive involvement of individuals using their own creativity. moreover, appears closely correlated to friend/us with a pearson correlation of r2: 0.539 , co-advertising proves to be closely correlated to pearson correlation of r2: 0.498 at 0.05 significance. this last functional benefit can be e plained by the “time saving” benefit for individuals who are collecting information about the they are going to purchase. findings of web monitoring of 4.601 textsrelative frequency of concepts c o s el li n g c o -l o g is ti c c o -u se c o -p o st u se p ri ce q u al it y t im e m e id en ti ty planning (collective research & innovation) 1.1 4.8 2.4 24.0 3.5 1.7 5.9 5.7 1.4 11.6 47 n key words: a conceptual framework (example from as we have seen, co-advertising is involvement (table 2), but it is important to analyze the relation between this process and the individual benefit perception. with a pearson correlation of r2: the individual wishing to “be the emotive involvement of individuals using their own creativity. moreover, with a pearson correlation of r2: 0.539 closely correlated to time, with a pearson correlation of r2: 0.498 at 0.05 significance. this last functional benefit can be explained by the “time saving” benefit for individuals who are collecting information about the relative frequency of concepts f ri en d s u s s o ci et y g if t u s n u m b er o f te x ts 5.9 13.9 51.0 408 11.6 3.0 78.3 136 48 co-production (collective contents & tasks) huffington post user generated contents 10.0 51.2 28.7 3.7 6.2 3.3 53.3 2.2 13.3 10.6 17.2 166 amazon turk cloud labor/microtasks 100.0 43.7 15.1 21.1 20.1 57 quora research tasks 10.0 40.0 30.0 20.0 53.1 14.3 14.3 4.1 14.3 92 co-communication (collective creativity) klout social rating 50.0 25.0 25.0 2.1 23.7 9.9 28.1 13.5 22.7 176 threadless product customisation 21.0 75.0 2.2 1.8 13.1 3.0 11.3 21.8 18.8 32.2 271 mountain dew product selection 18.6 20.7 39.5 4.2 16.9 4.8 37.1 2.1 14.6 6.0 35.4 342 co-selling (collective or interactive shopping) ebay ecommerce 4.3 10.2 53.6 21.7 1.4 8.7 34.2 38.4 9.5 6.5 0.8 10.6 300 fab content markets 66.0 20.0 14.0 9.6 34.0 9.6 27.9 11.2 7.6 200 groupon buying groups 6.7 40.0 13.3 20.0 20.0 31.4 41.4 3.1 7.9 15.2 1.0 162 co-logistic (collective or interactive logistic) facebook places check-in 32.0 23.0 35.0 10.0 6.1 39.8 3.3 11.0 39.8 209 dominos delivery 9.0 42.0 19.0 30.0 8.3 56.0 15.6 6.9 7.3 6.0 300 nextdoor physical sharing 10.8 8.1 8.1 8.1 13.5 45.0 6.3 4.3 38.0 2.2 13.0 42.4 181 co-use (collective and peer-to-peer cooperation) warcraft game sharing 14.5 52.7 23.6 9.1 16.0 16.0 25.7 20.2 10.2 11.8 407 dropbox joint application 7.0 47.3 2.8 40.0 2.8 20.1 64.4 0.8 5.3 6.1 3.4 200 airbnb house sharing 19.6 2.2 19.6 38.7 20.0 37.3 27.0 5.0 2.1 20.3 8.3 266 co-post use (collective & peer-to-peer cooperation) tripadvisor service rating 39.1 4.4 4.4 52.2 8.1 64.7 0.6 4.0 4.6 17.9 220 pinterest social commerce 27.2 24.5 11.7 6.4 30.1 4.0 12.0 17.3 32.0 9.3 25.3 409 pirate bay downloading 40.0 30.0 30.0 16.3 38.4 1.2 8.1 5.8 30.2 99 total /average 18.0 8.3 29.7 14.1 8.8 11.1 10.0 14.4 30.5 8.4 12.9 9.9 23.7 4,601 source: own table 2 internal relationship between types of content and co price money ward co-dvertising & communication pearson corr. elation 0.052 sig. (2-tailed) 0.872 source: own figure 3 shows the correlations between co model. figure 3 the effects of co-advertising on the co source: own in order to compare the intensity of relationships between inputs and outputs of the co value model, we tested a bivariate correlation with two different levels of significance 0.01 and 0.05. our sample shows a first set of relations ( co-advertising is confirmed to be correlated with three different benefits. a new very significant correlation is between at 0.01 significance. this relationship can be explained by the fact tha volved in co-selling focus their conversations on this economic issue. a second univocal co relation is between co-logistic nificance. this relationship is explained by th which mean customers discuss new forms of cooperation enabled by physical or logistical conditions. internal relationship between types of content and co-advertising price money reward quality customisation difference time freedom convenience me identity reputation self esteem difference friends game emulation me too together 0.052 -0.167 0.498 * 0.695 ** 0.539 * 0.872 0.481 0.026 0.001 0.014 shows the correlations between co-advertising and the value inputs of the co advertising on the co-value model in order to compare the intensity of relationships between inputs and outputs of the co value model, we tested a bivariate correlation with two different levels of significance 0.01 and 0.05. our sample shows a first set of relations (table 3). is confirmed to be correlated with three different benefits. a new very significant correlation is between co-selling and price with a pearson correlation of r2:0.718 this relationship can be explained by the fact that customers who are i selling focus their conversations on this economic issue. a second univocal co logistic and quality with a pearson correlation of r2: 0.506 at 0.05 si this relationship is explained by the functional goals of this form of cooperation, which mean customers discuss new forms of cooperation enabled by physical or logistical 49 advertising friends fun emulation me too all together us society ethic moral altruism relation gift us 0.539 * 0.332 0.014 0.153 advertising and the value inputs of the co-creation in order to compare the intensity of relationships between inputs and outputs of the covalue model, we tested a bivariate correlation with two different levels of significance 0.01 is confirmed to be correlated with three different benefits. a new very with a pearson correlation of r2:0.718 t customers who are inselling focus their conversations on this economic issue. a second univocal corwith a pearson correlation of r2: 0.506 at 0.05 sige functional goals of this form of cooperation, which mean customers discuss new forms of cooperation enabled by physical or logistical 50 table 3 – internal relationships between different types of content of conversations price qualiy time me/identity us/friends us/society coplanning pearson correlation 0.069 0.240 0.122 0.264 0.279 0.675* sig (2 tailed) 0.774 0.308 0.610 0.260 0.234 0.001 n 20 20 20 20 20 20 coproduction pearson correlation 0.079 0.268 0.265 0.204 0.110 0.312 sig (2 tailed) 0.741 0.253 0.258 0.388 0.642 0.181 n 20 20 20 20 20 20 coadvertising pearson correlation 0.062 0.167 0.498* 0.695* 0.539* 0.332 sig (2 tailed) 0.827 0.481 0.026 0.001 0.014 0.153 n 20 20 20 20 20 20 co-selling pearson correlation 0.718** 0.131 0.427 0.232 0.304 0.118 sig (2 tailed) 0.583 0.061 0.325 0.193 0.621 n 20 20 20 20 20 20 co-logistic pearson correlation 0.069 0.506* 0.006 0.169 0.053 0.153 sig (2 tailed) 0.773 0.023 0.805 0.477 0.826 0.521 n 20 20 20 20 20 20 co-use pearson correlation 0.121 0.316 0.085 0.112 0.266 0.304 sig (2 tailed) 0.610 0.175 0.720 0.629 0.257 0.193 n 20 20 20 20 20 20 co-post use pearson correlation 0.124 0.379 0.265 0.329 0.043 0.056 sig (2 tailed) 0.603 0.099 0.259 0.157 0.856 0.814 n 20 20 20 20 20 20 ** correlation n is significant at the 0.01 level (2-tailed) * correlation n is significant at the 0.05 level (2-tailed) source: own a third group of significant and multiple relationships is connected to co-planning activities. first of all we observe that co-planning is closely correlated to society/gift/us with a pearson correlation of r2: 0.675 at 0.01 significance. from a theoretical point of view, these relationships introduce a rational and cognitive interpretation of social sensitivity. people commenting on their personal experience of co-planning use words, phrases and sentences which show their awareness of being intellectual co-planners. last, but not least, it is necessary to observe the weak correlations between co-use and co-post use and social benefits. this is partially surprising because friendship and society were expected to be at the core of co-use and co-post use activities. the collective responsibility is confirmed (h3). in order to test this hypothesis, we ranked the conversation on the basis of three variables of identity -merelationships, -friends and society -usthe first five communities involving a strong element of identity -me-, appear often well positioned in terms of relationship -friendsand society -us-. there are also intermediate situations like groupon where consumers show interest in sharing purchase coupons with friends but do not find the game innovative enough to give distinction of selfidentity. overall, there are few communities where the consumer gives a low value to friend ship (amazon mturk, ebay, city 2.0.). moreover, values are very high in the “ ables and reveal an increasing nected (figure 4). figure 4 the percentage of identity source: own finally, we confirm also the convergence cited in almost the whole of the texts shows that the risks of consumer exploitation exist but are largely balanced out by consumer attention to the social content of services. what is si nificant is that consumer and citizen interests do no could be objected that communities like ebay and groupon have a very small social dime sion, but as a matter of fact, we found that dialogue is often about about the experiential and psyc nals that the convergence of interests is not taken for granted, and many consumers comment on the need to be careful about their rewards. it is precisely this explicit mention of risks that comprises a defense mechanism from our point view, this is new evidence of the convergence between the customer perspe tive logic of money and the citizen perspective with the aim of analysing forms we tested principal component analysis (pca) information. we then inserted two (figure 5). these two components in fact explain 68.88% of the original variance of outputs. ship (amazon mturk, ebay, city 2.0.). moreover, values are very high in the “ ables and reveal an increasing awareness of ethical implications of being continuously co the percentage of identity -me-, relationship -friendsand society finally, we confirm also the convergence (h4). the fact that the social cited in almost the whole of the texts shows that the risks of consumer exploitation exist but are largely balanced out by consumer attention to the social content of services. what is si nificant is that consumer and citizen interests do not appear in inverted order: for example, it could be objected that communities like ebay and groupon have a very small social dime sion, but as a matter of fact, we found that dialogue is often about following the rules about the experiential and psychological dimension of use (figure 8). these are frequent si nals that the convergence of interests is not taken for granted, and many consumers comment on the need to be careful about their rewards. it is precisely this explicit mention of risks that defense mechanism against negative aspects of the convergence taking place. from our point view, this is new evidence of the convergence between the customer perspe and the citizen perspective -logic of gift-. ith the aim of analysing in more depth the available data-set and clustering the 20 pla principal component analysis (pca) as to reduce the amount of redundant information. we then inserted two new latent variables (components 1 and 2) into ). these two components in fact explain 68.88% of the original variance of outputs. 51 ship (amazon mturk, ebay, city 2.0.). moreover, values are very high in the “society” variawareness of ethical implications of being continuously conand society -us social variables were cited in almost the whole of the texts shows that the risks of consumer exploitation exist but are largely balanced out by consumer attention to the social content of services. what is sigt appear in inverted order: for example, it could be objected that communities like ebay and groupon have a very small social dimenfollowing the rules, and 8). these are frequent signals that the convergence of interests is not taken for granted, and many consumers comment on the need to be careful about their rewards. it is precisely this explicit mention of risks that against negative aspects of the convergence taking place. from our point view, this is new evidence of the convergence between the customer perspecset and clustering the 20 platreduce the amount of redundant new latent variables (components 1 and 2) into the model ). these two components in fact explain 68.88% of the original variance of outputs. 52 figure 5 the ranking of communities according to the concepts of money and gift source: own table 4 the results of component analysis initial components total % of variance 1 4.272 47.470 2 1.927 21.412 3 0.863 9.585 4 0.626 6.951 5 0.466 5.173 6 0.321 3.566 7 0.213 2.368 8 0.208 2.306 9 0.105 1.169 source: own component 1 comprises the emotive world of component 2 comprises the rationale world of sitioning of the 20 communities can be almost fully described by the two new components (figure 6). the 20 platforms studied clearly have different vocations. it is strong vocation for the emotive world of such as warcraft or pinterest, or for others like city 2.0, nextdoor or tripadvisor more f cused on the rationale world of “innocentive” proves to be ranked quite high in both these types. this finding confirms digital conversations are focussed not only on customers’ benefits also on citizens benefitsidentity, friends, society. convergence between the customer perspective logic of gift. the ranking of communities according to the concepts of money and gift the results of component analysis initial eigenvalues extraction sum of squared loadings % of variance cumulative % total % of variance 47.470 47.470 4.272 47.470 21.412 68.882 1.927 21.412 9.585 78.467 6.951 85.418 5.173 90.591 3.566 94.157 2.368 96.525 2.306 98.831 1.169 100.000 comprises the emotive world of “creativity, individual and friends” comprises the rationale world of “planning, price, quality and society”. sitioning of the 20 communities can be almost fully described by the two new components the 20 platforms studied clearly have different vocations. it is not possible to identify a strong vocation for the emotive world of “creativity, individual and friends” such as warcraft or pinterest, or for others like city 2.0, nextdoor or tripadvisor more f cused on the rationale world of “planning, price, quality and society”. “innocentive” proves to be ranked quite high in both these types. this finding confirms digital conversations are focussed not only on customers’ benefitsprice quality identity, friends, society. it means that we are definitely seeing a new convergence between the customer perspectivelogic of money – and the citizen perspective the ranking of communities according to the concepts of money and gift extraction sum of squared loadings % of variance cumulative % 47.470 47.470 21.412 68.882 “creativity, individual and friends” and “planning, price, quality and society”. the positioning of the 20 communities can be almost fully described by the two new components not possible to identify a “creativity, individual and friends” for platforms such as warcraft or pinterest, or for others like city 2.0, nextdoor or tripadvisor more foce, quality and society”. a vocation as “innocentive” proves to be ranked quite high in both these types. this finding confirms that price quality and timebut it means that we are definitely seeing a new and the citizen perspective – figure 6 crowdsourcing platforms positioning source: own 5. conclusion this paper employed logic and empirical evidence to focus on the new positive of customers and citizens at work. the metrics of the co and reinforce the basic idea of convergence between the customer eyand the citizen perspective cent case histories focusing on the managerial implications of the new social game. the hypothesis of convergence was proven through the tion between customer and companies from 20 international crowd findings show that the continuous (customer and/or citizens) are changing the va a renewed social sensitivity, which is clearly influenced by new context, co-advertising is the co volvement since individuals’ conversations are strongly influenced by the social desire to share personal experiences, knowledge and opinions about the companies or brands they i teract with. consequently, companies are able to promote, mediate and intercept customers’ con sations, but the only possibility for individuals is to keep companies under non observation. the new overlap of panies and individuals’ responsibility, and reduce the distance betwee crowdsourcing platforms positioning this paper employed logic and empirical evidence to focus on the new positive customers and citizens at work. the metrics of the co-value model were used to measure and reinforce the basic idea of convergence between the customer perspective and the citizen perspective -logic of gift-. the model was applied to a large number of r on the managerial implications of the new social game. the hypothesis of convergence was proven through the analysis of continuous convers tion between customer and companies from 20 international crowd-sourcing platforms. the continuous digital conversations between companies and individuals (customer and/or citizens) are changing the value creation process. convergence is driven by a renewed social sensitivity, which is clearly influenced by collective responsibilities. is the co-creation construct with the highest level of consumer i dividuals’ conversations are strongly influenced by the social desire to share personal experiences, knowledge and opinions about the companies or brands they i consequently, companies are able to promote, mediate and intercept customers’ con sations, but the only possibility for individuals is to keep companies under non observation. the new overlap of dialogue and sale can generate a positive loop between co panies and individuals’ responsibility, and reduce the distance between market and society. 53 this paper employed logic and empirical evidence to focus on the new positive convergence value model were used to measure perspectivelogic of mon. the model was applied to a large number of reon the managerial implications of the new social game. continuous conversasourcing platforms. the digital conversations between companies and individuals lue creation process. convergence is driven by collective responsibilities. in the creation construct with the highest level of consumer individuals’ conversations are strongly influenced by the social desire to share personal experiences, knowledge and opinions about the companies or brands they inconsequently, companies are able to promote, mediate and intercept customers’ conversations, but the only possibility for individuals is to keep companies under non-contractual can generate a positive loop between comn market and society. 54 our panel of 4,601 texts was not geographically defined and this could represent a limitation of the results. furthermore, although numerous studies show how socio-demographic characteristics influence the interaction between customers and companies, this study makes no cross-cultural analysis. in this perspective recent studies on peer-to-peer communication show their interaction varies according to the gender and origin of the user. moreover, our analysis does not consider the factors of mediation and moderation existing in forums and reviews, especially online. an additional avenue for future research could be to test the new co-value model in different industries and cluster the role of digital conversations in various contexts. moreover, it would be interesting to analyze the role of various tools used by customers during their conversation. in fact, new technologies, and in particular mobile devices, could lead to new form of dialogue and value co-creation. finally, the semantic mining of words and texts could be conducted with more advanced solutions. this requires a fine tuning of professional software in line with recent developments in the field. methodology appendix for facebook we used spiderbook, a tool developed by a web metrics company caffeinalab. the key word for the search was the name of the service (e.g. tripadvisor). spiderbook yields the public status of users who were then reclassified for the purposes of analysis. the public status shows: • no. of friends + no. of friends of commentators (reach) • no. of ‘likes’ (engagement) • no. of comments (engagement: comments on status have the same audience as the " father status" and no result in terms of engagement. • no. of ‘share this’ (engagement) not all results have the same level of importance. importance depends on a combination of "reach" (the extent of the audience who could in theory receive the message) and "engagement" (actual reaction on the part of receivers). here is an example expressed algebraically. two statuses x and yeach describe a variable: • status x is written by a boy who has 1000 friends and y by a girl who has 100; • x gets 300 likes, 3 comments and 10 shares; • y gets 30 likes, 30 comments and 100 shares; the weight of x is: 1000*300*3*10: 9,000,000 and the weight of y is 100*30*30*100: 9,000,000. if there are no other comments, the system thus weighs x and y at 50% each. for twitter we used its own search engine selecting “all” and set the key word as the name of the service without the hashtag (#). this shows all single mentions. relevant replies to tweets were also included. the relative weighting of reach and engagement was carried out using the same principles as for facebook and the following parameters: • no. of followers (reach) • no. of retweets (engagement) • no. of replies to tweet (engagement): replies” have the same audience as the ‘parent tweet’ and were given no weight for engagement. • no. of "favourites", in other word the number of times a tweet was added as a favourite by a follower. for the search on google blog the keyword was again the name of the service. in cases where there were fewer than 200 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(2000). services marketing: integrating customer focus across the firm. new york; mcgrawhill. 8 _14-19_ gebresilassie 127 the economic impact of productive safety net program on poverty: microeconometrics analysis, tigrai national regional state, ethiopia yibrah hagos gebresilassie adigrat university, ethiopia received: april 23, 2014 accepted: june 6, 2014 online published: september 28, 2014 abstract this paper aims at evaluating the impact of productive safety net program on poverty using primary data from randomly selected 600 households in central zone of tigrai national regional state, ethiopia. propensity score matching and foster-greer-thorbecke were used to evaluate impact of the program and poverty, respectively. the paper revealed that the program has positive and significant effect on consumption, livestock holdings, and productive assets. moreover, impact of the program on total consumption expenditure per adult equivalent was found to be positive and significant. using total poverty line, poverty rate was lowest among program participants (30.33%) than non-participants (31.1%). highest poverty rate was found among households headed by women (38.42%) while households headed by men (23.1%). the study also revealed that the program has positive and significant effect on poverty reduction and protecting productive assets. finally, it was recommended that female headed program participants based programs should be provided to help boost their agricultural output and reduce endemic poverty. keywords: asset; consumption per adult equivalent; productive safety net program; propensity score matching; poverty; tigrai. 1. introduction recently, the global focus has been to given food security and poverty alleviation. this is being made in response to the increasing food insecurity and poverty in the world. the incidence of food insecurity and poverty is devastating particularly in the developing countries and in terms of food insecurity; 852 million people worldwide are still chronically underfed. in africa, an estimated 200 million (27.4 percent) people are famished (babatundeet al., 2007). eradicating extreme poverty and hunger is the first mdgs set by un; this goal also has become the core development objective and agenda of the government of ethiopia. the plan for accelerated and sustained development to end poverty is ethiopia’s “guiding strategic framework”. the key goal of pasdep is to enable chronically food insecure households to 128 acquire sufficient assets and generate income to move out of food insecurity and improve their resilience to shocks. similarly, the main focus of the government’s agricultural development strategy is to ensure self-sufficiency in food production at household level (ersfe, 2009). drought, environmental degradation, population pressure, limited access to services, shortage of farmland, lack of productive assets, low input and subsistence agricultural practices are the most prominent causes of food insecurity problems in rural areas of ethiopia. consequently, more than 38 percent of the rural households fall below the food poverty line and 15 percent of the rural population in ethiopia reported that they experience a food gap of more than four months (moard, 2009). realizing the magnitude and severity of the food insecurity, and linked to the pasdep, the government of ethiopia launched a development strategy known as productive safety net program (psnp) in 2005. the program is the largest social protection scheme in africa outside of south africa’s social grants schemes. the psnp delivers social transfers to chronically food insecure households, either through public work activities or as a direct support with three distinct objectives of smoothing food consumption, protecting household assets and building community assets (devereux and guenther, 2009). however, some studies conducted in ethiopia were at early stage of the program (gilligan et al, 2008). moreover, some of these studies used qualitative analysis (barnes, 2008 devereux et al, 2006; & rachel et al, 2006). a survey regarding the impact of psnp on poverty has not been yet evaluated, and remains untouched in the study areas. the propensity score matching (psm) and fostergreer-thorbecke (fgt) were used to evaluate impact of theprogram and poverty, respectively. 1.2. objective of the study the overall objective of this study is to evaluate the impact of productive safety net program (psnp) on poverty. more specifically; − to examine the impact of productive safety net program on consumption − to examine the differentiated effect of the program on men and women − to assess the magnitude of depth, gap and severity of poverty differentials between program participants and nonparticipants. 2. methodology 2.1. data and procedure to attain the stated objectives, mainly primary data was used. the primary data collection methods employed included both the use of structured and semi-structured type, focus group discussions and field observations to get information in-depth. secondary data was also used to supplement the primary data using that was collected from various sources. a three-stage sampling procedure was implemented. in the first stage, the study area was selected based on psnp coverage. in the second stage, five woredas (districts) were selected randomly and finally, samples of 600 representative households were drawn on probability proportional to sample size. about 365 (60.8 percent) program participants and 235 (39.3 percent) nonparticipants were selected randomly using a systematic random sampling procedure. 129 2.2. method of data analysis the collected data were subjected to both descriptive statistics and econometrics analysis such as foster, greer and thorbecke (fgt) index and propensity score matching (psm) to measure poverty and impact of the productive safety net program (psnp), respectively. 2.2.1. impact analysis choosing an appropriate model and analytical technique depends on the type of variable under consideration (gebrehiwot, 2008). here, the dependent variable of interest (program participation) is binary that takes a value of 1 and 0. assessing the impact of any intervention requires making an inference about the outcomes that would have been observed for program participants had they not have participated. the appropriate evaluation of the impact of the program requires identifying the average treatment effect on the treated (att) defined as the difference in the outcome variables between the treated households and their counterfactual. counterfactual refers to what would have happened to the outcome of program participants had they not have participated (rosenbaum and rubin, 1983; becker, s., and ichino, a. 2002 and gilligan et al., 2008). according to rosenbaum and rubin (1983), let y psnp be the outcome of the psnp participants and y psnpnon − outcome of the non-participants. for each household, only y psnp or y psnpnon − is observed, which leads to a missing data problem. in estimating the propensity score, the dependent variable used was participation in the psnp and let di denotes the participation indicator equalling 1 with probability of π if the household is program participant and 0 with probability of 1-π otherwise. let xi denotes a vector of observed individual characteristics used as conditioning variables. propensity score matching (psm) technique was used which looks like as follow: )})(,1())(,1({)( xpdexpdeeatt yy psnpnonpsnp xppsm =−== − [1] the perception is that two individual households with the same probability of participation will show up in the participants and non-participants samples in equal proportions on the basis of propensity scores. 2.2.2. poverty analysis the poverty situation of the program participants and non-participants was analyzed using the expenditure approach, the one developed by foster, greer, and thorbecke (1984) known as fgt index which is commonly applied for poverty analysis. a separate food and total poverty lines were developed for the study area using the cost of basic-need approach (cbn) as proposed by revallion and bidani (1994). the three measures of poverty in the fgt index were employed of which the head count index (p0) which depicts number of population who are poor, poverty gap index (p1) which measures the extent to which individuals fall below the poverty line (the poverty gaps) as a proportion of the poverty line and poverty severity index (p2) that demonstrates not only the poverty gap but also the inequality among the poor (wbi, 2005). let z is the poverty line, yi is the actual expenditure (per adult equivalent) of individuals below the poverty line, n is number of people, q is the number of poor people normally those below the poverty threshold, α is poverty aversion parameter andis a value given (0, 1, or 2) to determine the degree to which the measure is sensitive to the degree of deprivation for theses below the poverty line and higher values of α shows greater weight is placed on the poorest section of the society. then, the fgt or pα is given by: 130 α α ∑ =       −= q i i z yz n yzp 1 1 ),( [2] therefore, if the value of α =0, thefgt or the pα becomes the head count index (p0), when α = 1, pα is the poverty gap index (p1) and α =2, pα becomes the poverty severity index. the costofbasic-needs (cbn) approach was employed to estimate the poverty line for the 2010 collected data. ravallion and bidani (1994), and dercon and krishnan (1996, 2000) provided further information on the construction of the poverty line, including the details of the food basket and its sensitivity to different sources of data on prices used to value the food basket. individual expenditures have historically been shown to be correlated with income level. the consumption expenditure approach was used to estimate the poverty line; accordingly, the food poverty line was 235 per month (2820 per year) per adult equivalent ethiopian birr. once the food poverty line computed, the total poverty line was derived by taking the average food share of the first lower (first quartile) proportion of the population (wbi, 2005) which resulted in a total poverty line (tpl) of 330 per month (3960 per year) per adult equivalent ethiopian birr. the most widely used poverty indices: the head count index (p0), the aggregate poverty gap or poverty gap index (p1) and poverty severity index (p2) was employed. the head count index measures the share of the population whose consumption is below the poverty line (the share of the population that cannot afford to buy a basic basket of goods). the poverty gap index measures the extent of the poor (living below the poverty line) how far away from the poverty line and the poverty severity index measures not only the gap but also the inequality among the poor (a higher weight is placed on those households further away from the poverty line). 3. results and discussion 3.1. impact of the productive safety net program the impact indicators used in this study were assets and consumption expenditure. consumption is here measured as per adult equivalent, which is food consumption per-adult equivalent, non-food consumption and total consumption expenditure (food and non-food) per-adult equivalent. 3.1.1. family size out of the total sample respondents, 69 percent of them were male headed households and the remaining 31 percent female headed households whose livelihoods are based on farming activities. about 82 percent of the sample respondents were illiterate while 18 percent of them were literate. male-headed households participated more relative to the female-headed households in the study area. out of the total male-headed household respondents, 65 percent were from the psnp participants. only 35 percent of the female-headed households were psnp participants out of the total female-headed sample. there was statistical significant (at 1 percent) mean percentage difference between maleheaded and female-headed households in psnp participation. this result was in line with the study done by gilligan et al. (2008) whose findings on the psnp indicated that participants in the public work were more likely to come from male-headed households with married head.family size and program participation have positive relationship. on average, program participants (6) have a bit larger family size than the non-participants (5). the combined average family size for sample respondents was six persons per household. the mean 131 difference in family size between program participants and non-participants was statistically significant (at 5 percent). the result revealed that households with higher male adults were participating more in the program than those who have less male adults. thus, the mean difference of male adults between program participants and nonparticipants was positive. statistically, this was found to be significant at less than 1 percent level of significance. 3.1.2. age of the household the mean age of the sample household heads was found to be 49 years. the mean age of program participants and nonparticipants were 49 and 48 years, respectively. on average, the cultivated landholding size of the sample respondents was about 0.45 hectare. 3.1.3. land holding size the average cultivated landholding size for program participants was 0.35 hectare whereas that of the nonparticipants was 0.38 hectare. thus, the mean difference of the landholding between program participants and nonparticipants was found to be not statistically significant. 3.1.4. livestock holding the average number of livestock owned by the sample respondents prior to the program intervention (productive safety net program) was converted into tropical livestock unit (tlu) and this was used as lagged variable in matching technique. on average, the sample respondents have had about 3.7 while the program participants and the nonparticipants have 3.5 and 3.3 tlu, respectively. prior to the program intervention, however, the mean difference in terms of tlu between the program participants and nonparticipants was found to be not statistically significant. currently, on average, program participants and non-participants have 4.5 and 2.5 tlu, respectively. the result revealed that on average the tlu of the program participants have increased from 3.5 to 4.5 while that of the nonparticipants have decreased from 3.3 to 2.5. after program intervention, the average size of tlu for program participants has increased by one fold while that of the non-participants has declined by 0.8. statistically, this was found to be significant. oxen are important assets and were treated separately; on average the sample respondents have about 1 tlu. the mean oxen tlu for the program participants and nonparticipants were 1.16 and 0.67, respectively. 4. econometric analysis of welfare effects (impact of psnp on assets) 4.1 impact on livestock holdings the average the tlu of the program participants has increased from 3.5 to 4.5 tlu while that of the nonparticipants have decreased 3.3 to 2.5 tlu. after the program intervention (productive safety net program), the average size of program participants has increased while that of the nonparticipants has declined. the mean difference in terms of tlu between program participants and nonparticipants was found to be positive and statistically, significant at 1 percent level of significance. 4.2. impact on productive asset all asset categories have been valued in ethiopian birr based on their current prices as reported by each sample respondents, but deflated. the result indicated that the value of the productive assets at their prices (but deflated) was higher for program participants than non participants. the difference in the mean value of the productive assets between program participants and nonparticipants was positive and statistically significant (at 5 percent and at 132 10 percent using radius and kernel, respectively), but it was significant based on nearest neighbor matching estimators. 4.3. impact on durable and household goods the impact of the psnp on the value of the durable goods was positive and statistically significant (at 10 percent). this indicated that the program participants were able to protect their durable goods as a result of the program’s intervention. the mean value of the durable goods was found to be positive and statistically significant (at 5 percent). the impact of the psnp on household goods was found to be positive and statistically significant (at 1 percent). a study conducted by devereux et al. (2006) indicated that the impact of the program on assets protection has positive and significant effect (at 10 percent). in terms of asset protection, non-participants had more likely to experience decrease in their asset-holding than program participants. table 1 – att estimation results of the impact of productive safety net program on assets outcome variables estimators no. of psnp participants no. of non-psnp participants att t-values livestock nearest neighbor 332 123 1.966 3.490∗∗∗ kernel 210 143 1.845 10.375∗∗∗ radius 212 143 2.012 8.647∗∗∗ productive asset nearest neighbor 218 123 31.397 1.031 kernel 218 143 35.609 1.661∗ radius 218 143 38.324 2.357∗∗ durable goods nearest neighbor 218 123 34.518 2.154∗∗ kernel 218 143 36.075 2.329∗∗ radius 218 143 33.882 2.059∗∗ household goods nearest neighbor 218 123 89.321 3.627∗∗∗ kernel 218 143 80.196 3.744∗∗∗ radius 218 143 70.202 3.292∗∗∗ significant differences are indicated with: * p<0.05 (5 percent level), ** p<0.01(10 percent level), *** p<0.001 (1 percent level) and standard errors are bootstrapped. 4.4. impact of productive safety net program on consumption consumption expenditure was used as impact indicator while evaluating impact of the program (productive safety net program, psnp), and it was computed as per adult equivalent consumption expenditure. 4.4.1. impact on consumption expenditure the result of this study revealed that on average, program participants consumed more food items as compared to the non-participants. the difference in the mean value of food consumption per adult equivalent between program participants and the nonparticipants was found to be positive and statistically significant (at1 percent). therefore, the overwhelming majority of program participants participating in the psnp consumed more food items. a study conducted by gilligan et al. (2008) found that positive impact on per capita food expenditure and this was statistically significant (at1 percent) for program participants. thus, program participants were more likely to consume more food as compared to the nonparticipants. the estimated non-food household consumption expenditure per adult equivalent was positive, but it was not statistically significant. the total (food and non-food) consumption expenditure per adult equivalent for program participants was found to be higher as compared to that of the nonparticipants. the estimated results indicated that the mean total consumption expenditure per adult equivalent for program participants was positive and 133 statistically significant (at 1 percent). the principal results of the study on consumption expenditure showed that the program intervention (productive safety net program) enabled program participants to increase household consumption expenditure very considerably. a study conducted by devereux et al. (2006) noted that 75 percent of program participants have been reported that they consumed more food of better quality and barnes (2008) also noted that the psnp had positive and statistically significant (at1 percent) impact on household consumption expenditure. table 2 – att estimation results of impact of psnp on household consumption outcome variable matching method no of psnp participants no of psnp nonparticipants att t-values food nearest neighbor 332 123 1254.59 6.960∗∗∗ consumption kernel 218 143 1061.25 8.144∗∗∗ radius 218 143 1070.22 9.227∗∗∗ non-food nearest neighbor 218 123 9.50 0.127 consumption kernel 218 143 30.98 0.620 radius 218 143 31.04 1.011 total nearest neighbor 218 123 305.75 3.753∗∗∗ consumption kernel 218 143 242.72 4.072∗∗∗ radius 218 143 241.50 5.303∗∗∗ significant differences are indicated with: * p<0.05 (5 percent level), ** p<0.01(10 percent level), *** p<0.001 (1 percent level) and standard errors are bootstrapped. 5. econometric analysis of poverty 5.1. poverty line (tl) the incidence of poverty was analyzed using the total poverty line (330 per month or 3960 per year per adult equivalent ethiopian birr) and then food poverty line of 235 per month or 2820 ethiopian birr per year per adult equivalent. accordingly, 30.33 percent of the respondents were living below the poverty line with poverty gap index of 6.6 percent and poverty severity index of 2.77 percent. ahferom (30.33 %) and merebleke (25.55%), with poverty gap and severity index level (2% and 0.55%) and (1.85% and 0.45%) were the leading woredas (districts) in this zone with their high and low level of poverty, respectively. table 3 – incidence of poverty by woreda (districts) woreda (district) poverty estimates total poverty line p0 p1 p2 geter adwa 0.351(0.038) 0.052(0.009) 0.013(0.003) 330 ahferom 0.313(0.031) 0.054(0.008) 0.016(0.003) 330 kola temben 0.346(0.036) 0.049(0.008) 0.013(0.003) 330 merebleke 0.320(0.036) 0.025(0.009) 0.007(0.003) 330 lailaymachew 0.308(0.042) 0.077(0.014) 0.029(0.008) 330 population 0.328(0.008) 0.084(0.003) 0.031(0.001) 330 values in brackets are standard deviations 5.2. poverty and gender of the household about 30 percent of the female headed households were found to be below the poverty line with poverty gap index of 7.3 percent and severity index rate of 2.6 percent. male headed 134 households had 0.23 level of poverty head count index with poverty gap index of 0.062 and squared poverty gap index of 0.028. thus, the incidence of poverty was higher in female headed households than their counter part. table 4 – incidence of poverty by gender sex of the household head poverty estimates t-statistics p0 p1 p2 female 0.301(0.0021) 0.073(0.0051) 0.026(0.0023) male 0.231(0.0076) 0.062(0.0025) 0.028(0.0011) 0.004*** population 0.233(0.0046) 0.061(0.0031) 0.026(0.0010) ***significant at 1% & values in parenthesis are standard deviation 5.3. poverty and education as most studies have indicated, education has positive and significant impact on poverty. highest level of poverty of 35.55 percent (head count index) was observed in illiterate households; accompanied by high level of poverty gap index 9 percent and severity index of 1.65 percent. 5.4. poverty and family size significant numbers of research works carried out to express the relationship between poverty and family size revealed that there is an inverse relationship between households’ size and that of poverty status of the household. a household who have a larger family size has the higher probability of falling into poverty (esubalew, 2006). the average family size of the sample respondents was 5.66 per household. whereas the average family size of the program participants was 5.33 per household while that of the non-program participants was 4.85 per household. as the family size of the household increased, the incidence of poverty also increased. about 6.3 percent of the households that had a family size of 2-3 were living below the poverty line with income short fall of 3 percent and poverty severity index of 1.1 percent. about 12.8 percent of the households with family size of 4-5 were living below the poverty line with poverty gap index of 4.12 percent and poverty severity index of 1.88 percent. thus, as has been indicated by most empirical literatures, the level of poverty had increased directly with an increment of family size of the households. 5.5. poverty and productive safety net program the program participants were 60.8 percent (n=365) while the remaining 39.3 percent (n=235) were nonparticipants, but eligible. the result revealed that the poverty level of the program participants was lower than that of the non-participants. the results also indicated that 30.33 percent of the program participants and 31.11 percent of the non-participants were found to be living below the total poverty line. furthermore, the poverty severity index was lower for the program participants. based on the level of food poverty, there was statistically significant (at 5 percent) difference between the two groups (participants and non-participants). the head count indices were 0.37 and 0.191 for program participants and non-participant households, respectively. the poverty gap index was lower for the program participants (0.023) than that of the program non-participants (0.043). and the poverty severity of the program participants (0.012) was 1.9% lower than the non-participants (0.031). 135 table 5 – level of poverty by program participation variable total poverty estimates tpl food poverty estimates fpl p0 p1 p2 p0 p1 p2 participants 0.3033 0.066 0.025 330 0.370 0.045 0.021 235 non-participants 0.3110 0.059 0.022 330 0.391 0.051 0.026 235 population 0.30615 0.0624 0.025 330 0.383 0.053 0.020 235 pearson chi2(1) = 0.3432 pr = 0.411n pearson chi2(1) = 4.111 pr = 0.015** **significant at 5% and n = non-significant 5.6. food poverty about 235 ethiopian birr measured in per adult equivalent was used as food poverty line, accordingly, 30.6 percent of the households were found to be below the food poverty line with income gap of 6.24 percent and squared poverty gap index of 2.1 percent. as depicted in table 2 below, the level of food poverty incidence varied from woreda (district) to woreda (district). the highest food poverty head count index (0.217) was recorded in geter adwa and the least was observed in tahitaymachew (0.111). in addition, the poverty gap (0.034) was higher in geter adwa and the least was observed in merebleke (0.003). table 6 – food poverty by woredalevel woreda food poverty estimates food poverty line p0 p1 p2 geter adwa 0.217(0.031) 0.034(0.013) 0.012(0.002) 235 ahferom 0.157(0.021) 0.015(0.004) 0.006(0.003) 235 kola temben 0.126(0.022) 0.014(0.004) 0.005(0.003) 235 lailaymachew 0.134(0.030) 0.028(0.014) 0.011(0.011) 235 merebleke 0.215(0.012) 0.003(0.002) 0.001(0.001) 235 population 0.125(0.004) 0.024(0.001) 0.013(0.001) 235 source: author’s own survey computation 6. conclusion and recommendations 6.1. conclusion the study specifically revealed that the productive safety net program (psnp) intervention has enabled the program participants to retain their assets holdings. the program participants, as a result of the program’s intervention, have increased their livestock holdings. the program participants owned more livestock in terms of tlu, than the non-participants. the study revealed that the program has positive and statistically significant impact on productive assets, durable goods, and household goods. positive and statistically significant results were obtained for food consumption per adult equivalent and total consumption per adult equivalent (at 1 percent). based on the level of food poverty, there was statistically significant difference between the two groups (participants and non-participants). the head count indexes were 0.37 and 0.191 for program participants and non-participant households, respectively. the poverty gap index was lower for the program participants (0.023) than that of the program nonparticipants (0.043). and the poverty severity of the program participants (0.012) was 1.9% lower than the non-participants (0.031). furthermore, the poverty severity index was lower 136 for program participants. generally, findings this study revealed that the impact of the productive safety net program (psnp) has positive and statistically significant effect on poverty reduction through increasing households’ overall family consumption expenditure and in protecting assets of the rural households. 6.2. recommendations based on the above findings of the study, the following recommendations are made: o the government should encourage the program participants to re-orient on commercialized dairy and fattening livestock development activities in order to reduce the problem of food insecurity and to improve their income sources. o every member of the program participants should be fully targeted into the program so that 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(2008). tigrai food security coordination office, productive safety net program annual report 2008. wbi (world bank institute), (2005). introduction to poverty analysis; poverty manual, all, jh revision. 138 d:\prof\ijeb nr. 1\final_ijeb.pdf ����������������� ������ ��� ��� ������� ������� ���� �� ������ ���� ����������������� !"#$% &$�'(�)"#* $+&,-�.&+/ #0+$1�'(�2""0"-�3+&4"&5�15& 1��&0$+$6$ �'(�7"&,6", �"&5�8'%% #9 -��:"&,:"+�.&+/ 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�~kirvvnhy}ntksjrkhmnkorpk�mrxkx~krsokir}opm~ktjhmnkpjnkthxnkhppup}wnkhowklmuoiulvntkprshmwtksrmqksupjkxnz� �ktlnowkxrmnkpuxnksupjkirvvnhy}ntk�mrxkx~krsokir}opm~z� �rxlhmnwksupjkirvvnhy}ntk�mrxkx~krsokir}opm~�kx~kirxx}ouihpuroksupjk�rmnuyokirvvnhy}ntkutk|}upnksnvvzk� �kpjuoqkpm}tpkutk�htnwkrok�humonttkmhpjnmkpjhoktjhmuoykpjnkthxnk�hv}nzkk� gxlvr~nntkirxnk�mrxkwu��nmnopkir}opmuntktlnhqtkwu��nmnopkvhoy}hynt�kpj}tkxhquoykupkjhmwnmkprkntph�vutjkpm}tpkirxlhmnwkprknxlvr~nntk�mrxkpjnkthxnkir}opm~z ���������� � �� �������� �� ������� ��������������������� ����������!�"���#$%��"#��� ����&'(������!��)*��+�,(������!�-#��)*��./01�*�2�013456789:8;<685=>458?4@a6;013456789:8=b6@76478?4@a6;701c4@a6;87<4@601d@=ef>;8gf459;h01i>gf979;9=:8=j8?4:4k6?6:;87a955701l6><:=5=kh8;@4:7j6@01d@=?=;9=:8=j8>==m6@4;9=:84?=:k8;<68m4@;96789:b=5b6e 11 _14-27_ surucu 151 lying for the greater good: bounded rationality in a team oktay sürücü universität bielefeld, germany received: june 19, 2014 accepted: july 21, 2014 online published: september 18, 2014 abstract this paper is concerned with the interaction between fully and boundedly rational agents in situations where their interests are perfectly aligned. the cognitive limitations of the boundedly rational agent do not allow him to fully understand the market conditions and lead him to take non-optimal decisions in some situations. using categorization to model bounded rationality, we show that the fully rational agent can nudge, i.e., he can manipulate the information he sends and decrease the expected loss caused by the boundedly rational agent. assuming different types for the boundedly rational agent, who differ only in the categories used, we show that the fully rational agent may learn the type of the boundedly rational agent along their interaction. using this additional information, the outcome can be improved and the amount of manipulated information can be decreased. furthermore, as the length of the interaction increases the probability that the fully rational agent learns the type of the boundedly rational agent grows. keywords: bounded rationality; categorization; nudging; learning. 1. introduction in economic literature, one of the most commonly used assumptions about decision makers is the full rationality. when faced with an economic decision problem, a fully rational decision maker has the ability to see and understand what is feasible and what is preferable. furthermore, he is also able to calculate the optimal course of action given these two constraints. this widely used assumption, which simplifies economic models, has received many criticisms for overlooking real life situations by ignoring cognitive limitations. wide literature initiated by amos tversky, daniel kahneman, and their collaborators provides us with experimental evidence that human beings depart systematically from full rationality due to cognitive limitations. these limitations affect their ability to recognize the available information on markets and their ability to compute. herbert simon, the originator of the phrase, defines bounded rationality as "rational choice that takes into account the cognitive limitations of the decision-maker-limitations of both knowledge and computational capacity" (simon 1987). 152 boundedly rational agents try to simplify and structure the economic decision process. a possible way to do this is to use categories. the usage of categories is also supported by psychological evidence that people in environments with abundance of information show the tendency to group events, objects or numbers into categories depending on their perceived similarities (rosch and mervis 1975). according to the social psychologist gordon allport "…the human mind must think with the aid of categories. we cannot possibly avoid this process. orderly living depends upon it"(allport 1954, pg 20). both in economic and social psychological literature, there are many studies aiming to explain human behavior using categorization (e.g. see macrae and bodenhausen 2000 or fryer and jackson 2008). the following example illustrates one possible way how the categorization process works. consider a consumer who wants to buy a new television. there are an overwhelming number of available alternatives on the market. in order to make a decision, the consumer has to compare a long list of attributes among all products. these attributes include a wide variety of technical features (e.g. screen size, aspect ratio, resolution, contrast ratio, sound system, dimension, weight, etc.), price arrangements (price of the product, payment schedule, service fees), brand, warranty, product support, delivery service, etc. unless the consumer is an expert on televisions, he may have difficulties in making decision because of this long list of items to consider for each product on the market. what happens most of the time is that after eliminating the obviously undesirable alternatives (e.g. too expensive products), the consumer categorizes the rest of the alternatives so that in each category there are products with some similar attributes. at each step of the categorization process, the consumer chooses an attribute, attaches some criteria to it and partitions the set of products based on the criteria. say, for example, he considers the screen size attribute and the criteria he attaches is if it is less than 45 inches or between 45 and 55 inches or larger than 55 inches. in this way, he partitions the products into three sets as "products with screen sizes less than 45 inches", "products with screen sizes between 45 and 55 inches" and "products with screen sizes higher than 55 inches". he continues the categorization process by choosing another attribute-criterion tuple, say resolution and a threshold for resolution. he further refines each set in his partition based on this new attribute-criterion tuple and obtains a new partition. in particular, he divides each of the three sets into two as high-resolution and low-resolution, and ends up with 6 sets (categories) in his new partition.1 repeating this process for a number of steps, he ends up with a final partition of products.2 each category in this partition consists of products having similar features. he chooses one product from each category as a representative and compares all the representatives. then he considers only the category whose representative gives the maximum utility. the final decision is made among the products in that category. this process may lead to a non-optimal decision since the consumer considers only a small subset of products (the category whose representative gives him the highest utility) rather than the whole set. furthermore, another feature of categorization is that even if their preferences are perfectly aligned, the decisions made by different individuals may not be the same. this follows from the fact that the final partition for a consumer is most likely to be different than the final 1 low resolution-small size, high resolution-small size, low resolution-medium size, high resolutionmedium size, low resolution-big size and high resolution-big size. 2 the number of steps depends on the degree of the individual's bounded rationality. in the limit case (when the individual is fully rational, say, an expert on televisions), the number of steps is sufficiently large that each category contains only one product (finest partition). 153 partition of another consumer, since it depends on the number of steps and the criteria the individuals use. the main purpose of this study is to analyze the interaction between fully and boundedly rational agents. more specifically, we focus on situations in which both agents work together in a team. the boundedly rational agent makes a decision after receiving a message from the fully rational agent and this decision determines the payoff of the team. we investigate if and how the fully rational agent can nudge, put differently, if he can stimulate the boundedly rational agent to avoid from non-optimal decisions. we show that he can achieve this goal by manipulating the information that he sends to the boundedly rational agent. furthermore, during their interaction, the fully rational agent can infer about the categories used by the boundedly rational agent; and hence, decrease the amount of manipulated information. the following setting about a fully rational boss and his boundedly rational namesake can be considered as a motivating example for our model. the boss is willing to buy arms for hunting animals. however, having a criminal record, he does not meet the conditions for registration of arms with the police forces. therefore he asks his namesake, who does not have any records of criminal commitment, to buy a weapon for him. the namesake has also some connections in the weaponry black market. therefore he can buy the weapon from either the legal or illegal market. at this point, it is important to note that the problem we are dealing with is not a principal-agent problem, but an instance of team theory initiated by roy radner. in principal-agent problems there is a conflict of interest giving rise to agency cost. in our setting, however, this is not the case since the preferences of the boss and his namesake are perfectly aligned. our paper takes as a departure point dow (1991), where an economic decision problem for a boundedly rational agent visiting two stores and searching for the lowest price is modeled. the bounded rationality of the agent comes from his limitations in memory. more specifically, when the agent is in the second store, he cannot remember the exact price in the first store, but only remembers to which category it belongs. the agent makes a decision by comparing the price in the second store with the representative of the category to which the price in the first store belongs. dow (1991) characterizes the optimal categorization. we depart from dow's setting by introducing a fully rational agent and examining the interaction between the two agents. considering a similar setting, chen, iyer and pazgal (2010) and luppi (2006) examine the price competitions in the market and show that fully rational firms can take advantage of boundedly rational consumers. chen, iyer and pazgal (2010) depart from dow's setting by introducing two different types of consumers: totally uninformed consumers, who only consider buying from a specific store as long as the price is below their reservation value, and informed consumers with perfect memory, i.e., fully rational consumers. they characterize the nash equilibrium of the game in which firms choose pricing strategies and consumers with limited memory choose their categories. it is shown that having boundedly rational agents in the market softens price competition. a similar setting is used by luppi (2006), where there are rational firms on one side and boundedly rational consumers on the other side of the market. consumers categorize the price space and make their decision based on their categories. it is shown that in the presence of boundedly rational consumers, two firms competing a la bertrand depart from the standard equilibrium and make positive profits. the difference between these two papers and ours comes basically from the difference in the settings. in our case, the fully and the boundedly rational agents are working as a team and their common aim is to improve the outcome. in other words, the fully rational agent is not trying to take advantage of the boundedly rational agent like in chen, iyer and pazgal (2010) 154 and luppi (2006), but he is trying to decrease the expected loss caused by the boundedly rational agent. another literature strand to which this paper refers is the field of information transmission. crawford and sobel (1982) analyze costless strategic communication between a better-informed, fully rational sender and a fully rational receiver. the sender categorizes the support of messages and sends the category to which the realized message belongs instead of sending its real value. this situation arises because the players' preferences are not perfectly aligned. the receiver, after reading the signal, takes an action that affects both his and the sender's payoff. it is shown that as the preferences become more aligned, the number of categories the sender uses increases, i.e., the signal becomes more informative. although there have been many studies in economic literature on bounded rationality, studies on interaction between fully and boundedly rational agents are limited in number. to our knowledge, all these studies are concerned with how fully rational agents can take advantage of boundedly rational agents (see rubinstein 1993, piccione and rubinstein 2003, eliaz and spiegler 2006). the main novelty of our paper lies in our team approach. both types of agent work together to decrease the inefficiency caused by bounded rationality since their preferences are perfectly aligned. another interpretation of our model could be done by using the concept of interpreted signals rather than bounded rationality. this concept, introduced by hong and page (2009), is based on the assumption that people filter reality into a set of categories. hong and page call the predictions that agents make about the value of the variable of interest by using their own categories as interpreted signals. they state that "... two agents' signals differ if the agents rely on different predictive models. this can only occur if agents differ in how they categorize or classify objects, events or data, if agents possess different data, or if agents make different inferences." in our model, the interpreted signal of the boss and his namesake differ due to their different ways to categorize the real world. the action taken by the namesake may cause a loss for the boss because the product bought by his namesake might be less valuable for the boss than its alternative. in order to decrease this expected loss, the boss manipulates the information he sends to his namesake. moreover, it might be possible to decrease the amount of manipulated information, since the boss might infer the categorization of his namesake during their interaction. the organization of the paper is as follows. section 2 describes our two-period toy model, gives the details of learning mechanism and presents results obtained using myopic approach. section 3 recaptures the results using a farsighted approach and section 4 concludes. 2. a toy model we consider a two-period decision problem, in which a fully rational boss wants to buy a product in each period. there are two markets having a huge number of alternatives for the product. the first market is more complex than the second one. a possible explanation for this could be that the first market is a legal market with many regulations and the second market is an illegal one with less complexity. the boss can only observe the products in the first market but cannot perform any transaction since he does not have access to neither of the markets. therefore he asks his boundedly rational namesake, who has access to both markets, to compare products in the two markets and buy from one. however, cognitive limitations of the namesake do not allow him to fully understand the complex (first) market. being aware of his limitations, the boundedly rational agent categorizes the price space for the first market to simplify the decision process and uses the representatives of his categories in order to 155 compare the prices of the two markets. the objective of the boss is to minimize the expected loss due to the cognitive limitations of his namesake. it is common knowledge that the boss is fully and the namesake is boundedly rational. it is also known by both parties that the bounded rationality of the namesake is due to his limited ability in understanding the first market. it should be noted that for simplicity we consider only a single number (price) for a product, but in fact this is a combination of many elements, like the type, quality, brand, and age of the product, length of the warranty, payment arrangements and service fees. it is the multiplicity of such items that makes the namesake unable to fully understand the first market. however, the number of elements that are embedded in prices of the second market is less than those of the first market. there are no warranties, no payment arrangements and no service fees, for example. this is what makes the first market more complicated than the second market. being aware of his limitation, the namesake fully trusts his boss. this is because he knows that their preferences are perfectly aligned and that the boss is fully rational, i.e., that the boss does not have any limitations in understanding the market. furthermore, the namesake is aware of the fact that the boss may lie to him. however he knows that the reason for this is not that the boss wants to take advantage of him but he may do so in order to improve the outcome. finally, the boss knows that his namesake fully trusts him. in the first period, the boss observes the price on the first market, , and then reports a price to his namesake, (not necessarily the observed one). receiving the report, the namesake understands to which category the reported price belongs. then he compares the representative of that category with the price on the second market, , and decides from which market to buy. note that he may take a non-optimal action since he uses the representative instead of the realized price for the product in the first market. finally, he informs his boss about the price on the second market. therefore, the boss is able to understand whether the decision was optimal or not. at the beginning of the second period, the boss updates his beliefs about the namesake's categories by looking at the realized prices on both markets and the action of the namesake. then the first period is repeated. the notations used for the second period are as follows: stands for the realized price on the first market, whereas is the price on the second market, and is the reported price. we assume that prices on both markets are independent and distributed uniformly on unit interval [0,1]. there are three possible types for the namesake. all types use two categories, namely, they all partition the price space in two. in order to do that they choose a cutoff price level. prices lower than the cutoff level belong to the first category (low) and prices higher than the cutoff belong to the second category (high). the representative of each category which is used to make comparison is the median of that category. types differ in their choices of cutoff price level. type-1 uses 1/2 as the cutoff level and the representative price of his low category is 1/8, whereas it is 5/8 for his high category. type-2 uses 1/2 as the cutoff level, thus 1/4 and 3/4 are the representatives for his low and high categories, respectively. finally, type-3 who uses 3/4 as the cutoff level has 3/8 and 7/8 as the representatives for his low and high categories, respectively. the prior belief of the boss is that all types are equally likely. the objective of the boss is to minimize the expected loss caused by bounded rationality. he can send four different kinds of reports to his namesake. these reports and their corresponding perceived categories for each type are given in table 1. for example, if the boss chooses to report a price in [0,1/2], then all the types consider their low categories, and use 1/8, 1/4, 3/8 as representative, respectively. 156 table 1 action space type-1 type-2 type-3 used prices      ∈ 4 1 ,011p l l l       8 3 , 4 1 , 8 1      ∈ 2 1 , 4 11 1p h l l       8 3 , 4 1 , 8 5      ∈ 4 3 , 2 11 1p h h l       8 3 , 4 3 , 8 5      ∈ 1, 4 31 1p h h h       8 7 , 4 3 , 8 5 we consider a myopic approach in this section. that is, we assume that the boss is only concerned with the expected loss of the current period, not with the aggregate expected loss. a farsighted approach is considered in the following section. table 2 shows the expected loss for each possible combination of price realizations on the first market ( ) and actions taken by the boss. each number in bold gives the minimum expected loss for the relevant price realization. under the myopic approach, the action that corresponds to each bold number is optimal for the relevant price realization. for example, if the boss observes a price on the first market that belongs to interval [0,1/8], he will report a price that belongs to interval [0,1/4]. at this point we make another assumption about the boss. we assume that he prefers to tell the truth whenever it is among the optimal actions. this assumption together with the fact that [0,1/8] ⊂ [0,1/4] (truth-telling is among optimal actions) imply that the boss reports the observed value in this case. however, if [1/4,3/8] it is optimal to report [0,1/4]. in this case, the reported price is less than the observed value (the boss under-states the price). the other case in which the boss lies is when [5/8,3/4]. the optimal action of the boss, in this case, is to report [3/4,1], i.e., he reports a price that is higher than the observed value (the boss over-states the price). table 2 expected loss (common multiplier: 386 1 × ) observed price \ report ∈1p [0,1/4] ∈1p [1/4,1/2] ∈1p [1/2,3/4] ∈1p [3/4,1] ∈11p [0,1/8] 9 29 57 93 ∈11p [1/8,1/4] 3 15 35 63 ∈11p [1/4,3/8] 3 7 19 39 ∈11p [3/8,1/2] 9 5 9 21 ∈11p [1/2,5/8] 21 9 5 9 ∈11p [5/8,3/4] 39 19 7 3 ∈11p [3/4,7/8] 63 35 15 3 ∈11p [7/8,1] 93 57 29 9 157 from table 2 we obtain the following reaction function:               ∈     ∈      ∈     ∈ = . , 4 3 , 48 5 1, 4 3 , 8 3 , 4 1 4 1 ,0 )( 11 1 1 1 1 1 1 otherwisepricetruereport pifpreport pifpreport pr (1) under-statement occurs only if [1/4,3/8] and receiving this report all types use their low (l) categories (see table 1). however, if [1/4,3/8] and the boss reports the true value of the price rather than under-stating, type-1 uses his high (h) category whereas type-2 and 3 stick to their low (l) categories. so, it is only type-1 who is affected by understatement. since the boss prefers to tell the truth whenever it is among the optimal actions and under-statement does not affect other types, the boss uses this strategy only if type-1 is among possible types when the observed price belongs to interval [1/4,3/8]. over-statement occurs only if [5/8,3/4]. by the same reasoning as above, overstatement affects only type-3, not others. therefore, the boss uses this strategy only if type-3 is among possible types when [5/8,3/4]. otherwise, he prefers to report the truth. figure 1 represents the reaction function of the boss. here, we can observe that the behavior of the boss is symmetric around 1/2. the arrow on the left represents understatement and in case of under-statement only type-1 switches category, whereas the arrow on the right represents over-statement and only type-3 switches category in this case. as noted earlier, these types behave symmetrically which results in symmetric behavior of the boss. figure 1 reaction function at the end of the first period, the boss updates his beliefs by looking at the prices realized in both markets and the action taken by the namesake. to see how this works let us consider the following example. say, [0,1/8]. [1/8,1/4]. given the price on the first market, the boss reports the true value (see figure 1). in this case, the representative price is 1/8 for type-1, 1/4 for type-2 and 3/8 for type-3. the namesake, comparing the representative price with the price on the second market, buys the good from the first market if he is of type-1 and buys from the second market otherwise. in such a situation, the namesake's action reveals whether he is of type-1 or not, and the boss updates his belief accordingly. figure 2 summarizes the learning process at the end of period-1. numbers in bold stand for the numbers of possible types of the namesake. the boss starts with three possible and equally likely types. the probability that he learns the exact type, i.e., that the number for possible types reduces to 1, at the end of the first period is 3/32=0.09375. the probability that the number of possible types decreases to 2 (elimination of one type) is 3/16=0.1875, and finally the probability that the boss learns nothing is 23/32=0.71875. 158 figure 2 learning process, 1st period the boss starts the second period with updated beliefs. the objective is again to minimize the expected loss caused by bounded rationality. when type-1 is among possible types and the observed price on the first market in the second period ( ) belongs to the interval [1/4,3/8], he uses the under-statement strategy described above. furthermore, when type-3 is among possible types and [5/8,3/4], he uses the over-statement strategy. in all the other cases he reports the true observed value. the reaction function for the second period coincides with the one for the first period (figure 1) if both type-1 and type-3 are among possible types. figure 3 summarizes the learning process for the whole game. if the boss figures out the exact type of the namesake (arrives to node 1) at the end of the first period, there is nothing left to learn and he continues the second period with the relevant strategy. if he arrives to node 2 at the end of the first period, the learning process continues and he might either figure out the type and arrive to node 1 or not learn anything new and stay in node 2. if, at the end of the first period, he does not learn anything about the type (stays at node 3), there are three possibilities for the second period. he might figure out the exact type and arrive to node 1, or he might eliminate only one possible type and arrive to node 2, or he might not learn anything and stay at node 3. the overall probability that the boss figures out the exact type of the namesake by the end of the game is 0.19238, that he eliminates only one possible type is 0.29102 and that he does not learn anything is 0.51660. figure 3 learning process, 2nd period the transition matrix of the learning process is given in table 3. it is a finite markov chain and has three ergodic states. according to the theorem by kemeny and snell (1976), the probability after n steps that the process is in an ergodic state tends to 1, as n tend to infinity. this means that if the game is repeated for n periods the probability that the boss learns the exact type of the namesake tends to 1 as n gets larger. 159 table 2 transition matrix possible types {1,2,3} {1,2} {1,3} {2,3} {1} {2} {3} {1,2,3} 0.71875 0.08333 0.02083 0.08333 0.04167 0.01042 0.04167 {1,2} 0 0.84375 0 0 0.07813 0.07813 0 {1,3} 0 0 0.75000 0 0.12500 0 0.12500 {2,3} 0 0 0 0.84375 0 0.07813 0.07813 {1} 0 0 0 0 1 0 0 {2} 0 0 0 0 0 1 0 {3} 0 0 0 0 0 0 1 the relationship between the number of periods and the probability of learning the exact type is given in table 4. the probability increases in the number of periods, and it becomes almost 1 after 30 periods. table 3 number of periods/probability n p 5 0.46344 7 0.60419 10 0.75543 15 0.89388 20 0.95465 30 0.99178 a crucial point to be noted is that in this section we use a myopic approach to solve the optimization problem. the boss is concerned only with the expected loss of the period he is in, whereas under a farsighted approach, he considers the overall expected loss that is the sum of discounted future expected losses. however, both approaches yield the same results with the given available types. it follows from the fact that a manipulated message affects only one type, while other types stick to their category that they would consider if the message was not manipulated. in other words, a strategy that needs to be used in order to decrease the expected loss caused by one type does not conflict with the strategies that need to be used for other types. for example, the under-statement strategy is used whenever type-1 is among possible types. the fact that type-2 and/or type-3 are among possible types does not change this strategy, because it induces only type-1 to change his category, not the other types. therefore, the boss can continue to use the reaction function given in figure 1 even if he knows the exact type of the namesake. it should be noted that if he does so, he might report a manipulated price although reporting the true value is also among optimal actions. even though this violates our assumption that the boss prefers truth telling whenever it is possible, it yields the same expected loss for the boss. this fact ensures that he can use the same reaction function for each period no matter if he is farsighted or myopic. in the following section we show that myopic and farsighted optimizations do not always coincide. 160 3. farsighted approach in this section, we consider a farsighted approach and assume that the objective of the boss is to minimize the sum of discounted expected losses. we modify the model by changing the possible types. here, we assume that the namesake has two possible types. the first type uses two categories (low and high) and his cutoff price level is 1/3. therefore he uses 1/6 as the representative for low category (l) and 2/3 for high category (h). the second type uses three categories (low, medium and high) and his cutoff price levels are 1/3 and 2/3. thus 1/6, 1/2 and 5/6 are the representative prices for his low (l), medium (m), and high (h) categories, respectively. the prior belief of the boss is that both types are equally likely. in this setting, the boss can choose his strategy among three different types of action, which are represented in table 5. if he reports a price belonging to [0,1/3], both types use low categories and 1/6 as representative price. if he reports [1/3,2/3], then type-1 uses his high category and 2/3 as his representative for the first market price, and type-2 uses his medium category and 1/2 as the representative ( }2,1{∈i represents the period). finally, if the boss reports [2/3,1], both types will use high categories and type-1 uses 2/3 whereas type-2 uses 5/6 as representative price. table 4 action space type-1 type-2 used prices      ∈ 3 1 ,0ip l l       6 1 , 6 1      ∈ 3 2 , 3 1ip h m       2 1 , 3 2      ∈ 1, 3 2ip h h       6 5 , 3 2 we solve the optimization problem by backward induction. if the boss does not learn anything about the type of his namesake during the first period, he starts the second period with the belief that both types are equally likely. following the same reasoning of the previous section, we get the following reaction function:          ∈     ∈= , , 60 23 , 3 1 3 1 ,0 )2&1|( 2 1 2 2 1 otherwisepricetruereport pifpreport typetypepr (2) where )2&1|( 21 typetypepr stands for the reaction function for the second period given that both type-1 and type-2 are among possible types. and the expected loss in this case is . 17280 151 )2&1|(2 =typetypele (3) 161 if the boss learns that his namesake is of type-1 during the first period, his reaction function for the second period is          ∈     ∈= , , 60 25 , 3 1 3 1 ,0 )1|( 2 1 2 2 1 otherwisepricetruereport pifpreport typepr (4) and the expected loss in this case is . 576 7 )1|(2 =typele (5) finally, if the boss starts the second period with the information that his namesake is of type-2, his reaction function in this period is to always report the true value. this follows from the fact that this type uses optimal categorization given the number of categories and the distribution of the price. in this case, the expected loss is . 216 1 )2|(2 =typele (6) now, we move to the first period. if the boss, after observing the price on the first market, reports [0,1/3] then both types use low category and 1/6 as representative price for the first market (see table 5). therefore, it is impossible for the boss to distinguish between the two types. in this case, the overall expected loss is (7) where ∈δ [0,1] is the discount factor of the boss. if the boss reports [1/3,2/3] then type-1 uses his high category and 2/3 as representative price for the first market, whereas type-2 uses his medium category and 1/2 as representative (see table 5). in such a case, both types act in the same way conditional on the price realization of the second market being either lower than 1/2 or greater than 2/3. in the former case they both buy from the second, whereas in the latter case they buy from the first market. the two types take diverse actions only if [1/2,2/3]; type-1 buys from the second and type-2 buys from the first market. hence, with this strategy the probability that he boss figures out the type of his namesake is 1/6 and his expected loss is (8) finally, if the reported price is such that [2/3,1] then both types consider their high category and use 2/3 and 5/6 as representative price, respectively (see table 5). in this case, 162 the two types take different actions only if the price realization on the second market belongs to [2/3,5/6], which occurs with probability 1/6. hence, the expected loss in this case is (9) inserting (3), (5) and (6) into (7), (8) and (9) we derive the reaction function of the boss as follows: [ ]               ∈      ∈     ∈ ∈     ∈ = ,1, 3 2 , 3 2 , 3 2 , 3 1 ,,0 3 1 ,0 )( 1 1 1 1 1 1 1 1 1 otherwisepreport apifpreport apifpreport pr where a taking into account the assumption that the boss prefers to tell the truth whenever possible, the above reaction function becomes          ∈     ∈= . ,, 3 1 3 1 ,0 )( 1 1 1 1 1 otherwisepricetruereport apifpreport pr (10) the reaction function (10) depends on the discount factor . this implies that the optimal strategy of the boss when he is myopic ( =0) is different than when he is farsighted ( >0). this follows from the fact that a farsighted boss wants to invest in learning the type since he is concerned with his future losses as well as the current one. the difference here is quite small because the game we consider has only two periods. when the number of periods increases, not only the occasions in which he can learn about his namesake but also the value of knowing the type grows for a farsighted boss. as a result, the difference becomes important. 4. conclusion we have constructed a model in order to study the interaction between fully and boundedly rational agents when they are in a team and have perfectly aligned preferences. in an environment with abundance of product information (type, quality, brand, age of the good, length of the warranty, payment arrangements and service fees), boundedly rational agents are having difficulties in making decision due to their cognitive limitations. in order to simplify the situation, they try to group events, objects or numbers into categories. in our model we consider a boundedly rational agent who partitions the price space into connected sets. the decision made by this agent might be non-optimal in some cases, since he is using categories instead of realized prices and regards prices belonging to the same category as equal. 163 assuming different types for the boundedly rational agent that differ in categories used, we show that during his interaction, the fully rational agent may learn about the type of the boundedly rational agent. he can improve the outcome by using this additional information. the probability that he learns the type of the boundedly rational agent increases in the length of this interaction, whereas it decreases in the number of available types. finally, we show that myopic and farsighted approaches yield different results, depending on the available types. this difference is caused by the tradeoff between investing in learning the agent's type with the aim of decreasing future losses and minimizing the current period's expected loss. references allport, g.w. (1954). the nature of prejudice. reading, ma: addison wesley. chen, y., iyer g. & pazgal a. (2010). limited memory, categorization, and competition. marketing science, 29(4), 650-670. crawford, v. & sobel j. (1982). strategic information transmission. econometrica, 50, 1431-1451. dow, j. (1991). search decisions with limited memory. review of economic studies, 58, 114. eliaz, k. & spiegler r. (2006). contracting with diversely naive agents. review of economic studies, 73(3), 689-714. fryer, r. & jackson m. o. (2008). a categorical model of cognition and biased decision making. the b.e. journal of theoretical economics, vol. 8: iss. 1 (contributions), article 6. hong, l. & page s. (2009). interpreted and generated signals. journal of economic theory, 144, 2174-2196. kemeny, j. g. & snell j. l. (1976). finite markov chains. new york: springer-verlag. luppi, b. (2006). price competition over boundedly rational agents, mimeo. macrae, n. & bodenhausen g. (2000). social cognition: thinking categorically about others. annual review of psychology, 51, 93-120. piccione, m. & rubinstein, a. (2003). modeling the economic interaction of agents with diverse abilities to recognize equilibrium patterns. journal of european economic association, 1, 212-223. radner, r. (1962). team decision problems. annals of mathematical statistics, 33, 857-881. rosch, e. & mervis c. b. (1975). family resemblances: studies in the internal structure of categories. cognitive psychology, 7, 573-605. rubinstein, a. (1993). on price recognition and computational complexity in a monopolistic model. journal of political economy, 101, 473-484. simon, h. a. (1987). bounded rationality. in the new palgrave: a dictionary of economics, vol. 1, eds. j. eatwell, m. milgate, p. newman, 266-286. london: macmillan. tversky, a., & kahneman d. (1981). the framing of decision and the psychology of choice. science, 211, 453-458. 164 2 _14-02_ consoli the integration of interactive and collaborative tools 2.0 micro and small enterprises received: may 27, 2013 accepted: nowadays also micro and small companies use interactive web sites that integrate some tools 2.0 (chat, blogs, forums, ...) and links to social networks, such as interface with the external environment. by these new tools companies can interacts with all stakeholders of the supply chain and in particular with customers to improve their products/services. in this way between customers and co established and a process of co small enterprises should take advantage using these technological channels to increase the competitiveness. in this paper we ana collaborative tools in websites of micro and small companies that have introduced some experimentations in this direction. the analysis is oriented managers think that these new digital channels are important in reaching business goals. keywords: web 2.0, enterprise 2.0, innovative technologies. 1. introduction in italy, like to european countries, medium enterprises (sme) information technology, in recent years, the basic computerization of smes is growing. internet and pc are present in a smes to be more competitive, must invest in innovation and technology. information communication technology (ict) and in particular web technologies source of innovation and a great opp quality products that meet customers competitive advantages. to create an interactive channel with customers and gather their opinions and suggestions on product forum, blog) and social media (e.g. facebook, youtube, twitter, flickr). the aim of this paper is to analyse the business environment of this new technology to interact with the market scientific questions are the following: the integration of interactive and collaborative tools 2.0 in websites of micro and small enterprises domenico consoli business institute “c. battisti” accepted: january 27, 2014 online published: abstract nowadays also micro and small companies use interactive web sites that integrate some tools 2.0 (chat, blogs, forums, ...) and links to social networks, such as facebook and twitter, to interface with the external environment. by these new tools companies can interacts with all stakeholders of the supply chain and in particular with customers to improve their products/services. in this way between customers and company a bidirectional channel is established and a process of co-creation and co-production of products/services is stimulated. small enterprises should take advantage using these technological channels to increase the competitiveness. in this paper we analyse the state of the art about the use of interactive and collaborative tools in websites of micro and small companies that have introduced some experimentations in this direction. the analysis is oriented to understand if entrepreneurs or that these new digital channels are important in reaching business goals. web 2.0, enterprise 2.0, web-oriented technology, micro and small enterprises in italy, like to european countries, the entrepreneurial context consists of many operating in local and international markets. in recent years, the basic computerization of smes is growing. internet and pc are present in almost all small enterprises. smes to be more competitive, must invest in innovation and technology. information communication technology (ict) and in particular web technologies great opportunity for the development. enterprises et customers requirements to acquire new market shares and competitive advantages. to create an interactive channel with customers and gather their products/services companies could use web 2.0 tools (e.g. chat, forum, blog) and social media (e.g. facebook, youtube, twitter, flickr). the aim of this paper is the business environment of micro and small companies to understand if act with the market and in particular with customers. scientific questions are the following: 17 the integration of interactive and in websites of micro and small enterprises domenico consoli business institute “c. battisti” – fano, italy online published: february 12, 2014 nowadays also micro and small companies use interactive web sites that integrate some tools facebook and twitter, to interface with the external environment. by these new tools companies can interacts with all stakeholders of the supply chain and in particular with customers to improve their mpany a bidirectional channel is production of products/services is stimulated. small enterprises should take advantage using these technological channels to increase the lyse the state of the art about the use of interactive and collaborative tools in websites of micro and small companies that have introduced some to understand if entrepreneurs or that these new digital channels are important in reaching business goals. micro and small enterprises, entrepreneurial context consists of many small and operating in local and international markets. regarding the in recent years, the basic computerization of smes is growing. smes to be more competitive, must invest in innovation and technology. the information communication technology (ict) and in particular web technologies are a . enterprises must develop acquire new market shares and competitive advantages. to create an interactive channel with customers and gather their could use web 2.0 tools (e.g. chat, forum, blog) and social media (e.g. facebook, youtube, twitter, flickr). the aim of this paper is micro and small companies to understand if they use and in particular with customers. 18 • are corporate websites of smes just showcases that illustrate the company, products/services and business contacts? • in websites, are there some elements of interactivity in exchanging information with all stakeholders? • are web 2.0 tools used in business activities? • can be websites of smes considered as a context of co-creativity and co-production with customers? • do entrepreneurs/manager unterstand potentialities of web 2.0 technology? • for the adoption of the web 2.0 is it important the technological pre-existing environment? in our research to answer to these scientific questions we use a quantitative method. after a literature review on the web 2.0 channel adopted in smes, we have considered a sample of enterprises and we have analysed their websites and administered a questionnaire to entrepreneurs/managers to unterstand their viewpoint on these new interactive technologies. the paper is structured as follows: in the next section we show a literature review on the web 2.0 technology and its use in micro and small contexts. then we describe a reserch methodology and illustrate the results of this research. at the end, analysing the results, some conclusions are drawn. 2. literature review the concept of web 2.0 was born, in 2005, during a brainstorming session of a conference on the web (o’really, 2005). in this conference many participants affirmed that the web is more important with new interesting applications that involve online collaboration among users. subsequently an enterprise that uses web 2.0 tools was defined, from andrew mcafee (2006), enterprise 2.0. the author affirms that "enterprise 2.0 is the use of emergent social software platforms within companies, or between companies and their partners or customers". an enterpise 2.0 is an organizational and technological model based on active participation of all stakeholders (customers, suppliers, sponsors, business partners) who share knowledge. it represents a breakdown of traditional organization models towards an open and cooperative architecture of a social enterprise. the features of this new model are: bottom-up, open, interconnected and agile and the keywords are: sharing, cooperation and interactivity. with collaborative and cooperative tools the enterprise is more efficient and flexible to listen partners and in particular customers. in the web there are various sites that collect customer reviews (cho et al., 2002): epinions.com, planetfeedback.com, cnet.com, ciao.it, complaints.com, dooyoo.it, ecomplaints.com. by web 2.0 tools it is possible to create an interactive bi-directional channel among people, customers and suppliers. a process of co-creation and co-production is activated. customers and suppliers become co-producers and partners in the conception/design of product/service. the customer becomes prosumer, consumer and producer at the same time. in the literature the figure of prosumer has been emphasized in the book ”the third wave” (toffler, 1980). with this therm toffler predicted the fusion of the roles of producers and consumers in the new figure. in the cluetrain manifesto (levine et al., 2001), the authors affirm that "markets are conversations" and with the digital revolution there was a change of role of consumer from passive consumer to active prosumer. in the best seller “wikinomics: how mass collaboration changes everything” (tapscott and williams, 2006), the authors develop the concept of prosumer coining the related term of prosumption (production/consumption) that refers to the creation of products and services by the same consumers. in time magazine, grossman (2006) affirmed that time's person of the year, for 2006 , is ‘you’ “for seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”. contents’ production is no longer the prerogative of the media centers, press and traditional producers but everyone can participate in the production of contents by simple platforms. this phenomenon is indicated by terms user generated content (ugc) ( 2010) or consumer generated media (cgm) (sumi, 2008). these terms born, in 2005, in the areas of web publishing and new media to indicate the material available on the web produced by users rather than specialized companies. web 2.0 tools allow to implement a virtual community where owner customers can communicate, collaborate, co the concepts of enterprise 2.0, user generated content, prosumer and wikinomics are connected among themselves in a context of co companies to gain competitive and strategic advantages. micro and small enterprises, which are normally deep advantage of web technologies to expand global market. integrating, in their websites, an e geographical boundaries of the market and to sell abroad products/services. channels, the customer can be reached anywhere micro and small enterprises can use channels 2.0 to implement projects of open innovation (chesbrough, 2003, 2006; chesbrough et al., 2008), thus compensating the lack of internal research labs. they can exploit the c 2006b; stewart et al., 2009) or broker intermediaries to launch the application on the web to find a solution for a technical problem and accept ideas that come from external solvers. small companies can use the profes curriculum of candidate employees for the recruitment. some small enterprises use linkedin to search business partners to implement shared projects (contract projects). this happens especially in the sector of furniture for offices/shops, where they are looking for partners of electrical components or for masonry works, so that it is possible to deliver to the customer a complete end product (turnkey). a survey, conducted in 2009 (finotto e micelli, 2010), ta of web 2.0 technologies on a sample of 1,003 small and medium in the made in italy. in the research they monitored the adoption of management software, web sites and the presence of companies o by search results, authors deduced that the adoption of web 2.0 technologies is not dependent on previous experience in the use of management software like enterprise resource planning (erp) or enterprise c management of virtual spaces is independent of the know the second edition of iulm observatory (2011) on the use of social media by italian companies showed that small enterprises t to 43% (2011), with a reduction in the gap compared to medium and the large companies that increased activities 2.0 of a smaller percentage (medium companies increased from 32.3% (2010) to 47.2% (2011) and large companies from 57.9% (2010) to 58.4% (2011)). like the first edition (made in may areas of economic interest: fashion, food, hospitality, government, banks and furniture. for each sector were analysed 120 companies (for a total sample of 720 cases), segmented by size (40 large, 40 medium and 40 small). the attribution of the dimension was made in relation to the turnover, with differentiated classes for each sector analysed. in time magazine, grossman (2006) affirmed that time's person of the year, for 2006 g the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”. contents’ production is no longer the prerogative of the media centers, press and traditional producers but everyone can participate in the production of contents by simple this phenomenon is indicated by terms user generated content (ugc) ( 2010) or consumer generated media (cgm) (sumi, 2008). these terms born, in 2005, in the areas of web publishing and new media to indicate the material available on the web produced by users rather than specialized companies. s allow to implement a virtual community where owner customers can communicate, collaborate, co-producer together and improve product/service. the concepts of enterprise 2.0, user generated content, prosumer and wikinomics are themselves in a context of co-creativity and co-operation that allows to companies to gain competitive and strategic advantages. micro and small enterprises, which are normally deep-rooted in the territory, may take advantage of web technologies to expand them in a wider geographic market and even in a global market. integrating, in their websites, an e-commerce section may be useful to expand geographical boundaries of the market and to sell abroad products/services. e reached anywhere (consoli, 2012a). micro and small enterprises can use channels 2.0 to implement projects of open innovation (chesbrough, 2003, 2006; chesbrough et al., 2008), thus compensating the lack of internal research labs. they can exploit the crowdsourcing phenomenon (howe, 2006a, 2006b; stewart et al., 2009) or broker intermediaries to launch the application on the web to find a solution for a technical problem and accept ideas that come from external solvers. small companies can use the professional social network linkedin to consult public curriculum of candidate employees for the recruitment. some small enterprises use linkedin to search business partners to implement shared projects (contract projects). this happens of furniture for offices/shops, where they are looking for partners of electrical components or for masonry works, so that it is possible to deliver to the customer a complete end product (turnkey). a survey, conducted in 2009 (finotto e micelli, 2010), taking into account the adoption of web 2.0 technologies on a sample of 1,003 small and medium-sized enterprises operating italy. in the research they monitored the adoption of management software, web sites and the presence of companies on major social networks and contents aggregators. by search results, authors deduced that the adoption of web 2.0 technologies is not dependent on previous experience in the use of management software like enterprise resource planning (erp) or enterprise content management (ecm). the skill on the management of virtual spaces is independent of the know-how of traditional ict (legacy). the second edition of iulm observatory (2011) on the use of social media by italian companies showed that small enterprises that use social channels increased from 9.8% ( 2010) to 43% (2011), with a reduction in the gap compared to medium and the large companies that increased activities 2.0 of a smaller percentage (medium companies increased from 32.3% d large companies from 57.9% (2010) to 58.4% (2011)). like the first edition (made in may-november 2010), the research has considered six areas of economic interest: fashion, food, hospitality, government, banks and furniture. for 120 companies (for a total sample of 720 cases), segmented by size (40 large, 40 medium and 40 small). the attribution of the dimension was made in relation to the turnover, with differentiated classes for each sector analysed. 19 in time magazine, grossman (2006) affirmed that time's person of the year, for 2006 g the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game”. contents’ production is no longer the prerogative of the media centers, press and traditional producers but everyone can participate in the production of contents by simple this phenomenon is indicated by terms user generated content (ugc) (strobbe et al., 2010) or consumer generated media (cgm) (sumi, 2008). these terms born, in 2005, in the areas of web publishing and new media to indicate the material available on the web s allow to implement a virtual community where owner-managers and producer together and improve product/service. the concepts of enterprise 2.0, user generated content, prosumer and wikinomics are operation that allows to rooted in the territory, may take them in a wider geographic market and even in a commerce section may be useful to expand geographical boundaries of the market and to sell abroad products/services. by social micro and small enterprises can use channels 2.0 to implement projects of open innovation (chesbrough, 2003, 2006; chesbrough et al., 2008), thus compensating the lack of rowdsourcing phenomenon (howe, 2006a, 2006b; stewart et al., 2009) or broker intermediaries to launch the application on the web to find a solution for a technical problem and accept ideas that come from external solvers. sional social network linkedin to consult public curriculum of candidate employees for the recruitment. some small enterprises use linkedin to search business partners to implement shared projects (contract projects). this happens of furniture for offices/shops, where they are looking for partners of electrical components or for masonry works, so that it is possible to deliver to the customer a king into account the adoption sized enterprises operating italy. in the research they monitored the adoption of management software, n major social networks and contents aggregators. by search results, authors deduced that the adoption of web 2.0 technologies is not dependent on previous experience in the use of management software like enterprise ontent management (ecm). the skill on the how of traditional ict (legacy). the second edition of iulm observatory (2011) on the use of social media by italian hat use social channels increased from 9.8% ( 2010) to 43% (2011), with a reduction in the gap compared to medium and the large companies that increased activities 2.0 of a smaller percentage (medium companies increased from 32.3% d large companies from 57.9% (2010) to 58.4% (2011)). november 2010), the research has considered six areas of economic interest: fashion, food, hospitality, government, banks and furniture. for 120 companies (for a total sample of 720 cases), segmented by size (40 large, 40 medium and 40 small). the attribution of the dimension was made in relation to 20 . 3. the research 3.1 research methodology in the paper we analysed the websites of 48 micro and small enterprises on the use of web 2.0 tools and we administered a questionnaire to entrepreneurs or managers in sectors like ict/marketing/communication. the analysis of the website has been useful for monitoring tools and interactive channels used by the company and to see if these tools were integrated in a coherent and coordinated design inside the website. to define the sample of companies to analysis, at first, we spoke with representatives managers of professional associations that represent the italian micro and small enterprises (confartigianato and cna). taking in consideration their suggestions and other sources, like the website and the press, we have selected no. 48 local small enterprises that have activated, inside, some experiments 2.0. these companies operate in diversified sectors: mechanicalelectronic (19%), furniture (25%), fashion-artistic (23%), food and wellness (17%) and services-communication (16%). in the selected sample we can distinguish companies belonging to sectors of low information intensity, such as mechanical and electrical engineering, medium information intensity, such as furniture, fashion or artistic and high information intensity, such as services/ communication. the difference depends on the content of "information" inherent the specific product/service that represents the core business of the company. in the sample we consider both companies that produce for the industrial market (b2b business-to-business) and for end customers (b2c business-to-consumer). inside b2b companies there are enterprises that produce for the retail market and have also a brand for end customers (b2b2c – business-to-business-to-consumer). the selected sample takes into account companies belonging to different size classes: from individual companies without employees to company with 50 employees. in particular, within the sample, the distribution of companies for dimensional classes is the following: companies with no more than 2 employees (35%); companies with a number of employees between 3 and 10 (23%); companies with a number of employees between 11 and 30 (25%) and with a number of employees between 31 and 50 (17%). we have assigned a greater weight to companies with less than 3 employees because this type of enterprises, in implenting the model of enterprise 2.0, do not have yet been studied in the literature to better understand their dynamics and the phenomenon 2.0. after selecting the sample of enterprises, a first important step was to analyse the websites of various companies under investigation. compared to a study of a few years ago on a wider sample of companies belonging to an association of small businesses, it was noted that today a greater number of companies has a website and that almost all have some interactive channels to interchange information with customers, such as contact forms or web 2.0 tools (blog, chat, forum, social networks). the website analysis was useful also to formulate a questionnaire for entrepreneurs/managers to understand who manage the website, the channels 2.0, the strategic planning and future trends. in the administration of the questionnaire several companies interviewed have expressed their intentions to update the website. 3.2 the profile of the sample of companies the selected sample of 48 companies operates table 1 business sector of companies. business sector (code) f fa sc services/communication fw me the first 4 sectors of table information technologies), while the sector intensity. virtual channels and web technologies tailored clothes/artistic objects sector). the analysed companies, based on the number of following classes (table 2). table 2 company employees. no. employees for company no. companies <=2 17 >2 e <=10 11 >10 e <=30 11 >30 e <=50 9 as we can see from table micro enterprises with two employees (an entrepreneur with an employee or two entrepreneurs) than to companies more structured having from 30 to 50 employees. the reason is due to the desire to not have yet been investigated from this point of view. the companies analysed were 48 and their profile (identification code, sector, market, company representative who responded to questionnai table 3. if the number of employees is 0 it means that company. among the 48 selected companies, 23 are b2b, 8 are b2c and 17 are both b2b and b2c companies that provide retailers and identify these companies as b2b2c. b2c companies are generally those more interested in opening a dialogue with end customers. the profile of the sample of companies the selected sample of 48 companies operates in the following sectors (table business sector of companies. description number of companies furniture 13 fashion/artistic 11 services/communication 8 food/wellness 9 mechanical-electronic 7 table 1 are high information-intensive (they can take advantage , while the sector mechanical/electronic is low virtual channels and web technologies promote very well furniture ed clothes/artistic objects (fa sector) and not mechanical-electronic ed companies, based on the number of employees, may be grouped i company employees. no. of companies 17 11 11 9 table 2, in the choice of companies, we have given more weight to micro enterprises with two employees (an entrepreneur with an employee or two entrepreneurs) than to companies more structured having from 30 to 50 employees. the reason is due to the desire to investigate the phenomenon 2.0 inside micro companies that do not have yet been investigated from this point of view. the companies analysed were 48 and their profile (identification code, sector, market, company representative who responded to questionnaire, number of employees) is shown in if the number of employees is 0 it means that only the entrepreneur works in the among the 48 selected companies, 23 are b2b, 8 are b2c and 17 are both b2b and b2c companies that provide retailers and have their own brand for the end customer. we can identify these companies as b2b2c. b2c companies are generally those more interested in opening a dialogue with end customers. 21 table 1): they can take advantages by is low informationfurnitures (f sector) or electronic devices (me employees, may be grouped into the 2, in the choice of companies, we have given more weight to micro enterprises with two employees (an entrepreneur with an employee or two entrepreneurs) than to companies more structured having from 30 to 50 employees. the investigate the phenomenon 2.0 inside micro companies that do the companies analysed were 48 and their profile (identification code, sector, market, re, number of employees) is shown in only the entrepreneur works in the among the 48 selected companies, 23 are b2b, 8 are b2c and 17 are both b2b and b2c have their own brand for the end customer. we can identify these companies as b2b2c. b2c companies are generally those more interested in 22 table 3 profile of analysed companies. identification code sector market company representative number of employees agme15 me b2b marketing manager 15 mtam2 f b2b entrepreneur 2 mosc sc b2b b2c entrepreneur 0 smma fa b2b b2c entrepreneur 0 lpam20 f b2b b2c entrepreneur 20 abma32 fa b2b b2c entrepreneur 32 fpam16 f b2b entrepreneur son 16 fbab46 fw b2b entrepreneur 46 cume7 me b2b entrepreneur 7 egab15 fw b2b marketing manager 15 acam27 f b2b entrepreneur 27 clam8 f b2b entrepreneur 8 kcab3 fw b2c entrepreneur 3 siam16 f b2b communication manager 16 saab8 fw b2b entrepreneur 8 omma fa b2b b2c entrepreneur 0 inme50 me b2b marketing manager 50 cmme16 me b2b entrepreneur 16 fbma2 fa b2b b2c entrepreneur 2 mhsc7 sc b2c entrepreneur 7 msam48 f b2b ict manager 48 kaam6 f b2b entrepreneur 6 aaam15 f b2c entrepreneur 15 tfsc12 sc b2c entrepreneur 12 deme1 me b2b entrepreneur 1 gcam11 f b2b b2c entrepreneur daughter 11 ccma20 fa b2b entrepreneur 20 coma1 fa b2b b2c entrepreneur 1 tcab7 fw b2b b2c entrepreneur 7 ptma fa b2b b2c entrepreneur 0 vaam1 f b2b b2c entrepreneur 1 tcab1 fw b2b b2c entrepreneur 1 pcsc sc b2b blogger 0 dvab1 fw b2b b2c entrepreneur 1 rome41 me b2b community manager 41 cisc2 sc b2b b2c entrepreneur 2 elsc1 sc b2b b2c entrepreneur 1 phma3 fa b2c entrepr. and web marketing consultant 3 fmam49 f b2b sales manager 49 dram50 f b2b communication manager 50 pisc1 sc b2b b2c entrepreneur 1 masc sc b2c entrepreneur 0 ilcs sc b2b b2c web manager 0 alsc5 sc b2b entrepreneur 5 bmam42 f b2b ict manager 42 gdsc sc b2c entrepreneur 0 brma8 fa b2b b2c communication manager 8 doma50 fa b2b community manager 50 3.3 analysis of websites nowadays for a company, small it is important that companies have an easily navigable describes and communicates very the corporate website is useful to expand markets the goal in building a website (dubini p., garavaglia m, following points: • inform: present and promote products/services to • provide: provide to customer • entertain: be sure that the navigation • build loyalty: endear the visitor in order to entice him to come back to visit the website • interact: exchange information with cust product/ service in particular, in the website analysis we focused on the following languages (lang.). a website, in multiple languages, indicates that the company operates also in foreign markets and then needs to communicate a lot and so it can be involved in column of the table 4 language. multimedia (mult.). it takes into account the integration of various graphics-images-audio and vid with also movies. an enterprise that use multimedia element is predisposed to use interactive tools. contact form/reserved area contacts with customers and in particular if there is a contact form or a restricted area to communicate with customers contributions. presence of tools 2.0. to see if the company uses specific interactive and collaborative tools and if it is ready to start extra communication services, takes in consideration issue/opportunities of the territory. it is important the richness of content website and the ability to collect, organize the results obtained from the analysis of in table 4. in table 4 tools 2.0 are marked with (f), blog (b), forum (r), chat (c), wiki (w), twitter (t), linked pinterest, (p), news (n), skype (s), rss (r), mail (m), e google+ (g), issuu (i). small or large, the website is a very important space. for customers it is important that companies have an easily navigable website, rich in content and communicates very well products/services and references ( s useful to expand markets, customize and build consumer in building a website (dubini p., garavaglia m, 2009) can be summarized in the promote products/services to customers; customers additional product information sure that the navigation through contents of the website : endear the visitor in order to entice him to come back to visit the information with customers to satisfy them analysis we focused on the following features: . a website, in multiple languages, indicates that the company in foreign markets and then in a global contexts. it needs to communicate a lot and so it can be involved in using social media. column of the table 4 “1” means that the website is developped only in italian . it takes into account the integration of various audio and video. there are websites with only pictures and . an enterprise that use multimedia element is predisposed to use contact form/reserved area. we tried to understand if the website contains points of with customers and in particular if there is a contact form or a restricted area customers, to attract them on its website and . to see if the company uses specific interactive and collaborative is ready to start some trials of type 2.0. (e.com.). if the company, in promoting akes in consideration other topics such as the culture and /opportunities of the territory. it is important the richness of content he ability to collect, organize and update information. the results obtained from the analysis of websites of the sample of co 4 tools 2.0 are marked with a single character enclosed in parentheses (f), blog (b), forum (r), chat (c), wiki (w), twitter (t), linkedin (l), youtube (y), flicker (k), pinterest, (p), news (n), skype (s), rss (r), mail (m), e-commerce (e), tg aziendale (a), 23 , the website is a very important space. for customers site, rich in contents, that and references (main customers). consumer loyalty. ) can be summarized in the site is pleasant : endear the visitor in order to entice him to come back to visit the them and improve the . a website, in multiple languages, indicates that the company global contexts. it is a company that using social media. in the means that the website is developped only in italian . it takes into account the integration of various elements like textpictures and websites . an enterprise that use multimedia element is predisposed to use site contains points of with customers and in particular if there is a contact form or a restricted area on its website and to stimulate some . to see if the company uses specific interactive and collaborative promoting its products and culture and emerging /opportunities of the territory. it is important the richness of contents of the sites of the sample of companies are shown enclosed in parentheses: facebook in (l), youtube (y), flicker (k), commerce (e), tg aziendale (a), 24 table 4 analysis of features of websites company lang. (no.) mult. contacts tools 2.0 e. com. agme15 1 yes yes y,f,l,k no mtam2 5 images no f no mosc 1 images yes f no smma 5 images no f,l,s yes lpam20 1 images no f,e no abma32 5 yes yes f,e yes fpam16 1 images no f, s no fbab46 1 yes yes b,f,y,p yes cume7 4 images yes s no egab15 1 yes yes f,y,p no acam27 4 yes yes f,t,y no clam8 2 images yes f yes kcab3 1 yes yes f,y,b,t yes yesam16 3 yes yes f,y,s no saab8 1 images yes f no omma 2 images yes b,f yes inme50 5 yes no f,t,l no cmme16 2 images no f no fbma2 2 images yes f no mhsc7 5 yes yes f,t,k,l,e yes msam48 2 images yes l,y,t,g+ no kaam6 2 images no f,y no aaam15 2 images no f no tfsc12 1 images no b,f,y yes deme1 3 yes yes y no gcam11 2 images yes f,t,y no ccma20 1 yes no b,f,y,t,pc,k yes coma1 1 images no f no tcab7 1 images no b,f no ptma 3 images yes f,n no vaam1 1 images yes f,e no tcab1 3 images no b,f no pcsc 1 images no b,t,f,l yes dvab1 2 yes yes y no rome41 1 yes no b, r,f,t yes cisc2 1 images yes b,f,t,y no elsc1 1 yes yes f,t,l no phma3 1 images yes f,t,y,g+ no fmam49 5 images no f,y no dram50 5 images yes f,y,n yes pisc1 1 images no f,t,l no masc 1 images yes f,s no ilcs 1 images no f,l,t no alsc5 1 images no f,t no bmam42 2 images yes f,t,i no gdsc 1 images no b,f,t,y no brma8 3 yes yes f,b,f,t,y no doma50 2 yes no b,f,r,t,l,y yes data obtained can be summarized as follows table 5 summary of results. item companies with a website websites with 2 or more languages website with only a language websites with pictures and movies websites only with pictures absence of multimedia elements interactivity with customers richness of contents presence of elements 2.0 from table 5 we can see another language (usually english). all 48 companies some media elements. a high percentage of companies use tools 2.0 does not necessarily make the company more interactive. often, in fact, these components are inserted in websites from a previous research (consoli, 2010 belonging to an italian association of small enterprises (table 6 and table 7). table 6 percentage of enterprises with websites. source: own. smes with websites without websites invisible on the web table 7 presence of elements 2.0 in the website. source: own. presence of elements 2.0 in the website nothing (showcase website) some elements 2.0 as we can see from table (72.4%) and there was still 4.6% of companies that from table 7 it is possible to see incorporated in their website has considerably improved. 3.4 analysis of the answers to a questionnaire this session will analyse the responses to the questionnaire sent to companies of the sample. entrepreneurs or marketing/communications few cases, the community manager. in almost all examined companies developed by an external agency. technology are structured in (username and password) and modifiable/upgradeable both in content ata obtained can be summarized as follows (table 5). value 100% websites with 2 or more languages 52% 48% websites with pictures and movies 31% 69% absence of multimedia elements 0% 56% 25% 86% see as different companies (52%) present the web other language (usually english). all 48 companies analysed have a website and all a high percentage of companies use some elements 2.0 (86%). however the presence of necessarily make the company more interactive. often, in fact, these in websites because it is a trend without an active use revious research (consoli, 2010), made in 2009-2010, ociation of small enterprises, the following results were obtained percentage of enterprises with websites. source: own. percentage of enterprises 72,41% (2,30% with only contacts page) 22,99% 4,60% presence of elements 2.0 in the website. source: own. presence of elements 2.0 in the website percentage 95,79% 4,21% table 6, the percentage of enterprises with websites was quite low (72.4%) and there was still 4.6% of companies that had not yet a web space. is possible to see that the majority of companies, about 96% had not yet e elements of web 2.0. so over a period of 2-3 years, the situation analysis of the answers to a questionnaire e the responses to the questionnaire sent to companies of the sample. /communications/ict managers replied to the questionnaire anager. in almost all examined companies, website developed by an external agency. sites that use the content management system (cms) separate sections easily accessible by appropriate credentials (username and password) and modifiable/upgradeable both in content 25 website at least with have a website and all show elements 2.0 (86%). however the presence of necessarily make the company more interactive. often, in fact, these cause it is a trend without an active use. 2010, on 270 companies , the following results were obtained with websites was quite low a web space. that the majority of companies, about 96% had not yet 3 years, the situation e the responses to the questionnaire sent to companies of the sample. s replied to the questionnaire and in websites have been sites that use the content management system (cms) appropriate credentials (username and password) and modifiable/upgradeable both in contents and in pictures. 26 several companies in our sample manage and update their websites inside, although they have been developed by external experts. in next paragraphs we describe the main findings from the questionnaire responses provided by the companies. who manages the corporate website? the results to this question are shown in table 8. table 8 subjects who manage the website. subject percentage administrative 0 % marketing 5,8% commercial 1,9% sales 0,0% employee 5,8% cio 13,5% entrepreneur 25,0% family of entrepreneur 5,8% communication 1,9% external consultant 32,7% foreign agency 1,9% web master 3,8% nobody 1,9% as we can see from table 8 the subjects inside/outside the company who manage the website are: consultant/external agency (32.7%), entrepreneur (25%), chief information officer (cio) (13.5 %), family of the entrepreneur (5.8%), employee (5.8%), marketing area (5.8%), internal web master (3.8%), commercial area (1.9%). the percentage of owner is high because in this research many micro enterprises with only the owner without employees or composed by the owner and a few employees have been analysed. many enterprises commit the development and the management of the website to a web agency or an external consultant. in the case of an internal management, this is made by the son/daughter of the owner or by an internal employee, who works in a marketing/communication/ict area. the management of the website, in 34.6% of companies, is made outside (external consultant or foreign agency), while the remaining 65.4% is made inside the company. the 54% of analysed companies invests on seo (search engine optimization), that optimizes the research on the web via specific keywords. nowadays the investment in seo it is important especially if the company wants attract visits to website (lead generation). google uses semantic algorithms increasingly complex to lead enterprises in the first lines of searching pages. to achieve this goal a good seo consultant is necessary. the 80% of companies has some elements of web 2.0, the 11% will invest in the future in virtual channel 2.0, the 9% is still not convinced to invest. these results differ slightly from the value of the 86% that we obtained from the direct analysis of the website. this depends on the fact that the person who answered to the questionnaire may not be aware of the fact that on the corporate website there is a link to some interactive channels. who manages the web 2.0? the results obtained from the responses of the companies that use elements 2.0 in their corporate websites are shown in table 9. table 9 subjects who manage social channel 2.0 of the website. subject administrative marketing commercial sales generic employee cio entrepreneur family member communication external consultant web master nobody as we can see from the table owner (27%), external consultant (17%), marketing entrepreneur (8%), trade manager (8%) or by employees working in other areas. of 38 companies that use elements of web 2.0, 34 internally manage these virtual channels and only 4 have an external consultant even if some communities 2.0 management of these interactive and collaborative tools values are different from the case of external consultants suggests that social media are interfaces more user regarding social media most used in different websites, the results a 10. table 10 percentage of social media more used. tool percentage facebook 79% twitter 37% youtube 37% blog 25% linkedin 19% skype 10% e-comm 8% flicker 6% pinterest 6% forum 4% as we can observe from (37%), youtube (37%), blog company (25%), linkedin (19%). interactive tools considered most efficient are the who manage social channel 2.0 of the website. percentage 0% 12% 8% 0% 7% 4% 27% 8% 4% 17% 2% 11% table 9, the elements of web 2.0 are managed in most cases by owner (27%), external consultant (17%), marketing manager (12%), son/ anager (8%) or by employees working in other areas. se elements of web 2.0, 34 internally manage these virtual channels have an external consultant. communities 2.0 are initially developed from external web agencies management of these interactive and collaborative tools is made inside the company the case of external consultants who manage website suggests that social media are interfaces more user-friendly. regarding social media most used in different websites, the results a percentage of social media more used. percentage tool percentage 79% news 4% 37% rss 4% 37% chat 2% 25% google+ 2% 19% issuu 2% 10% picasa 2% 8% wiki 0% 6% mail 0% 6% tg aziendale 0% 4% from table 10, social media most used are facebook (79%), twitter (37%), youtube (37%), blog company (25%), linkedin (19%). interactive tools considered most efficient are the following (table 11) 27 9, the elements of web 2.0 are managed in most cases by son/daughter of the anager (8%) or by employees working in other areas. in the sample se elements of web 2.0, 34 internally manage these virtual channels from external web agencies, the the company. these websites. this modality regarding social media most used in different websites, the results are shown in table most used are facebook (79%), twitter following (table 11). 28 table 11 percentage of interactive tools more efficient. tools percentage tools percentage facebook 88% skype 2% youtube 44% mail 2% twitter 29% picasa 2% blog 25% chat 0% linkedin 17% wiki 0% flicker 6% e-comm 0% forum 4% enterprise tv 0% pinterest 4% google+ 0% rss 4% issou 0% news 2% in the first places, as more efficient tools, there are facebook (88%), youtube (44%), twitter (29%), linkedin (17%). the reasons of the companies that use social media (table 12) are mainly due to the desire to acquire new customers (73%), to make promotions (54%) and to increase the company's visibility (50%). table 12 motivations for companies to use social media. motivation percentage interactive channel 6% visibility 50% promotion 54% customers 73% merchandising 2% e-commerce 6% contacts 8% foreign 2% communication 0% low cost investiments 0% increase of ranking 0% curiosity 4% in the future, many enterprises think to consolidate its presence in social networks (67%) and in some cases to start with some experiments of e-commerce (29%) or to enhance the advertising (15%) (table 13). other data obtained from the research are the following: the 69% of enterprises said to have interactive channels with customers and mostly use e-mail, phone, newsletter and facebook, the 31% claimed to not have yet activated virtual channels with customers, the 40% claims to have contact with customers even after the sale while the 60% is not active in sales service. the 38% makes some statistics on consumer preferences and tastes but nobody still uses specialized software of opinion mining to analyse customer reviews. few people think to do so in the future. the 63% of respondents uses mobile devices for business activities. the 85% of enterprises said to not be afraid of online reputation. most of the companies has not yet implemented web 2.0 tools into their websites. table 13 future actions of enterprises. future actions consolidation of social networks advertising e-commerce facebook in other languages youtube integration of various websites sales do not enter in social channels marketing customer care 4. discussion on questionnaire responses the results of the questionnaire web 2.0 (development of new products, opening of new sales channels, manag relationship with customers before and after the sale). build and manage relationships and dialogues with customers on the network is not easy and resources. for many enterprises, despite the willingness to interact and collaborate, communication is still one-way and sample use web channels as an extension of traditional channel channel to promote their offer. it is not always true that the most advanced compani that have experiences in network technologies. these tools, however, are definitely more used by enterprises that have, as target, younger customers who use a lot social networks. b2b companies, sometimes uses virtua position on search engines (cases: alsc5, bmam42, inme50). small enterprises, generally, are supported by external agencies in developing the website and the structure of facebook and flickr communities but a lot of these companies, gradually, manage by themselves, virtual channels because are very user kcab3). instead the management of static websites, especially those traditional non always entrusted to a web agency or to an external consultant (cases: ccam20, alsc5, vaam1, dvab1, cume7, dmme3, ...). several companies begin to experiment and to include in their websites some interactive elements 2.0 (cases: agme15, mtam2, fbma2, cisc2, acam27), s invest in these tools in the future (cases: cume17, clam8, saab8) and others are not interested (cases: dmme3, elme17, mcme20). this last case is relative to companies that operate in the b2b market. the most of the companies analy is convinced of the high potential of the website and social networks. some company plans to implement in the future the model 2.0 (cases: cume7, acam27). many companies are beginning to invest in seo and optimi associate to the “announcements" of the website (cases: doma50, phma3, alsc5, bmam42, ...). the reason of the company to enter in social networks are: visibility, promotion, advertising, acquisition of new leads (lead generation) future actions of enterprises. percentage social networks 67% 15% 29% 2% 2% integration of various websites 2% 0% channels 0% 0% 6% questionnaire responses of the questionnaire show an interest, in companies, to the potential offered by web 2.0 (development of new products, opening of new sales channels, manag before and after the sale). build and manage relationships and dialogues with customers on the network is not easy and it is necessary to dedicate time and resources. for many enterprises, despite the willingness to interact and collaborate, way and not two-way and interactive. most of companies web channels as an extension of traditional channels and then as a communication offer. it is not always true that the most advanced companies that use social channels are those that have experiences in network technologies. these tools, however, are definitely more used by enterprises that have, as target, younger customers who use a lot social networks. b2b companies, sometimes uses virtual interactive channels to raise the ranking or the position on search engines (cases: alsc5, bmam42, inme50). small enterprises, generally, are supported by external agencies in developing the website and the structure of facebook and t a lot of these companies, gradually, manage by themselves, virtual channels because are very user-friendly (cases: kaam16, siam16, ptma, gcam11, fbma2, kcab3). instead the management of static websites, especially those traditional non usted to a web agency or to an external consultant (cases: ccam20, alsc5, vaam1, several companies begin to experiment and to include in their websites some interactive elements 2.0 (cases: agme15, mtam2, fbma2, cisc2, acam27), some enterprises think to invest in these tools in the future (cases: cume17, clam8, saab8) and others are not interested (cases: dmme3, elme17, mcme20). this last case is relative to companies that operate in the b2b market. the most of the companies analysed, except for a few cases (cmma1, dmme3), is convinced of the high potential of the website and social networks. some company plans to implement in the future the model 2.0 (cases: cume7, acam27). many companies are beginning to invest in seo and optimize search keywords to associate to the “announcements" of the website (cases: doma50, phma3, alsc5, bmam42, the reason of the company to enter in social networks are: visibility, promotion, advertising, acquisition of new leads (lead generation) (gahan, 2012) for transform them in 29 to the potential offered by web 2.0 (development of new products, opening of new sales channels, management of the before and after the sale). build and manage relationships and to dedicate time and resources. for many enterprises, despite the willingness to interact and collaborate, the way and interactive. most of companies of the and then as a communication es that use social channels are those that have experiences in network technologies. these tools, however, are definitely more used by enterprises that have, as target, younger customers who use a lot social networks. l interactive channels to raise the ranking or the position on search engines (cases: alsc5, bmam42, inme50). small enterprises, generally, are supported by external agencies in developing the website and the structure of facebook and t a lot of these companies, gradually, manage by themselves, virtual friendly (cases: kaam16, siam16, ptma, gcam11, fbma2, kcab3). instead the management of static websites, especially those traditional non-cms is usted to a web agency or to an external consultant (cases: ccam20, alsc5, vaam1, several companies begin to experiment and to include in their websites some interactive ome enterprises think to invest in these tools in the future (cases: cume17, clam8, saab8) and others are not interested (cases: dmme3, elme17, mcme20). this last case is relative to companies that operate in the sed, except for a few cases (cmma1, dmme3), is convinced of the high potential of the website and social networks. some company plans to ze search keywords to associate to the “announcements" of the website (cases: doma50, phma3, alsc5, bmam42, the reason of the company to enter in social networks are: visibility, promotion, for transform them in 30 future customers. a restriction which all companies of the sample manifest is to not understand how many of contacts are transformed in real customers. in the future many people think to consolidate its presence on social media, others think to associate virtual channels in the activation of e-commerce section. most companies give a small weight to post-sale (no. 21/48); some companies, for this goal, use e-mail, phone, newsletter and others have implemented a private community to increase the customer loyalty (case: doma50). at this stage of the questionnaire, many enterprises claim to not be afraid of online reputation. most of these companies think to implement the model of enterprise 2.0 in the future. the more structured companies have a chief information officer (cio), which manages social media (cases: mhsc7, brma8, cmm16, bmam42, fmam49), in other cases the manager is an employee/manager of marketing, communications, commercial areas (cases: doma50, egab15, siam16, agme15) or the owners’son/daughter (cases: ptma, smma, mhsc7, abma32, gcam11). in the case of social networks, the size of company is not important. there are larger companies of the sample that do not use web 2.0 channels (cases: inme50, msam48) and other ones smaller which use them (cases: smma, ptma, pcsc, masc, gdsc). smaller companies, without organizational-bureaucratic constraints, create and manage in-house social network, while larger companies are supported from consultants and care more the content and the management of virtual communities. in small companies, it is also easier the integration of mobile devices such as tablets, smartphones (it consumerization) for the lack of restrictive policies in their information systems. in larger companies, the integration is more difficult to achieve for the presence of more restrictions in the authorized access. 5. conclusions the new enterprise 2.0 (consoli 2012b, 2013) is a model that, at present, is in embryonic stage, even in large enterprises. it is a model still in an experimental state almost unknown scientifically, from the point of view of dynamic processes, methods and variables to consider. it is a model "in progress", in developing methods to assess performances and the return on investment (roi). it is based on revolutionary concepts such as sharing, collaboration and co-creation, and then on a new philosophy of doing business. since it is not yet an established model it is evident that there is not a large academic literature on the topic and there are not yet present interpretative models which contextualize the topic in its entirety. the previous models of performance evaluation and measurement of ict readiness (balocco et al., 2006; spinelli, 2009) consider the ict maturity (infrastructure and software) inside the company and the ict strategic vision. in future, in the new business model of enterprise 2.0, will be important to take in consideration the dimension of interactive and collaborative tools of web 2.0 that support the exchange of information with all stakeholders (suppliers, customers, other companies). the analysis of cases (by websites and questionnaire), in a sample of micro and small enterprises, has highlighted as the model of enterprise 2.0 can also be applied in this type of companies. the analysis shows that small enterprises have understood the potentiality of web 2.0 and increasingly feel the need to be present on social networks, although this awareness does not always imply the mastery of logic and languages of these channels. for the implementation of the new business model, it is not enough to integrate some web 2.0 tools (chat, forums, blogs, social media, ..) on the corporate website, but it is necessary to introduce a series of changes in the company from the point of view both organizational and technological. the central problem, is to use these tools in a coordinated and correct way and, for this reason, it is necessary to devel efficient organizational structure. a large size or a pre-existing technological equipment inside the company does not imply a good implementation of the model. instead it is important t or manager and the presence of an internal expert facilitator ("pivot") who stimulate adoption and the use of these interactive channel starting from a specific limited area of the company. if micro and small enterprises monitor and control all stages of a correct use interactive and collaborative tools they, for its flexibility and thinness in internal business processes, could gain a competitive advantage over the medium and large companies. data obtained in this research analysis can be used as a starting po quantitative investigations involving a larger sample of companies and using specific statistical tools. in this way it regarding the correct use of social media 2.0, by micro and business goals and so it will be possible to of an interactive and dynamic references balocco, r., mainetti, s. & rangone, a. 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(1980). the third wave, bantam books, us. 2 _14-02_ vasquez parraga explaining customer loyalty to retail stores in u.s. hispanic markets received: august 1, 2013 accepted: explaining customer store loyalty in emerging markets, in particular hispanic markets, is the main purpose of this paper. acknowledging that there have been many attempts to be understand customer store loyalty, this study employs an explanation chain and, thus, a model describing key relationships in the generation of customer loyalty, from initial customer satisfaction to trust, to commitment, to loyalty. additional variab moderators of the relationships taking place within the explanation chain. using both spss and sem analyses, the results support a strong explanation chain of customer store loyalty with moderators adding less than 5% explained varianc research limitations are also examined. keywords: retail customer; hispanic consumers 1. introduction this study aims at examining the process store customers follow in developing loyalty to a store. examining this process is important in a context of a growing market in which store choices are numerous and continue to multiply. moreover, explaining the of store loyalty is crucial when a) the phenomenon becomes more complex as population grows and more stores enter the markets, and b) existing conceptual frameworks offer limited empirical support. thus, the following research questions rq1. what are the critical components of an explanation chain of customer loyalty? rq2. what are the significant moderators of the relationships taking place in the explanation chain? rq3. how similar or different are hispanic consumer the stores they patronize? explaining customer loyalty to retail stores in u.s. hispanic markets arturo z. vasquez miguel the university of texas-pan american, u.s.a. accepted: january 27, 2014 online published: abstract explaining customer store loyalty in emerging markets, in particular hispanic markets, is the main purpose of this paper. acknowledging that there have been many attempts to be understand customer store loyalty, this study employs an explanation chain and, thus, a model describing key relationships in the generation of customer loyalty, from initial customer satisfaction to trust, to commitment, to loyalty. additional variables are explored as moderators of the relationships taking place within the explanation chain. using both spss and sem analyses, the results support a strong explanation chain of customer store loyalty with moderators adding less than 5% explained variance. managerial implications and research limitations are also examined. customer store loyalty; trust; commitment this study aims at examining the process store customers follow in developing loyalty to a store. examining this process is important in a context of a growing market in which store choices are numerous and continue to multiply. moreover, explaining the of store loyalty is crucial when a) the phenomenon becomes more complex as population grows and more stores enter the markets, and b) existing conceptual frameworks offer limited thus, the following research questions guide the study: . what are the critical components of an explanation chain of customer loyalty? what are the significant moderators of the relationships taking place in the how similar or different are hispanic consumers in the way they become loyal to the stores they patronize? 3 explaining customer loyalty to retail stores in u.s. hispanic markets asquez-parraga iguel a. sahagun pan american, u.s.a. online published: february 12, 2014 explaining customer store loyalty in emerging markets, in particular hispanic markets, is the main purpose of this paper. acknowledging that there have been many attempts to better understand customer store loyalty, this study employs an explanation chain and, thus, a model describing key relationships in the generation of customer loyalty, from initial customer les are explored as moderators of the relationships taking place within the explanation chain. using both spss and sem analyses, the results support a strong explanation chain of customer store loyalty e. managerial implications and ommitment; satisfaction; u.s. this study aims at examining the process store customers follow in developing loyalty to a store. examining this process is important in a context of a growing market in which store choices are numerous and continue to multiply. moreover, explaining the formation process of store loyalty is crucial when a) the phenomenon becomes more complex as population grows and more stores enter the markets, and b) existing conceptual frameworks offer limited . what are the critical components of an explanation chain of customer loyalty? what are the significant moderators of the relationships taking place in the s in the way they become loyal to 4 the purpose of this research is to attempt an explanation of customer store loyalty by testing an explanation chain of the key relationships taking place in the process of generating customer loyalty. in addition, this research explores the effects of significant moderators in the relationships defining the explanation chain. research results are based on data gathered from consumers in hispanic markets in the u.s. the remaining of the paper addresses the components of explanation chain and the reason why such an explanation is a parsimonious approach to customer store loyalty. next, the methods and results of the research are explained and discussed along with the research implications of the most important findings. the conclusions of the study are presented last. 2. explaining customer store loyalty both research and practitioners are interested in a parsimonious explanation of customer store loyalty. several factors have been identified as predictors or influential attributes of customer loyalty in a retail context. some factors were generated by the retailer, such as service quality (fullerton, 2005; wong & sohal, 2003a) or perceived quality (mitchell & kiral, 1998), process brand –the experience that retailers provide—(davies, 1992), brand differentiation (tuckey, 2001), private-label use (ailawadi, pauwels, & steemkamp, 2008), incentives offered by retailers (beeler, 2000), and positive encounters at the store (wong & sohal 2003b). other factors have been identified on the basis of studies of customer behavior, such as budget spent at the store (knox & denison, 2000), shoppers’ individual needs (barlow, 2000), cross-shopping (stark & ebenkamp, 1999), emotional satisfaction (wong, 2004), and uncertainty avoidance a la hofstede (straughan & albers-miller, 2001). in addition, website information and perceived value were positively associated to customer loyalty intentions towards apparel retail websites (kim & niehm, 2009). 2.1. the role of customer satisfaction, trust, and commitment on customer store loyalty satisfaction and loyalty have been key concepts in understanding customer behavior outcomes. at the center of attention, however, is the actual role of customer satisfaction in the achievement of customer loyalty. some authors assert that loyalty is the result of obtaining customer satisfaction (hallowell, 1996; heskett, jones, loveman, sasser, & schlesinger, 1994), including moderating effects (chen, wang, wang, & tsai, 2010) and various antecedents (de wulf, odekerken-schroeder & iacobucci, 2001; juhl, kristensen & ostergaard, 2002; kristensen, juhl & ostergaard, 2001; murgulets, eklof, dukeov, & selivanova, 2002; piron, 2001). in contrast, other authors empirically conclude that store loyalty cannot be generated by customer satisfaction alone or that both satisfaction and loyalty are only indirectly related (miranda, konya & havrila, 2005; reichheld, 1996; sivadas & baker-prewitt, 2000; vasquez-parraga & alonso, 2000). yet, accepting that customer satisfaction and loyalty are indirectly related, the key question is which mediating variables are in between satisfaction and loyalty. authors differ on which mediating variables are relevant. trust, commitment, word-of-mouth communication are some mediatory variables identified in previous research (sivadas & baker-prewitt, 2000). more specifically, some alternatives were proposed to explore or explain customer store loyalty, such as the means-end chain (lee, chang & liu, 2010) and the role of retail format in observable loyalty patterns in a market (bustos-reyes & gonzalezbenito, 2008). we adopt a framework that appears to be more rational and complete to explain how customer loyalty is generated and sustained when adopting consumer services, the v-a approach (vasquez-parraga & alonso, 2000; zamora, vasquez-parraga, rodriguez, & gonzalez, 2011). this approach offers important advantages as a conceptual framework. first, it adopts “true” loyalty (see dick attitudinal characteristics. second, it includes transactional satisfaction, not only product satisfaction, for a more thorough measurement of customer satisfaction. third, it the importance of three core variables explanation of loyalty. these variables have a sequential impact on loyalty starting in a satisfactory experience with both the product and the transaction. such generates trust, which in turn produces commitment, which in turn results in loyalty. this sequence of satisfaction, trust, commitment, and loyalty is the explanation chain (hunt, 2010) and attempts to represent a parsimonious explanat loyalty is defined as the end result of trust and commitment between the client and the provider through multiple encounters, building up a satisfactory relationship in the long (bravo, vasquez-parraga, & zamora zamora, vasquez-parraga, morales, & cisternas 2.2. the role of other factors on customer store loyalty unlike oliver (1997, 1999), sawmong (2006), who study loyalty under conditions of cognitive, affective, conative, and action evaluations, the v-a approach examines the entire process of generating loyalty under both essential conditions, cognitive and affective, and thus identifies and test moderating effects on either the role of trust or the role of commitment on the basis of two attitude sources, cognitive and affective. the cognitive effects derive from attitudes such as customer perceived risk, store familiarity, store choi influences derive from attitudes such as customer opportunistic propensity, consumer involvement, and shared values with the service provider. both, the cognitive and affective attitudes moderate the effect of either shown in figure 1. figure 1 – antecedents of customer loyalty ( 2000) pts “true” loyalty (see dick & basu, 1994), which includes both behavioral and attitudinal characteristics. second, it includes transactional satisfaction, not only product satisfaction, for a more thorough measurement of customer satisfaction. third, it the importance of three core variables—satisfaction, trust, and commitment explanation of loyalty. these variables have a sequential impact on loyalty starting in a satisfactory experience with both the product and the transaction. such positive experience generates trust, which in turn produces commitment, which in turn results in loyalty. this sequence of satisfaction, trust, commitment, and loyalty is the explanation chain (hunt, 2010) and attempts to represent a parsimonious explanation of customer loyalty. thus, customer loyalty is defined as the end result of trust and commitment between the client and the provider through multiple encounters, building up a satisfactory relationship in the long parraga, & zamora, 2005; torres, vasquez-parraga, & barra, parraga, morales, & cisternas, 2004). 2.2. the role of other factors on customer store loyalty unlike oliver (1997, 1999), sawmong & omar (2004), and evanschitzky (2006), who study loyalty under conditions of cognitive, affective, conative, and action a approach examines the entire process of generating loyalty under both essential conditions, cognitive and affective, and thus identifies and test moderating effects on either the role of trust or the role of commitment on the basis of two attitude sources, cognitive and affective. the cognitive effects derive from attitudes such as customer perceived risk, store familiarity, store choice, and communication. the affective influences derive from attitudes such as customer opportunistic propensity, consumer involvement, and shared values with the service provider. both, the cognitive and affective attitudes moderate the effect of either trust on commitment or commitment on loyalty, as antecedents of customer loyalty (adapted from vasquez-parraga & alonso, 5 basu, 1994), which includes both behavioral and attitudinal characteristics. second, it includes transactional satisfaction, not only product satisfaction, for a more thorough measurement of customer satisfaction. third, it underscores satisfaction, trust, and commitment—in the explanation of loyalty. these variables have a sequential impact on loyalty starting in a positive experience generates trust, which in turn produces commitment, which in turn results in loyalty. this sequence of satisfaction, trust, commitment, and loyalty is the explanation chain (hunt, 2010) ion of customer loyalty. thus, customer loyalty is defined as the end result of trust and commitment between the client and the provider through multiple encounters, building up a satisfactory relationship in the long-term parraga, & barra, 2009; omar (2004), and evanschitzky & wunderlich (2006), who study loyalty under conditions of cognitive, affective, conative, and action a approach examines the entire process of generating loyalty under both essential conditions, cognitive and affective, and thus identifies and tests a number of moderating effects on either the role of trust or the role of commitment on the basis of two attitude sources, cognitive and affective. the cognitive effects derive from attitudes such as ce, and communication. the affective influences derive from attitudes such as customer opportunistic propensity, consumer involvement, and shared values with the service provider. both, the cognitive and affective trust on commitment or commitment on loyalty, as parraga & alonso, 6 in addition, we examine the role of some demographic characteristics, such as income and education, besides the core explanatory variables of loyalty and the corresponding moderating effects on trust and commitment. no hypotheses were posited because the research reported here is formative in the area of customer store loyalty; nonetheless, the results are reflective in the study of loyalty using the v-a approach. 3. methodology following a previous application of a survey research designed to test the explanation chain with transportation users (zamora et al., 2011), this study adapted the questions and measures related to the eight core constructs and eight moderating factors used. the eight core constructs representing the process leading to loyalty and the explanation chain are cognitive loyalty, affective loyalty, behavioral loyalty, trust, commitment, satisfaction with service, satisfaction with employees, and satisfaction despite competition. the eight moderating factors of the effects of trust on commitment and the effects of commitment on loyalty are store choice, store familiarity, company opportunism, communication between the customer and the company, perceived risk, consumer involvement with the service, shared personal values, and shared management values, as listed in table 1. table 1 – confirmatory factor analysis constructs and items factor loading inner behavioral loyalty (α = .853, ave = 61.647%) even though grocery stores are available in many brands, i always use the same one. if i like a grocery store, i rarely switch from it just to try something different. i have been with my favorite store for a long time. i plan to continue relying on my favorite store for a long time. .665 .564 .871 .846 outer behavioral loyalty (α = .843, ave = 86.616%) i say positive things about my favorite store to others. i encourage friends and relatives to use my favorite store. .877 .770 affective loyalty (α = .877, ave = 59.492%) once i get used to a store, i hate to switch. i feel a strong loyalty to my favorite store. i have developed some sort of emotional connection with my favorite store. continued service from my favorite store gives me peace of mind. i’d like my current favorite store to be my permanent store. .744 .837 .745 .752 .774 cognitive loyalty (α = .800, ave = 45.562%) once i get to know a grocery store, i tend to use that store more often. for the time being, i am not looking for an alternative store. when i decide to stay with a store, i make sure that the store is a competent one. i am loyal to my grocery store because personnel at this store are very knowledgeable. client loyalty in grocery stores is based on good reasons or experiences. .539 .617 .790 .704 .697 commitment (α = .905, ave = 66.430%) i am proud to be a client of my favorite grocery store. i feel a sense of belonging to my store. as far i am concerned no one could choose a better grocery store. i am very confident about the success of my store. i feel that i have a personal relationship with my grocery store. .857 .892 .814 .765 .737 α = cronbach coefficient alpha. ave = average variance extracted table 1 – confirmatory factor analysis trust (α = .900, ave = 60.716%) i have complete faith in the integrity of the i feel quite confident that my store will always try to treat me fairly. my grocery store has been frank in dealing with me. my store would never try to gain an advantage by deceiving its clients. my grocery store is trustworthy. i am sure that the offerings at my favorite grocery store are valuable ones. opportunism (α = .865, ave = 57.097%) to accomplish its own objectives, my store might not provide me with the best benefits available. to accomplish its own objectives, my store sometimes promises to do things without actually delivering them my grocery store sometimes pretends that a service is of value to me, when in fact the store is looking out for itself. i think that my store does not care about m y grocery store only cares about the money i pay. familiarity (α = .861, ave = 53.865%) compared to other people, i know a lot about grocery stores. compared to most of my friends, i know a lot about grocery stores. i am familiar with many products offered by my favorite store. i know a lot about selecting products and services made available by grocery stores. i have a clear idea about what grocery stores should offer for me to get maximum satisfaction. risk (α = .848, ave = 53.981%) i am concerned about making a mistake in choosing a grocery store. the decision to choose a grocery store involves high risk. if i have to switch my current store, i might lose some benefits i have already i think that there is a hidden cost if i switch my current store. switching among stores involves a cost in terms of time and effort. communication (α = .853, ave = 54.661%) my store keeps me informed of new products. my store clearly explains the product features when i ask. when i make suggestions, the personnel working at my store always listen to my suggestions. if i want to, i can have detailed conversations regarding products and prices with personnel from my store. as far as i know, my store cares about receiving feedback from its customers. involvement (α = .889, ave = 62.035%) i have great interest in grocery stores. grocery stores are fascinating. i have a compulsive need to know more about grocery stores. i like to make comparisons between grocery stores. i like to talk to my friends about grocery stores. shared personal values (α = .774, ave = 81.578%) in this business, unethical behaviors shouldn’t be in this business, using unethical advertising cannot be justified. α = cronbach coefficient alpha. ave = average variance extracted confirmatory factor analysis (continued) constructs and items = .900, ave = 60.716%) i have complete faith in the integrity of the personnel at my store. i feel quite confident that my store will always try to treat me fairly. my grocery store has been frank in dealing with me. my store would never try to gain an advantage by deceiving its clients. m sure that the offerings at my favorite grocery store are valuable ones. = .865, ave = 57.097%) to accomplish its own objectives, my store might not provide me with the best benefits its own objectives, my store sometimes promises to do things without actually my grocery store sometimes pretends that a service is of value to me, when in fact the store is i think that my store does not care about me. m y grocery store only cares about the money i pay. = .861, ave = 53.865%) compared to other people, i know a lot about grocery stores. compared to most of my friends, i know a lot about grocery stores. am familiar with many products offered by my favorite store. i know a lot about selecting products and services made available by grocery stores. i have a clear idea about what grocery stores should offer for me to get maximum satisfaction. i am concerned about making a mistake in choosing a grocery store. the decision to choose a grocery store involves high risk. if i have to switch my current store, i might lose some benefits i have already earned. i think that there is a hidden cost if i switch my current store. switching among stores involves a cost in terms of time and effort. = .853, ave = 54.661%) my store keeps me informed of new products. store clearly explains the product features when i ask. when i make suggestions, the personnel working at my store always listen to my suggestions. if i want to, i can have detailed conversations regarding products and prices with personnel as far as i know, my store cares about receiving feedback from its customers. = .889, ave = 62.035%) i have great interest in grocery stores. i have a compulsive need to know more about grocery stores. e to make comparisons between grocery stores. i like to talk to my friends about grocery stores. α = .774, ave = 81.578%) in this business, unethical behaviors shouldn’t be tolerated. in this business, using unethical advertising cannot be justified. 7 factor loading .786 .849 .780 .810 .807 .625 to accomplish its own objectives, my store might not provide me with the best benefits its own objectives, my store sometimes promises to do things without actually my grocery store sometimes pretends that a service is of value to me, when in fact the store is .658 .716 .846 .811 .731 i have a clear idea about what grocery stores should offer for me to get maximum satisfaction. .904 .915 .609 .666 .473 .714 .829 .793 .746 .562 when i make suggestions, the personnel working at my store always listen to my suggestions. if i want to, i can have detailed conversations regarding products and prices with personnel .585 .738 .798 .846 .702 .849 .879 .783 .641 .764 .989 .608 8 table 1 – confirmatory factor analysis (continued) constructs and items factor loading shared management values (α = .725, ave = 41.815%) in this business, unethical behaviors shouldn’t be tolerated. in this business, using unethical advertising cannot be justified. the way opportunistic stores try to get new customers is unethical. it is unethical to call a competitor’s customers and try to convince them to switch stores. .752 .815 .499 .439 satisfaction with service (α = .908, ave = 72.680%) this is one of the best experiences with a grocery store i have ever had. this grocery store is exactly what i need. this grocery store has worked out as well as i thought it would. this grocery store has adequately fulfilled my expectations. .729 .907 .902 .860 satisfaction with employees (α = .876, ave = 64.131%) employees at my current grocery store give me personal attention. employees at my current grocery store know what they are doing. employees at my grocery store are never too busy to respond to client requests promptly. employees from my favorite grocery store are polite. .809 .794 .839 .760 satisfaction despite competition (α = .896, ave = 68.407%) compared to the other stores, my grocery store offers the best products. compared to the other stores, my grocery store has the best reputation. compared to the other stores, my stores gives customers the best satisfaction overall. i am satisfied with my decision to choose this store over all the other stores. .822 .828 .860 .797 α = cronbach coefficient alpha. ave = average variance extracted in order to apply the framework to store users in line with the purpose of this research, adult consumers were approached in a geographical area where 1) consumers have access to grocery stores carrying either national or local or both types of brands, 2) different requirements to get customer satisfaction in the short-term and gain customer loyalty, trust and commitment in the long-term can be scrutinized, and 3) consumers predominantly share a hispanic ethnic background. numbering more than 50 million people, hispanic consumers are the largest minority, approximately 16% of the u.s. population. hispanic consumers represent several countries of origin in latin america, in particular mexico as well as countries in europe and asia. despite the range of national origin, common demographics and similar ethnic traits are the basis for the official u.s. government designation of this large demographic segment as “hispanic.” consumer researchers have generally studied hispanics on the basis of the strong impact of cultural heritage on consumer behavior (wadia, 1967), the constraints that the social majority imposes on minority ethnic groups to limit both consumption and opportunities for self-fulfillment and psychological well-being (hirschman, 1985), and the situational effects, such as social surroundings and product type, that moderate the relationship between felt ethnicity and consumer behavior (stayman & deshpande, 1989). we assume in this study that hispanic consumers may demonstrate social and situational differences in the way they get customer satisfaction, trust others in the society, commit to others, and become loyal customers. only heads of households and/or adults who acknowledged having shopping experience were interviewed. the actual sample included 362 store customers. table 2 summarizes the sample profile. about 62% are women, 45% married, and 41% older than 30 years. table 2 characteristics gender males females marital married single divorced or separated age 20 years or less between 21 between 31 between 41 50 years or more 4. results and discussion 4.1 results on the measures used table 1 shows all the constructs measured including the items used, their factor loadings, their reliability coefficients (α), and the average variance explained (ave). the items representing cognitive, affective, and behavioral loyalty loaded as expected in corresponding constructs, with a minor exception. behavioral loyalty reflected two components, an inner and an outer tendency of behavioral loyalty as best described by the items themselves (see table 1). a four constructs reflecting customer loyalty show high reliability coefficients (above .80) and significant average variances explained. as a result, customer loyalty is a second derived from four constructs. similarly, the items representin the three types of satisfaction (with the service, with employees, and with the competition) loaded as expected with reliability coefficients above .85 and average variance explained above 67%. customer satisfaction is a second both sets of constructs, loyalty and satisfaction were further analyzed using structural equation modeling to obtain corresponding second model. figure 2 shows the well satisfaction and the resulting overall fit of the model representing the explanation chain. table 2 – sample profile characteristics percentages gender males 38.3 females 61.7 marital status married 44.8 single 46.4 divorced or separated 8.8 20 years or less 4.7 between 21-30 years 54.2 between 31-40 years 15.8 between 41-50 years 15.0 50 years or more 10.3 discussion 4.1 results on the measures used table 1 shows all the constructs measured including the items used, their factor loadings, their ), and the average variance explained (ave). the items representing ive, and behavioral loyalty loaded as expected in corresponding constructs, with a minor exception. behavioral loyalty reflected two components, an inner and an outer tendency of behavioral loyalty as best described by the items themselves (see table 1). a four constructs reflecting customer loyalty show high reliability coefficients (above .80) and significant average variances explained. as a result, customer loyalty is a second similarly, the items representing customer commitment and trust and the items reflecting the three types of satisfaction (with the service, with employees, and with the competition) loaded as expected with reliability coefficients above .85 and average variance explained mer satisfaction is a second-order factor derived from three constructs. both sets of constructs, loyalty and satisfaction were further analyzed using structural equation modeling to obtain corresponding second-order factors and a simultaneous fit of the odel. figure 2 shows the well-fitted second-order constructs of customer loyalty and satisfaction and the resulting overall fit of the model representing the explanation chain. 9 table 1 shows all the constructs measured including the items used, their factor loadings, their ), and the average variance explained (ave). the items representing ive, and behavioral loyalty loaded as expected in corresponding constructs, with a minor exception. behavioral loyalty reflected two components, an inner and an outer tendency of behavioral loyalty as best described by the items themselves (see table 1). all four constructs reflecting customer loyalty show high reliability coefficients (above .80) and significant average variances explained. as a result, customer loyalty is a second-order factor g customer commitment and trust and the items reflecting the three types of satisfaction (with the service, with employees, and with the competition) loaded as expected with reliability coefficients above .85 and average variance explained order factor derived from three constructs. both sets of constructs, loyalty and satisfaction were further analyzed using structural order factors and a simultaneous fit of the order constructs of customer loyalty and satisfaction and the resulting overall fit of the model representing the explanation chain. 10 figure 2 – customer store loyalty: explanation chain sem results t ru s t � � = . 6 1 7 l o y a lt y � � = .7 2 9 s a ti s fa c ti o n 0 . 7 8 5 0 . 9 4 6 0 . 8 5 4 0 . 8 6 7 0 . 9 3 1 0 . 9 5 4 0 . 8 5 3 s a t _ e 0 .7 6 6 0 .8 1 3 0 .8 0 2 0 .8 2 1 s a t_ e 1 s a t_ e 2 s a t_ e 3 s a t_ e 4 s a t is _ c 0 .8 2 0 0 .8 1 2 0 .8 6 7 0 .8 0 7 s a t_ s 0 .8 8 0 0 .8 9 1 0 .7 4 2 0 .8 9 2 s a t_ s 3 s a t_ s 1 s a t_ s 2 s a t_ s 4 0 . 8 6 8 t ru s t6 t ru s t4 t ru s t3 t ru s t1 0 .8 0 9 0 .7 7 4 0 .7 9 3 0 .6 2 0 t ru s t2 t ru s t5 0 .8 4 4 0 .8 0 5 c o m m it m e n t � � = . 7 2 8 0 .7 5 7 0 .7 9 8 0 . 8 6 1 0 . 8 4 8 c o m t1 c o m t2 c o m t4 c o m t5 c o m t3 0 .8 0 1 l o y _ a 1 l o y a l_ a 0 .7 4 6 0 .8 5 0 0 .7 1 9 0 .7 4 4 0 .7 8 4 l o y a l_ c 0 .5 7 1 0 .6 4 5 0 .7 0 4 0 . 7 6 9 0 . 6 5 5 l o y _ b in n e r 0 .9 1 3 0 .8 9 4 0 .5 7 3 0 .7 1 5 0 . 7 7 3 0 .8 5 4 l o y _ b o u t e r l o _ b o 1 0 . 7 2 7 0 .8 5 8 s a t_ c 1 s a t_ c 2 s a t_ c 3 s a t_ c 4 l o y _ a 2 l o y _ a 3 l o y _ a 4 l o y _ a 5 l o y _ c 1 l o y _ c 2 l o y _ c 3 l o y _ c 4 l o y _ c 5 l o _ b o 2 l o _ b i4 l o _ b i3 l o _ b i2 l o _ b i4 0 .0 6 8 0 .0 3 7 0 .0 3 1 0 .0 2 9 0 . 0 4 9 0 .0 6 9 0 .0 5 4 0 .0 8 8 0 . 0 4 8 0 .1 1 4 0 .0 9 5 0 . 1 1 7 0 .0 8 2 0 .0 9 1 0 .0 8 3 0 .0 6 8 0 . 1 2 7 0 .0 8 9 0 .0 8 1 0 . 1 0 3 0 .0 8 6 0 .0 8 6 0 .1 3 8 0 .0 5 4 0 .0 4 6 0 .0 7 9 0 .0 4 6 0 .0 6 5 0 .0 5 3 0 .0 4 5 0 .0 5 8 0 .0 4 7 0 . 0 3 4 0 .0 4 7 0 .0 4 3 0 .0 6 4 0 .0 5 0 0 .0 6 7 0 .0 5 8 0 .0 6 2 0 .0 5 7 0 .0 3 9 0 .0 6 5 0 .0 9 4 0 .0 3 0 0 .0 5 0 0 .0 3 1 0 .0 4 0 0 .0 4 1 table 3 reports on the model fit measures including cfi = .920, nfi= .863, chi squared (692) = 1,520.621 at p = .000, rmsea= .058, and srmr= .073. these are all plausible goodness of fit results. both figure 2 and table 3 also show the explained variances (r2 = .617), commitment (r explanation, before additional variables are considered in the model. in contrast, data from a sample of non shows slightly weaker explanatory results for trust (r loyalty (r2 = .687). 4.2. results on the loyalty process tables 4 and 5 quantify the loyalty process relationships charted in figure 1. table 4 shows the mutual relationships among all constructs. all core variables are highly and positively related at p < 0.01 level. similarly, all moderating factors are significantly related at p < 0.01, except for 4 relationships (commitment shared personal values – store familiarity; shared manager values significant at p < 0.05, and 6 relationships out of 29 (opportunism values; opportunism shared personal values; opportunism personal values communication; shared personal values values consumer involvement) that are not significant. finally, all core variables are significantly related, though not always positi moderating factors at p < 0.01. opportunism is negatively related to all core variables signifying the counter-effect of an "egoist" trait to the relational properties of loyalty, commitment, trust and satisfaction. table 5 shows the joint eff loyalty, using hierarchical moderated regression analysis with one when testing for the various effects. three models are used in order to observe the separate effects of groups of variables starting with the core variables (model 1), following with the moderating variables (model 2), and finishing with simple interaction terms between a core variable and a moderating variable (model 3). notably, the core variables ex loyalty to the store (table 5, model 1) whereas the moderating variables impact loyalty only to some extent (∆ r2 is .017) as seen in model 2. with that advantage, the interaction terms increase the coefficients to .637 ( presence of sub processes in the overall process of generating and sustaining customer store loyalty. the moderating effects of shared personal values interacting with trust particularly notable. shared personal values significantly and negatively interact with customer trust. when shared personal values are present, the role of trust becomes reduced. the more personal value is shared by the customer, the le customer. in contrast, data from a sample of non shows similar results although the impact of the core variables on customer loyalty is slightly lower (.555); the additional ef a greater increase in effects (∆ is little (r2 = .597) despite a significant interaction trust which produced a slightly greater increase in overall effects ( table 3 reports on the model fit measures including cfi = .920, nfi= .863, chi squared (692) = 1,520.621 at p = .000, rmsea= .058, and srmr= .073. these are all plausible goodness of fit results. both figure 2 and table 3 also show the explained variances = .617), commitment (r2 = .728), and loyalty (r2 = .729), denoting high levels of explanation, before additional variables are considered in the model. in contrast, data from a sample of non-hispanic consumers (not reported in this paper) ows slightly weaker explanatory results for trust (r2 = .567), commitment (r 4.2. results on the loyalty process tables 4 and 5 quantify the loyalty process relationships charted in figure 1. table 4 shows ationships among all constructs. all core variables are highly and positively related at p < 0.01 level. similarly, all moderating factors are significantly related at p < 0.01, except for 4 relationships (commitment – opportunism; commitment shared pe store familiarity; shared manager values – perceived risk) that are significant at p < 0.05, and 6 relationships out of 29 (opportunism shared management shared personal values; opportunism – consumer involvement; shared communication; shared personal values perceived risk; shared personal consumer involvement) that are not significant. finally, all core variables are significantly related, though not always positi moderating factors at p < 0.01. opportunism is negatively related to all core variables effect of an "egoist" trait to the relational properties of loyalty, commitment, trust and satisfaction. table 5 shows the joint effects of the independent variables on the dependent variable, loyalty, using hierarchical moderated regression analysis with one-tailed test for significance when testing for the various effects. three models are used in order to observe the separate ts of groups of variables starting with the core variables (model 1), following with the moderating variables (model 2), and finishing with simple interaction terms between a core moderating variable (model 3). notably, the core variables explain a relatively high r2 coefficient (.607) for customer loyalty to the store (table 5, model 1) whereas the moderating variables impact loyalty only is .017) as seen in model 2. with that advantage, the interaction terms he coefficients to .637 (∆ r2 = .015) as shown in model 3, indicating a minor presence of sub processes in the overall process of generating and sustaining customer store the moderating effects of shared personal values interacting with trust particularly notable. shared personal values significantly and negatively interact with customer trust. when shared personal values are present, the role of trust becomes reduced. the more personal value is shared by the customer, the less trusting to the store is the in contrast, data from a sample of non-hispanic consumers (not reported in this paper) shows similar results although the impact of the core variables on customer loyalty is slightly lower (.555); the additional effect of the moderating factors is also weaker (r a greater increase in effects (∆ r2 is .027); and the additional effect of meaningful interactions = .597) despite a significant interaction trust – shared personal values ( which produced a slightly greater increase in overall effects (∆ r2 is .015). 11 table 3 reports on the model fit measures including cfi = .920, nfi= .863, chi squared (692) = 1,520.621 at p = .000, rmsea= .058, and srmr= .073. these are all plausible goodness of fit results. both figure 2 and table 3 also show the explained variances of trust = .729), denoting high levels of hispanic consumers (not reported in this paper) = .567), commitment (r2 = .708), and tables 4 and 5 quantify the loyalty process relationships charted in figure 1. table 4 shows ationships among all constructs. all core variables are highly and positively related at p < 0.01 level. similarly, all moderating factors are significantly related at p < 0.01, shared personal values; perceived risk) that are shared management consumer involvement; shared perceived risk; shared personal finally, all core variables are significantly related, though not always positively, to all moderating factors at p < 0.01. opportunism is negatively related to all core variables effect of an "egoist" trait to the relational properties of loyalty, ects of the independent variables on the dependent variable, tailed test for significance when testing for the various effects. three models are used in order to observe the separate ts of groups of variables starting with the core variables (model 1), following with the moderating variables (model 2), and finishing with simple interaction terms between a core coefficient (.607) for customer loyalty to the store (table 5, model 1) whereas the moderating variables impact loyalty only is .017) as seen in model 2. with that advantage, the interaction terms = .015) as shown in model 3, indicating a minor presence of sub processes in the overall process of generating and sustaining customer store the moderating effects of shared personal values interacting with trust in model 3 are particularly notable. shared personal values significantly and negatively interact with customer trust. when shared personal values are present, the role of trust becomes reduced. ss trusting to the store is the hispanic consumers (not reported in this paper) shows similar results although the impact of the core variables on customer loyalty is slightly fect of the moderating factors is also weaker (r2 = .582) despite is .027); and the additional effect of meaningful interactions shared personal values (-.072***) 12 table 3 – fitting of results to the a-v explanation chain (see fig. 2) measurement parameter estimates (standardized) factor loadings error variances λsat_e1 .821*** λlo_bi1 .715*** εsat_e1 .064*** εlo_bi1 .086*** λsat_e2 .802*** λlo_bi2 .573*** εsat_e2 .050*** εlo_bi2 .138*** λsat_e3 .813*** λlo_bi3 .894*** εsat_e3 .067*** εlo_bi3 .054*** λsat_e4 .766*** λlo_bi4 .913*** εsat_e4 .058*** εlo_bi4 .046*** λsat_s1 .742*** λlo_bo1 .858*** εsat_s1 .068*** εlo_bo1 .086*** λsat_s2 .891*** λlo_bo2 .854*** εsat_s2 .037*** εlo_bo2 .103*** λsat_s3 .892*** λlo_a1 .746*** εsat_s3 .031*** εlo_a1 .114*** λsat_s4 .880*** λlo_a2 .850*** εsat_s4 .029*** εlo_a2 .068*** λsat_c1 .820*** λlo_a3 .719*** εsat_c1 .043*** εlo_a3 .127*** λsat_c2 .812*** λlo_a4 .744*** εsat_c2 .047*** εlo_a4 .089*** λsat_c3 .867*** λlo_a5 .784*** εsat_c3 .034*** εlo_a5 .081*** λsat_c4 .807*** λlo_c1 .571*** εsat_c4 .047*** εlo_c1 .095*** λtrust1 .809*** λlo_c2 .645*** εtrust1 .058*** εlo_c2 .117*** λtrust2 .844*** λlo_c3 .704*** εtrust2 .045*** εlo_c3 .082*** λtrust3 .774*** λlo_c4 .769*** εtrust3 .053*** εlo_c4 .091*** λtrust4 .793*** λlo_c5 .655*** εtrust4 .065*** εlo_c5 .083*** λtrust5 .805*** εtrust5 .046*** λtrust6 .620*** εtrust6 .079*** λcomt1 .848*** εcomt1 .048*** λcomt2 .861*** εcomt2 .049*** λcomt3 .801*** εcomt3 .069*** λcomt4 .798*** εcomt4 .054*** λcomt5 .757*** εcomt5 .088*** structural parameter estimates gamma (γγγγ 's) γsatisfaction-trust .785*** γtrust-commitment .853*** γcommitment-loyalty .854*** second order factors second order factors gamma (γγγγ 's) γloyalty-loy_binner .773*** γsatisfaction-sat_e .867*** γloyalty-loy_bouter .727*** γsatisfaction-sat_s .868*** γloyalty-loyal_a .954*** γsatisfaction-sat_c .946*** γloyalty-loyal_c .931*** explained variances: r2trust = .617*** r2commitment = .728*** r2loyalty = .729*** goodness of fit x2(692) = 1520.621, p = .000 rmsea = .058 srmr = .073 nfi = .863 cfi = .920 tli = .914 ***p<.001 (two-tailed) table 4 – correlations matrix variable 1 2 1. loyalty 1.00 2. commitment .751** 1.00 3. trust .681** .757** 4. satisfaction .620** .639** 5. opportunism -.154** -.135* 6. shared p. values .152** .107* 7. shared m. value .148** .194** 8. communication .478** .518** 9. store familiarity .529** .540** 10. store choice .323** .404** 11. perceived risk .215** .329** 12. c. involvement .333** .471** **correlation is significant at the 0.01 level (2 * correlation is significant at the 0.05 level (2 table 5 – regression results: explanation chain and moderating factors dependent variable: customer loyalty constant commitment trust satisfaction opportunism shared personal values shared management values communication familiarity product choice perceived risk consumer involvement trust x opportunism trust x shared p. values trust x shared m. values trust x communication trust x familiarity commitment x c. involvement commitment x shared m. values commitment x familiarity commitment x product choice commitment x perceived risk r2 f ∆∆∆∆r2 a core variable effects b moderating variable effects c two-way interaction effects *p<.10, **p<.05, ***p<.01 (one-tailed test for hypothesized relationships). 3 4 5 6 7 8 9 1.00 .709** 1.00 -.281** -.263** 1.00 .219** .243** -.083 1.00 .228** .296** -.082 .369** 1.00 .544** .636** -.259** .097 .274** 1.00 .481** .551** -.078 .128* .155** .482** 1.00 .381** .310** .162** .197** .205** .262** .342** .169** .257** .243** .016 .131* .302** .324** .310** .369** .048 .001 .198** .535** .520** correlation is significant at the 0.01 level (2-tailed). correlation is significant at the 0.05 level (2-tailed). regression results: explanation chain and moderating factors model 1a model 2b b t-value b t-value 18.190*** 5.761 16.033*** 3.615 1.414*** 9.803 1.426*** 9.047 .461*** 3.082 .412*** 2.647 .262*** 3.520 .178** 2.283 .083 .832 .192 .955 -.146 -1.231 .149 1.064 .442*** 3.351 -.168 -.772 -.080 -.782 -.175* -1.631 .607 .624 184.241 52.894 .017 tailed test for hypothesized relationships). 13 9 10 11 12 1.00 .342** 1.00 .324** .140** 1.00 .520** .203** .548** 1.00 model 3c b t-value -3.974 -.202 1.243* 1.814 1.255 1.557 .163** 2.043 .204 .366 1.620* 1.778 -.501 -.813 .625 1.118 .007 .010 -.447 -.599 -.052 -.106 .558 1.173 -.004 -.275 -.050* -1.707 .027 .954 -.017 -.939 -.014 -.530 -.029 -1.567 -.019 -.671 .036 1.426 .014 .470 .000 -.024 .637 28.371 .013 14 5. conclusions in response to the first research question—what are the critical components of an explanation chain of customer loyalty?—this research found that the impact of satisfaction, trust, and commitment on customer loyalty is sequential in the form of an explanation chain. a satisfactory experience with the store services and employees generates customer trust, which in turn produces relationship commitment between the customer and the store, which in turn results in customer loyalty in the long term. by testing an explanation chain, this study contributed an account of how store users become loyal to the store. it was found that the process of providing customer satisfaction and generating customer loyalty in stores is dependent on the core factors of the v-a approach used, in particular commitment and trust, the necessary mediating variables of the satisfaction-loyalty link. in response to the second research question—what are the significant moderators of the relationships taking place in the explanation chain?—the effect of trust can be mildly reduced by the prevalence of shared personal values in customers’ behavior. yet, an attempt to uncover other moderating effects using the other seven potential factors did not result in additional explanation. the results show that many other variables affecting customer loyalty may be mild at the best, not directly but indirectly, and not to the level of effects caused by the core variables, satisfaction, trust, and commitment in this sequential order. in response to the third research question—how similar or different are hispanic consumers in the way they become loyal to the stores they patronize?—this study shows nonsignificant differences in the way the process of generating and maintaining customer loyalty takes place. both hispanic consumers and non-hispanic consumers become loyal customers following the path suggested by the explanation chain; however, hispanic consumers reflect higher levels of satisfaction, trust, commitment, and loyalty than those reported for nonhispanic consumers. for both groups of consumers, the core variables significantly impact the generation of customer loyalty while other variables, such as the moderating variables explored in this research, have a negligible impact. there are practical consequences of this research on the understanding of loyalty formation among store customers and the management of the store seeking to develop longterm relationships with buyers. customer satisfaction alone will not result in customer loyalty, unless managers are complacent about repeated purchase (spurious loyalty) in a context of little or no competition. in today's environment of increasing competition among stores, earning "true" 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(2011). road travelers' motivations and loyalty: train versus bus services. journal of travel and tourism marketing, 28, 541-555. 4 mincu_gruber 59 exploring the factors influencing the intention to use self-service technologies laurentiu mincu, university of manchester, uk thorsten gruber, loughborough university, uk received: february 22, 2013 accepted: july 1st, 2013 online published: october 14, 2013 abstract despite decades of research on self-service technology (sst), there are still only limited numbers of studies conducted in emerging markets (ostrom et al., 2010). in order to help close this surprising gap in the literature, two studies were conducted in an emerging eastern european country: an exploratory investigation with 20 in-depth semi-structured interviews and a quantitative survey research involving 139 respondents.the research outcomes reveal similarities, but also differences among the factors which influence ssts usage by eastern european and western consumers, respectively. antecedents such as complexity, previous experience with ssts, perceived risk, relative advantage and technology readiness were found to be strongly related to the intention of using these devices, thus confirming previous findings. however, in contrast to previous discoveries, the attitude towards the past, individualism, masculinity, rational and experiential thinking, were found to have only weak connections with the behavioural intention. the research provides valuable theoretical contributions to the scarce literature available on sst usage in emerging markets. keywords: self-service technologies; emerging markets; romania; online shopping; atms; sst use model. 1. introduction in the last decades, services have received increasing attention from both the academic and business world. their importance becomes quite obvious considering that today’s most advanced economies are based on services, with over 70 % of their gdps coming from this sector (ostrom et al., 2010). in order to improve their efficiency and build stronger relationships with their customers, service firms have begun to implement various types of technologies. from all the technological assets employed by service companies, ssts stand out as some of the most important ones (meutner, bitner, ostrom & brown, 2005). ssts represent ‘technology interfaces that enable customers to produce a service independent of direct service employees involvement’ (meutner, ostrom, roundtree & bitner, 2000, p.50). ssts provide several benefits for both companies and consumers. these include cost reduction, faster delivery, disintermediation, convenience and greater consumer loyalty (curran & meutner, 2005; meutner et al., 2005). numerous factors influence sst employment, ranging from technology characteristics (zhu, nakata, sivakumar & grewal, 60 2007), to individual differences (parasuraman, 2000), situational circumstances (gelderman, ghijsen & van diemen, 2011) or cultural traits (steenkamp, hofstede & wedel, 1999). despite the fact that the body of literature written on ssts is quite significant, there are still some gaps in our current knowledge. perhaps the most important one is that most past papers are based on studies conducted in western countries. several authors, however, call for the need of conducting research in emerging markets as these are ‘radically different from the traditional industrialized capitalist society’ (sheth, 2011, p. 166). in particular, what is needed are studies that determine to what extent the variables which affect technology usage by consumers coming from these regions are similar to, or different from, previous findings (e.g. nilsson, 2007). this article aims to address this research gap by investigating the attitudes of eastern european consumers towards ssts. romania was chosen for the following reasons. first, the international monetary fund (imf, 2012) classifies romania as an emerging market and developing economy with a growing service sector (romanian national institute of statistics, 2011). the country’s real gdp rose by over 39 % between 2003 and 2008. the value fell in 2009 and 2010 because of the worldwide economic downturn. the figure for 2011, however, was positive again, namely 2.5% (imf, 2012, p.194). the economic growth in romania was among the highest in europe and more than three times the eu average. due to its rapid development and high growth rates, romania has even been referred to as an eastern "tiger" economy (aims, 2012). second, according to hofstede, hofstede & minkov (2010), romania possesses different cultural characteristics in comparison to western countries, such as higher uncertainty avoidance and lower individualism, which could impact on technology acceptance. moreover, various technological applications and ssts such as online retailing or automatic teller machines (atms) have witnessed appreciable growth in this country over the last five or six years (euromonitor, 2011; 2012a,b). the portion of the romanian population which used the internet in 2006 was estimated at 24.2% and rose to almost 50% in 2011 (euromonitor, 2012a). by comparison, during the same year, the number of internet users in the uk and sweden represented over 85% of the entire population (euromonitor, 2012a). internet retailing or online shopping is probably the fastest growing sst in romania. in 2005, the total market was estimated at almost €50 million. over the next five years, the value increased by 230 %, reaching €165 million in 2010 (euromonitor, 2011). in 2011, the total value of romanian atm transactions reached approximately €23 billion, increasing by 4.8 % from 2010 and 176 % from 2006. the total amount is expected to rise to €29.6 billion in 2016 (euromonitor, 2012b). the data reveal that romania still lags behind western and even eastern european countries when it comes to the employment of various ssts. for example, the value of internet retailing per capita in russia is almost four times greater than in romania, although the countries have similar degrees of internet access. the figures suggest that availability is not the only obstacle to sst employment in this country and that ssts could still have a potential for future growth. consequently, this study aims at revealing which other factors could influence sst usage and which factors have the strongest impact on the consumers’ intention to use ssts. 2. literature review ostrom et al. (2010, p.4) assert in their award winning article that the changes in the science and practice of services marketing have led to 10 essential research priorities. the tenth priority, leveraging technology to advance service, is seen as the pervasive force which will lead to the success of the other nine (ostrom et al., 2010). the technological assets which can 61 be used by (service) companies are quite diverse. keegan & green (2005) believe that organizational information systems should include hardware and software components such as the intranet, electronic data interchange (edi), a customer relationship management (crm) system and data warehouses. nevertheless, a further category needs to be taken into consideration, a category which includes those technologies designed for the consumer’s use. these applications, which have been gaining increasing importance in the last decades, are commonly known as ssts (meutner et al., 2005). 2.1 factors influencing ssts usage in this current paper, the investigation of the forces which shape sst employment started with meutner et al.’s (2005) model, which is one of the most comprehensive and cited frameworks in the literature. the model is presented in figure 1. figure 1 − key predictors of consumer trial of self-service technologies source: meutner et al., 2005, p. 63 as it can be seen, the framework involves numerous factors that could impact on ssts usage. some of these factors have been mentioned in previous studies and confirmed in later research. however, not all of them are of equal importance and some, such as compatibility and complexity or compatibility and relative advantage, actually overlap (sääksjärvi & samiee, 2011). moreover, several other variables which affect sst employment have been identified over the years as well. 2.1.1 innovation characteristics similar with meutner et al.’s (2005) work, arts, frambach & bijmolt (2011) found that relative advantage influences technology or sst adoption. after conducting a research among online financial services consumers, lee, lee & eastwood (2003) discovered that they usually seek cost efficiency, flexibility and greater control over their bank accounts. relative advantage can be either utilitarian in nature (for example service delivery speed) or hedonic, such as the opportunity to explore new things and have fun (collier & sherrell, 2010). 62 scholder, bearden & subhash’s (1991) study also revealed that risk is among the determinants of ssts usage. if the perceived level of risk increases, the consumer’s trust in his own abilities to operate the technology, as well as his motivation, decline. however, curran & meutner (2005) found that risk influences the consumer’s choice only when it comes to less widespread technologies and especially those offered through the internet. besides financial or privacy risks, featherman & wells (2010) provide further examples of perils related to sst employment such as time costs, psychological downturns which include frustration or loss of self-esteem and social risks, the latter occurring when the user fails to operate the sst in the presence of other individuals. similar to meutner et al. (2005), authors such as zhu et al. (2007) and wood & moreau (2006) also found complexity to be an important antecedent variable of sst usage. single feature design ssts (which provide either interactivity, such as online avatars or comparability, such as price comparison websites) lead to a higher positive effect on the consumer’s perceived control than combined-feature ssts (zhu et al., 2007). multifunctional innovations can increase consumer confusion thus obstructing the adoption process because the potential users are not sure about the main functionality of the product (wood & moreau, 2006). 2.1.2 individual differences individuals with higher technology anxiety were found to be less satisfied by the sst interaction, less likely to use or re-use the technology and less inclined to spread positive word of mouth (liu, 2012; meutner, ostrom, bitner & roundtree, 2003). similar to the concept of technology anxiety, although more complex, is the notion of technology readiness (tr). people can be placed on a continuum with strong positive attitudes towards technology at one end and strong negative opinions at the other end. according to parasuraman (2000), four different components form the technology readiness construct: optimism (the extent to which consumers believe that technology is going to improve their lives); innovativeness (the consumers’ perception about themselves as being inventive or novelty seekers); discomfort (the difficulty in operating different forms of technology) and insecurity (consumers’ lack of trust in technology). apart from meutner et al. (2005), several authors such as gelderman et al. (2011) and lee et al. (2003) revealed that non-users of ssts have more need for interaction than users. some consumers see service encounters as social experiences and prefer face to face interactions. the need for interaction can appear even after the consumer has adopted the technology if he feels that the particular sst is taking control over his life and limits his freedom (johnson, bardhi, & dunn, 2008). patterson (2000) found the consumer’s previous experience to be an antecedent of sst usage, which can take two forms: focal product experience, which represents the individual’s previous use of the sst under investigation and product norm experience, which refers to the individual’s experience with ssts in general. in terms of focal product experience, the first attempt is particularly important. if positive, it will encourage future use (wang, harris & patterson, 2012). consumer technology inertia is defined as an ‘attachment to, and persistence in, using an incumbent system (i.e., the status quo) even if there are better alternatives and incentives to change’ (polites & karahanna, 2012, p.24). polites & karahanna (2012) found a negative connection between inertia and the consumer’s attitude towards new technologies, which, in turn, influences intention. 63 2.1.3 additional variables the concept of ‘role’ refers to ‘the socially defined expectations of individuals in particular social positions’ (edvardsson, tronvoll & gruber, 2011, p.331). the more certain the user feels about what is expected of him, the greater the chance of trying the sst (gelderman et al., 2011). the company has to define what type of participation it desires from the consumers when implementing a sst (van beuningen, de ruyter & wetzels, 2009). simon & usunier (2007) offer additional explanations for the use of ssts. the authors suggest that every individual has two thinking styles: a rational one which is intentional, analytical, verbal and almost affect free and an experiential system which is more automatic and mostly associated with affect. the authors found that individuals with high rational engagement prefer ssts over face to face contact, the opposite being true for consumers with high experiential engagement. culture is another major determinant that impacts upon the use of ssts. of the five cultural dimensions proposed by hofstede et al. (2010), uncertainty avoidance, individualism/collectivism and masculinity/femininity are the most likely to affect sst employment (park & jun, 2003; steenkamp et al., 1999; nilsson, 2007). for example, park & jun (2003) found that cultures with high uncertainty avoidance are slower at adopting innovations. lim, leung, choon & lee (2004) argue that ssts increase consumer uncertainty as they fail to replicate the processes, atmosphere or sensory effects of the traditional service environments. thus, people coming from cultures with high uncertainty avoidance will tend to bypass ssts and new products in general. innovativeness involves initiating a new behaviour, often independent of others. such a change would be positively regarded in individualistic cultures, but would most likely be inhibited by collectivistic ones (lim et al., 2004). steenkamp et al. (1999) discovered that hofstede’s masculinity/femininity cultural dimension also influences consumer innovativeness. in countries with high levels of masculinity, individuals tend to show off their social and material superiority by buying new products or using new technologies. therefore these countries are characterized by higher consumer innovativeness and propensity to adopt ssts (steenkamp et al., 1999). two further individual dimensions, which are influenced by the cultural background, have a negative impact on sst adoption. these are ethnocentrism (devotion to national products) and attitudes towards the past, which represent an individuals’ perception that products, people and life were better in the old days (steenkamp et al., 1999). 2.2. gaps in current understanding the limitations regarding previous research on ssts typically fall into three major categories. first, several authors such as van beuningen et al. (2009) or cunningham, young & gerlach (2009) conducted their studies with student samples. this limits the possibility of generalizing their findings (gelderman et al., 2011). second, most studies focused on comparing ssts from the same industry and did not attempt a cross-industry examination (gelderman et al., 2011). for instance, curran & meutner (2005) focused their studies on atms, mobile banking and online banking respectively. reinders, dabholkar & frambach (2008) conducted their research exclusively on ssts from the travel industry. finally, as mentioned before, the majority of papers written on ssts based their research in western countries. authors such as steenkamp et al. (1999), parasuraman (2000) or nilsson (2007) call for the need of conducting investigations in eastern and developing countries. the study of ssts in romania is particularly limited. gurău (2005) studied the implementation of internet banking. however, his study was strictly qualitative and did not investigate the problem from the consumers’ perspective. 64 3. the research study in order to address the identified gaps in our current knowledge, the main objective of this current research is to discover the factors which influence sst usage in an emerging market (romania) and reveal which factors have the greatest impact on consumers’ intention to use sst. this study uses a combination of quantitative and qualitative techniques. the qualitative study was employed to gain preliminary insights into consumers’ attitudes towards ssts and to determine the main factors that influence consumers’ decision to use these technologies. following that, the quantitative research helped investigate which of these variables have the greatest impact on sst use. 3.1 study 1 3.1.1 data collection in order to study the consumers’ attitudes and intentions towards ssts and ssts usage, different technologies have to be investigated (meutner et al., 2005). atms and online shopping were the chosen technologies for both the quantitative and qualitative studies. the two ssts are different in various ways. first, they come from distinct industries: banking and retailing. second, consistent with schumann, wunderlich & wangenheim’s (2012) classification, atms are provider based ssts while online shopping is customer-based. third, atms are less complex than online shopping and are generally seen as safer (curran & meutner, 2005). the exploratory part of the research comprised of 20 in-depth, semi-structured interviews.the sample size fits within the recommended ranges (parasuraman, grewal, & krishnan, 2004). moreover, after conducting the first 17 interviews, the process reached data saturation, as the interviewees were not able to provide any extra information from their predecessors. for a greater reliability of the results, respondents were selected in order to replicate the demographic structure of the romanian population. the structure of the sample is presented in table 1. table 1 − qualitative study sample structure variables groups/categories absolute values percentages gender male 9 45 female 11 55 age 18-24 2 10 25-34 4 20 35-44 4 20 45-54 3 15 55-64 3 15 65 + 4 20 education primary and lower secondary 6 30 upper secondary 11 55 tertiary 3 15 monthly income below ron 700 1 5 ron 7001500 3 15 ron 15012500 8 40 ron 25014000 3 15 above ron 4000 5 25 out of the 20 interviews, 14 were conducted in a face to face setting (11 at the respondents’ workplace and 3 at their homes) and 6 online, via skype, in order to reach geographically dispersed interviewees. the investigated variables and the set of predetermined questions which were asked during the interviews can be found in table 2. 65 table 2 − variables investigated during the in-depth, semi-structured interviews investigated variables corresponding questions compatibility (meutneret al., 2005) do you feel that using atms is compatible with your lifestyle, with the way you handle your daily tasks? what about online shopping? relative advantage (lee et al., 2003 ; collier & sherrell, 2010) do you consider that atms provide any advantages in comparison to the traditional methods of handling your money? do you consider that online shopping provides any advantages in comparison to traditional shopping methods? perceived risks (scholderet al.,1991; curran & meutner, 2005; featherman & wells, 2010; wang et al., 2012) do you perceive atms as risky? what about online shopping? complexity (wood & moreau, 2006; zhu et al., 2007) do you consider online shopping to be complex, difficult? are atms hard to operate? observability (meutner et al., 2005) would it be easier for you to use atms/online shopping if you could observe how others use them? trialability (meutner et al., 2005) if you were able to trial atms/ online shopping without any cost, would that encourage you to use these technologies? inertia (meutner et al., 2005; polites & karahanna, 2012) do you see yourself as a person who is reluctant to change his habits? technology readiness and technology anxiety (parasuraman, 2000; meutner et al., 2003; curran & meutner, 2005; gelderman et al. 2011) in your opinion, does technology give people more freedom, more mobility? in general, are you among the first from your family or circle of friends who seeks to acquire new technology when it appears? do you generally find technology difficult to use? do you feel apprehensive when using technology? need for interaction (lee et al., 2003; johnson et al., 2008) when using a certain service or buying a certain product, do you feel the need to interact with company/store employees? previous experience (patterson 2000; meutneret al., 2005; wang et al., 2012) do you believe that your previous experience with atms and online shopping has an effect on you using these technologies? role clarity (van beuningen et al., 2009) do you know what is expected of you when you use atms? what about when you shop online? 66 3.1.2 data analysis and results content analysis was used to analyse the qualitative data in this current research. no computer programs were employed as the interviewees’ responses were quite clear and concise and did not require a complex classification or examination. out of the 20 interviewees, 5 never used atms nor shopped online. 9 used atms, but never shopped online and 6 used both ssts. the interviews revealed that the need for interaction was the most frequently mentioned factor by both users and non-users of ssts, with a total of 17 respondents approaching this topic. this is in line with previous findings by lee et al. (2003), meutner et al. (2005) or gelderman et al. (2011). this determinant of sst usage was relevant only in the case of online shopping. relative advantage and perceived risk were the next most common factors identified by the interviewees (14 and 16 respondents, respectively). according to most respondents the two go hand in hand. if the advantages are greater than the risks, consumers are willing to use ssts. consistent with curran & meutner (2005), the interviews revealed that the risks and complexity associated with online shopping, a less widespread technology, are greater than with atms. the most frequently mentioned risk (13 interviewees) is the probability of the actual product not matching the online description. inertia was also identified as an appreciable factor (9 respondents), especially by consumers aged above 55. in some situations, respondents even admitted that ssts provide several advantages, but they still seemed reluctant to change their habits and blamed this resistance on age. complexity and previous experience with ssts were also found to be relevant, confirming the findings of patterson (2000), wood & moreau (2006) or wang et al. (2012). mainly consumers aged above 65 found both atms and online shopping complicated. it is noteworthy that complexity and role clarity seemed to overlap. with no exception, respondents who stated that atms or online shopping are easy to handle, also believed that they understand what is expected of them when using these technologies. consistent with meutner et al. (2005) and parasuraman (2000), technology anxiety, as well as technology readiness influenced consumers. interviewees who asserted that they do not feel comfortable with new technologies or feel embarrassed to use them in public (8 respondents), were non-users or infrequent users of atms and, especially, online shopping. surprisingly, observability and trialability did not seem to influence the interviewees. only 4 out of 20 stated that they would be willing to use ssts if they had the opportunity to observe how other consumers employ these technologies. trial was relevant for only 5 respondents. the interviews also confirmed sääksjärvi & samiee’s (2011) findings that compatibility and relative advantage overlap. most respondents (12 out of 20) who claimed that ssts are compatible with their lifestyles argued that this happens because these technologies solve their problems through the advantages they provide. besides confirming previous findings, the series of interviews managed to reveal one more interesting factor which has not been identified in previous studies. the factor was mentioned by only one respondent, aged between 25 and 34, with tertiary studies. this variable could be labelled social changes. although previous studies such as those of lim et al. (2004) or nilsson (2007) argue that in collectivistic cultures, such as romania, people are more likely to be forced to accept social norms, the interviewee regarded this factor as something that goes beyond national culture, and refers to it as an ongoing, global metamorphosis that leaves the average, ordinary individual powerless. one of the goals of the qualitative research was to gain a deeper understanding of the factors which influence ssts usage in an emerging market. however, a secondary objective was to reveal which variables could be included in the quantitative survey research. the results show that the need for interaction, relative advantage, perceived risks, inertia and previous experience need to be part of the survey. observability and trialability were excluded 67 from further analysis. technology anxiety and technology readiness were found to be relevant. however, the latter is a more complex construct that, to a certain extent, incorporates the former (meutner et al., 2005). therefore, the technology anxiety construct was eliminated from the survey research, which, in turn, included tr. compatibility and relative advantage overlapped. consequently, the former was excluded from the survey research. for similar reasons, role clarity was not included in the survey. 3.2 study 2 3.2.1 hypotheses and data collection some of the variables which were included in the quantitative study have been mentioned in the previous section of the article. however, other factors such as thinking styles (simon & usunier, 2007), uncertainty avoidance, masculinity, individualism (hofstede, hofstede, minkov & vinken, 2008a), attitude towards the past or ethnocentrism (steenkamp et al., 1999) were not included in the exploratory study because the scales which measure these factors were designed for quantitative research. the final independent and dependent variables are shown in table 3 and the hypotheses in table 4, together with the relevant literature sources. table 3 − variables included in the survey research independent antecedent variables independent mediating variable dependent variable complexity attitude towards ssts intention to use ssts relative advantage perceived risk inertia need for interaction previous experience technology readiness rational thinking experiential thinking uncertainty avoidance individualism masculinity attitude towards the past ethnocentrism the data for the quantitative study were collected using a combination of convenience, snowball and quota sampling. the sample aimed at replicating the structure of the romanian population. initially, several respondents, known by the researchers and who fitted within the predermined sample characteristics, were chosen. based on the same characteristics, the respondents recommended further participants for the survey research. a total of 170 questionnaires were distributed. out of these, 132 were administrated in a face to face settings (at the respondents’ workplace, homes or other public spaces) so the return rate was 100 %. in order to save time and reach geographically dispersed respondents, a further 38 questionnaires were designed using qualtrics survey software and delivered via email. 31 respondents (81.5%) replied. out of the total 163 received questionnaires, 24 (14.72 %) were excluded from the analysis due to incomplete answers, leaving a number of 139 valid questionnaires. the sample characteristics are shown in table 5. 68 table 4 − quantitative survey research hypothesis hypothesis supporting literature h1: the complexity of ssts has a negative effect on the intention to use ssts meutner et al. (2005); zhu et al. (2007); lee et al. (2003) h2: there is a positive relationship between the relative advantages of ssts and the intention to use ssts meutner et al. (2005); lee et al. (2003) h3: perceived risk is negatively related to the intention of using ssts scholder et al. (1991); meutner et al. (2005); wang et al. (2012) h4: consumer inertia is negatively related to the intention of using ssts meutner et al. (2005) h5: the need for interaction with service employees has a negative impact on the intention to use ssts curran & meutner (2005); johnson et al. (2008) h6: the consumer’s previous experience with ssts is positively related to the intention of using a specific sst meutner et al. (2005); wang et al. (2012), patterson (2000) h7: the consumers’ technology readiness is positively related to the intention of using ssts parasuraman (2000); gelderman et al. (2011) h8a: rational thinking has a positive effect on the intention to use ssts simon & usunier (2007) h8b: experiential thinking has a negative effect on the intention to use ssts h9a: romanian consumers are characterized by high scores of uncertainty avoidance hofstede et al. (2010) h9b: there is a negative relationship between uncertainty avoidance and the intention to use ssts lim et al. (2004); park & jun (2003); nilsson (2007) h10a: romanians tend to be collectivists rather than individualists hofstede et al. (2010) h10b: individualism is positively related to the intention of using ssts lim et al. (2004); park & jun (2003); nilsson (2007) h11a: romania is a relatively feminine society hofstede et al. (2010) h11b: masculinity has a positive effect on the intention to use ssts steenkamp et al. (1999) h12: the attitude towards the past has a negative effect on the int. to use ssts steenkamp et al. (1999) h13: there is a negative relationship between ethnocentrism and the intention to use ssts steenkamp et al. (1999) h14: romanian consumers tend to have a more positive attitude towards wider adopted ssts curran & meutner (2005) h15: the attitude towards ssts is positively related to the intention of using these technologies curran & meutner (2005) h16: the attitude towards ssts mediates the relationship between the other factors which influence ssts employment and the intention to use ssts. curran & meutner (2005) table 5 − the sample characteristics variables groups/categories absolute values percentages gender male 67 48.2 female 72 51.8 age 18-24 15 10.8 25-34 31 22.3 35-44 27 19.4 45-54 17 12.2 55-64 22 15.8 65 + 27 19.4 education primary and lower secondary 41 29.5 upper secondary 72 51.8 tertiary 26 18.7 monthly income below ron 700 11 7.9 ron 7001500 27 19.4 ron 15012500 51 36.7 ron 25014000 19 13.7 above ron 4000 31 22.3 69 3.2.2 data analysis and results 3.2.2.1 reliability analysis cronbach’s alpha was used in order to determine the scale reliability. the summary of the results are shown in table 6. table 6 − reliability of scales scale source cronbach’s alpha complexity meutner et al. (2005);wang, wu, lin, wang, & he (2012) .902 relative advantage meutner et al. (2005) .908 perceived risk meutner et al. (2005); shamdasani, mukherjeeb, & malhotra (2008) .959 consumer inertia meutner et al. (2005) .955 need for interaction meutner et al. (2005) .864 previous experience meutner et al. (2005) .784 technology readiness parasuraman (2000), geldermanet al. (2011). .876 rational thinking simon & usunier (2007) .835 experiential thinking simon & usunier (2007) .780 uncertainty avoidance hofstedeet al. (2008a; 2008b) .045 individualism/collectivism hofstedeet al. (2008a; 2008b) .404 masculinity/femininity hofstedeet al. (2008a; 2008b) .698 attitude towards the past holbrook (1993); steenkampet al. (1999) .772 ethnocentrism shimp & sharma (1987); steenkampet al. (1999) .897 attitude towards ssts curran & meutner (2005) .969 intention to use ssts curran & meutner (2005) .871 as table 6 shows, the scales measuring complexity, relative advantage, perceived risk, inertia, need for interaction, technology readiness, rational thinking, ethnocentrism, attitudes towards ssts and intention have an excellent internal consistency with cronbach alpha values above .8 (pallant, 2007). most of the remaining scales score above .6 which means they are reliable as well. the only exceptions are uncertainty avoidance and individualism/collectivism, with results below .6. therefore, at first sight these scales can be considered unreliable. however, hofstede et al. (2008a) explicitly state that, in order to be efficient, any reliability tests (and particularly cronbach’s alpha) conducted on these scales should not be based on individual scores, but on country mean scores, by analysing samples coming from at least ten different countries. considering these aspects, but also the fact that these scales have been intensively used in the past, they were not removed from the correlation and regressions analysis. 3.2.2.2 hypotheses testing descriptive statistics and correlation analysis.the summary of the hypotheses testing results can be found in table 7. the descriptive statistics are shown in table 8. the correlation results are presented in tables 9 and 10. as it can be seen from both correlation matrices, all 70 the relationships between the independent variables and the dependent variable are statistically significant (p < .05). the correlation coefficient between complexity and intention (r= -.845, p < .01) suggests a very strong, negative relation (shiu, hair, bush, & ortinau, 2009). therefore h1 is supported. relative advantage is also strongly related to intention (r=.796, p < .01). h2 is supported. the analysis also shows that there is a strong negative relationship between perceived risk and intention (r= -.718, p <.01), thus supporting h3. inertia is moderately and negatively related to intention (r= -.544, p < .01) and h4 is supported. the same stands for need for interaction (r= -515, p <.01), supporting h5. previous experience and attitude towards ssts are strongly and positively related to intention (r= .829, p < .01; r= .891, p < .01). h6 and h15 are confirmed. there is a strong, positive relation between technology readiness and the intention to use ssts ( r= . 746, p < .01), thus supporting h7. the second correlation matrix reveals that there is a very weak, but significant connection between rational thinking and the consumers’ intention to use ssts (r= -.174, p < .05). however, the relationship is negative which contrasts with the initial hypothesis. consequently, h8a is rejected. although very weak (r = -.199, p < .05), there is a negative connection between experiential thinking and intention to use ssts. h8b is therefore confirmed. as expected, a high level of uncertainty avoidance restrains the intention of using ssts (r= -.593, p < .01). h9b is confirmed. contrary to the initial expectations, it seems that high levels of individualism and masculinity would deter consumers from using ssts (r= .184, p < .05; r= -.191, p< .05). h10b and h11b are rejected. both h12 and h13 are accepted. the attitude towards the past and ethnocentrism have a negative impact on consumers’ intentions of using ssts (r= -.259, p < .01; r= -.407, p < .01). the scores for uncertainty avoidance, individualism and masculinity were calculated using hofstede’s formulas (hofstede et al.,2008a, pp.7-9). in the current research, the neutral value for these variables is 0, which means that, for example, a score above this value on individualism would suggest an individualist country, whereas a score below, a collectivist one. the mean score for uncertainty avoidance is 5.14, therefore h9a is rejected. this value shows that the level of uncertainty avoidance is only slightly above neutral, but not high. (see table 8). the average value for individualism is 18.3. this shows a moderate, close to neutral level of individualism. therefore, h10a is rejected. the masculinity mean value of 16.8 would suggest a slightly masculine country. h11a is also rejected. finally, h14 is supported.the mean scores show that romanians tend to have a marginally more positive attitude towards atms (mean=4.98) than towards online shopping (4.27). hierarchical multiple regression. in order to verify hypothesis h16, a test of mediation is required. as it can be seen from the first of the previous correlation matrices, complexity, relative advantage, previous experience and technology readiness are highly correlated (values greater than ± .7) and should not be included in the same regression block in order to avoid multicoliniarity (pallant, 2007). perceived risk is also highly correlated with complexity, technology readiness and relative advantage. consequently, in order to avoid the inclusion of these variables in the same blocks, four separate hierarchical multiple regression (hmr) tests were conducted. attitude towards ssts was introduced in the second stage of all these four regressions. the summary of the results is presented in table 11. all four models had durbin-watson values between 1.5 and 2, as well as variance inflation factor (vif) scores of below 5, which indicates that there are no issues with autocorrelation and multicoliniarity, respectively (pallant, 2007). 71 table 7 − hypothesis testing results hypothesis confirmed/ rejected h1: the complexity of ssts has a negative effect on the intention to use ssts confirmed h2: there is a positive relationship between the relative advantages of ssts and the intention to use ssts confirmed h3: perceived risk is negatively related to the intention of using ssts confirmed h4: consumer inertia is negatively related to the intention of using ssts confirmed h5: the need for interaction with service employees has a negative impact on the intention to use ssts confirmed h6: the consumer’s previous experience with ssts is positively related to the intention of using a specific sst confirmed h7: the consumers’ technology readiness is positively related to the intention of using ssts confirmed h8a: rational thinking has a positive effect on the intention to use ssts rejected h8b: experiential thinking has a negative effect on the intention to use ssts confirmed h9a: romanian consumers are characterized by high scores of uncertainty avoidance rejected h9b: there is a negative relationship between uncertainty avoidance and the intention to use ssts confirmed h10a: romanians tend to be collectivists rather than individualists rejected h10b: individualism is positively related to the intention of using ssts rejected h11a: romania is a relatively feminine society rejected h11b: masculinity has a positive effect on the intention to use ssts rejected h12: the attitude towards the past has a negative effect on the intention to use ssts confirmed h13: there is a negative relationship between ethnocentrism and the intention to use ssts confirmed h14: romanian consumers tend to have a more positive attitude towards wider adopted ssts confirmed h15: the attitude towards ssts is positively related to the intention of using these devices. confirmed table 8 − descriptive statistics variable mean median mode std. deviation complexity 3.03 2.33 1 1.80 relative advantage 4.27 4.5 4.16 1.69 perceived risk 3.39 2.75 1.25 1.85 inertia 4.19 4 4 1.93 need for interaction 4.07 4.5 4.5 1.87 previous experience 4.36 4.66 7 1.91 technology readiness 3.67 3.66 3.66 1.28 rational thinking 3.29 3 1 1.85 experiential thinking 5.01 5 5 1.41 uncertainty avoidance 5.14 -5 -40 91.6 individualism 18.38 0 0 68.11 masculinity 16.87 0 0 68.37 attitude towards the past 4.6 4.8 4.8 1.24 ethnocentrism 4.5 4.75 7 1.62 attitude towards atms 4.98 5.66 7 1.86 attitude towards online shopping 4.27 4.66 7 2.03 attitude towards ssts 4.62 5 7 1.86 intention to use ssts 4.7 5.5 7 2.21 72 table 9 − correlation matrix 1 c o m p le xi ty r el at iv e a d va nt ag e p er ce iv ed r is k in er ti a n ee d fo r in te ra ct io n e xp er ie nc e t ec hn o lo gy re ad in es s a tt it ud e to w ar d s s s t s in te nt io n to us e s s t s c o m pl ex it y p ea rs o n c o rr el at io n 1. 0 0 0 -. 68 4 ** .7 9 4 ** .5 7 7 ** .4 4 8 ** -. 7 38 * * -. 71 9 ** -. 8 15 ** -. 84 5 ** s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 39 .0 0 0 1 3 9 1 3 9 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 r el at iv e a d va nt ag e p ea rs o n c o rr el at io n -. 6 84 * * 1 .0 0 0 -. 7 1 0 ** -. 4 4 2 ** -. 4 03 * * .7 0 9 ** .7 0 7* * .8 0 2* * .7 96 * * s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 13 9 .0 0 0 1 3 9 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 p er ce iv ed r is k p ea rs o n c o rr el at io n .7 9 4 ** -. 71 0 ** 1 .0 00 .4 8 5 ** .5 0 2 ** -. 6 88 * * -. 67 8 ** -. 7 31 ** -. 71 8 ** s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 .0 00 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 in er ti a p ea rs o n c o rr el at io n .5 7 7 ** -. 44 2 ** .4 8 5 ** 1 .0 0 0 .3 1 0 ** -. 5 44 * * -. 62 8 ** -. 6 21 ** -. 54 4 ** s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 3 9. 00 0 13 9 1 3 9 1 3 9 1 3 9 1 3 9 n ee d f o r in te ra ct io n p ea rs o n c o rr el at io n .4 4 8 ** -. 40 3 ** .5 0 2 ** .3 1 0 ** 1. 0 0 0 -. 4 46 * * -. 47 5 ** -. 4 59 ** -. 51 5 ** s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 39 1 39 .0 0 0 1 3 9 1 3 9 1 3 9 1 3 9 e xp er ie nc e p ea rs o n c o rr el at io n -. 7 38 * * .7 0 9* * -. 6 8 8 ** -. 5 4 4 ** -. 4 46 * * 1. 0 0 0 .7 8 2* * .8 6 5* * .8 29 * * s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 39 13 9 1 39 .0 0 0 1 3 9 1 3 9 1 3 9 t ec hn o lo g y re ad in es s p ea rs o n c o rr el at io n -. 7 19 * * .7 0 7* * -. 6 7 8 ** -. 6 2 8 ** -. 4 75 * * .7 8 2 ** 1 .0 0 0 .8 2 4* * .7 46 * * s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 39 13 9 1 3 9 13 9 .0 0 0 1 3 9 1 3 9 a tt it ud e to w ar ds s s t s p ea rs o n c o rr el at io n -. 8 15 * * .8 0 2* * -. 7 3 1 ** -. 6 2 1 ** -. 4 59 * * .8 6 5 ** .8 2 4* * 1. 0 0 0 .8 91 * * s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 39 13 9 1 3 9 1 3 9 1 39 .0 0 0 1 3 9 in te nt io n to u se s s t s p ea rs o n c o rr el at io n -. 8 45 * * .7 9 6* * -. 7 1 8 ** -. 5 4 4 ** -. 5 15 * * .8 2 9 ** .7 4 6* * .8 9 1* * 1 .0 0 0 s ig . (2 -t ai le d) .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 n 1 3 9 1 3 9 1 3 9 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 .0 00 ** . c o rr el at io n is s ig ni fi ca nt a t th e 0 .0 1 l ev el ( 2 -t ai le d ). 73 table 10 − correlation matrix 2 r at io na l th in ki n g e xp er ie nt ia l th in ki n g u nc er ta in ty av oi d an ce in di vi du al is m m as cu li ni ty a tt it ud e to w ar ds t he p as t e th no ce nt ri sm a tt it ud e to w ar d s s s t s in te nt io n to us e s s t s r at io na l th in ki n g p ea rs o n c o rr el at io n 1 .0 0 0 -. 07 0 .0 8 9 -. 0 3 5 .0 3 6 -. 0 1 9 .1 3 2 -. 1 22 -. 1 74 * s ig . (2 -t ai le d ) .4 12 .2 9 5 .6 8 6 .6 7 5 .8 2 3 .1 2 2 .1 5 3 .0 40 n 1 3 9 .0 00 1 39 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 1 3 9 e xp er ie nt ia l th in ki n g p ea rs o n c o rr el at io n -. 07 0 1 .0 00 .3 2 8 ** .1 1 4 -. 1 9 2 * .3 7 9* * .2 0 8 * -. 30 7 ** -. 1 99 * s ig . (2 -t ai le d ) .4 1 2 .0 0 0 .1 8 0 .0 2 3 .0 0 0 .0 1 4 .0 0 0 .0 19 n 1 3 9 1 3 9 .0 0 0 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 1 3 9 u nc er ta in ty av o id an ce p ea rs o n c o rr el at io n .0 8 9 .3 2 8 ** 1 .0 0 0 .2 5 8 ** -. 0 3 1 .1 94 * .4 79 * * -. 55 1 ** -. 5 9 3 ** s ig . (2 -t ai le d ) .2 9 5 .0 00 .0 0 2 .7 2 1 .0 2 2 .0 0 0 .0 0 0 .0 00 n 1 3 9 1 39 1 3 9. 00 0 13 9 1 3 9 1 3 9 1 3 9 1 3 9 1 3 9 in d iv id ua li sm p ea rs o n c o rr el at io n -. 03 5 .1 14 .2 5 8 ** 1 .0 0 0 -. 1 3 4 -. 0 3 6 -. 0 7 3 -. 1 33 -. 1 84 * s ig . (2 -t ai le d ) .6 8 6 .1 80 .0 0 2 .1 1 6 .6 7 1 .3 9 3 .1 1 8 .0 30 n 1 3 9 1 39 1 39 1 39 .0 0 0 1 3 9 1 3 9 1 3 9 1 3 9 1 3 9 m as cu li ni ty p ea rs o n c o rr el at io n .0 3 6 -. 1 92 * -. 0 3 1 -. 1 3 4 1. 0 0 0 -. 1 1 6 .0 1 4 -. 1 12 -. 1 91 * s ig . (2 -t ai le d ) .6 7 5 .0 23 .7 2 1 .1 1 6 .1 7 4 .8 7 0 .1 8 9 .0 25 n 1 3 9 1 39 1 39 13 9 1 39 .0 0 0 1 3 9 1 3 9 1 3 9 1 3 9 a tt it ud e to w ar d s th e p as t p ea rs o n c o rr el at io n -. 01 9 .3 7 9 ** .1 9 4* -. 0 3 6 -. 1 1 6 1. 0 0 0 .4 20 * * -. 34 6 ** -. 2 5 9 ** s ig . (2 -t ai le d ) .8 2 3 .0 00 .0 2 2 .6 7 1 .1 7 4 .0 0 0 .0 0 0 .0 02 n 1 3 9 1 39 1 39 13 9 1 3 9 1 39 .0 0 0 1 3 9 1 3 9 1 3 9 e th no ce nt ri sm p ea rs o n c o rr el at io n .1 3 2 .2 0 8 * .4 7 9 ** -. 0 7 3 .0 1 4 .4 2 0* * 1 .0 0 0 -. 32 5 ** -. 4 0 7 ** s ig . (2 -t ai le d ) .1 2 2 .0 14 .0 0 0 .3 9 3 .8 7 0 .0 0 0 .0 0 0 .0 00 n 1 3 9 1 39 1 39 13 9 1 3 9 1 3 9 1 3 9 .0 00 1 3 9 1 3 9 a tt it ud e to w ar d s s s t s p ea rs o n c o rr el at io n -. 12 2 -. 3 0 7 ** -. 5 5 1 ** -. 1 3 3 -. 1 1 2 -. 3 46 ** -. 32 5 ** 1 .0 0 0 .8 9 1 ** s ig . (2 -t ai le d ) .1 5 3 .0 00 .0 0 0 .1 1 8 .1 8 9 .0 0 0 .0 0 0 .0 00 n 1 3 9 1 39 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 .0 00 1 3 9 in te nt io n to us e s s t s p ea rs o n c o rr el at io n -. 1 7 4 * -. 1 99 * -. 5 9 3 ** -. 18 4 * -. 1 9 1 * -. 2 59 ** -. 40 7 ** .8 91 * * 1 .0 00 s ig . (2 -t ai le d ) .0 4 0 .0 19 .0 0 0 .0 3 0 .0 2 5 .0 0 2 .0 0 0 .0 0 0 n 1 3 9 1 39 1 39 13 9 1 3 9 1 3 9 1 3 9 1 3 9 1 3 9 .0 0 0 *. c o rr el at io n is s ig ni fi ca nt a t th e 0. 0 5 l ev el ( 2 -t ai le d) . 74 table 11 − hierarchical multiple regression results hmr β1 a β2 b sig.1 c sig.2 d r2 adjusted r2 ∆r2 f change vif durbin watson first hmr stage 1: .741 .735 .741 128.859* 1.704 1.713 complexity -.730 -.343 .000 .000 inertia -.072 .059 .184 .180 1.507 need for interaction -.166 .046 .001 .008 1.257 stage 2: attitude towards ssts .600 .000 .847 .842 .106 92.258* 3.416 second hmr stage 1: .646 .639 .646 82.274* 1.049 1.694 relative advantage .774 .217 .000 .001 rational thinking -.104 -.060 .047 .106 1.018 experiential thinking -.063 .060 .231 .123 1.044 stage 2: attitude towards ssts .729 .000 .820 .815 .174 129.940* 3.052 third hmr stage 1: .759 .750 .759 83.761* 2.255 1.610 perceived risk -.179 -.040 .006 .478 experience .613 .210 .000 .005 2.197 uncertainty avoidance -.143 -.113 .009 .013 1.625 individualism -.061 -.060 .185 .114 1.141 masculinity -.139 -.118 .002 .002 1.120 stage 2: attitude towards ssts .597 .000 .836 .828 .077 61.435* 4.661 fourth hmr stage 1: .584 .574 .584 63.061* 1.350 1.553 technology readiness .743 .023 .000 .739 attitude towards the past .141 .119 .031 .006 1.365 ethnocentrism -.162 -.168 .012 .000 1.312 stage 2: attitude towards ssts .859 .000 .820 .815 .237 176.579* 3.116 a beta value in the first stage; b beta value in the second stage; c beta significance value in the first stage; d beta significance value in the second stage. *p < .001 the first regression includes need for interaction, inertia and complexity. as it can be seen, the p value of the beta coefficients reveals that inertia does not make a statistically significant contribution to the model (p > .05). complexity and need for interaction are significant in the first stage (p < .01) and still remain significant after attitude towards ssts is 75 introduced into the model. however, their beta coefficients and significance levels decrease in the second stage, which shows that their relationship with intention is partially mediated by attitude (pallant, 2007). in the second regression, experiential thinking does not make a statistically significant contribution to the model (p>.05). after attitude towards ssts is introduced, rational thinking becomes statistically insignificant, showing that attitude fully mediates its relationship with intention. relative advantage is only partially mediated. initially, in the third regression, the only statistically insignificant variable is individualism (p >.05). perceived risk becomes insignificant (p >.05) after attitude is introduced into the model and therefore is fully mediated. the changes in the beta and p values reveal that previous experience, uncertainty avoidance and masculinity are partially mediated. the fourth and final regression increases in explanatory power by 23.7 % after attitude is introduced, the greatest rise of all the models. the changes in the significance and beta values show that tr is fully mediated by attitude, whereas attitude towards the past and ethnocentrism are not mediated at all. considering that attitude mediates the relationship of only nine variables with intention, h16 is partially confirmed. 4. discussion the correlation analysis revealed that, of all the independent antecedent variables, complexity has the strongest connection with the intention to use ssts (r = -.845, p< .01). previous papers such as meutner et al. (2005), wood & moreau (2006), and zhu et al. (2007) also considered complexity to be a significant predictor of intention. it is obvious that, as the perceived difficulty of a technology increases, the probability of it being used by consumers decreases. complexity was also found to be relevant in the qualitative exploratory research, especially in the case of older consumers. the in-depth interviews showed that atms are generally seen as less complex than online shopping, confirming that single feature ssts are usually regarded as simpler to operate than their multiple feature counterparts (zhu et al.,2007). previous experience was found to have the second strongest relationship with intention (r = .829, p< .01), thus confirming the findings of patterson (2000) or wang et al. (2012). consumers are willing to try out new ssts if they previously employed similar technologies and the attempts have been successful. the survey results disclose the fact that both relative advantage and perceived risk are powerful antecedents of intention. it can certainly be argued that romanian consumers are willing to change the way they buy or consume a service if the new marketing channel offers superior benefits in comparison to the old one (collier & sherrell, 2010; lee et al., 2003; lee et al., 2012). on the other hand, consumers will refrain from using ssts if they believe that there is a probability of being affected financially, physically or emotionally after using such a technology (featherman & wells, 2010; scholder et al., 1991). technology readiness was the last predictor strongly and positively correlated with intention. this is in line with parasuraman’s (2000) or gelderman et al.’s (2011) findings. therefore, the results show that romanian consumers with high technology readiness have a greater propensity to embrace new technologies, the opposite being true for low tr individuals. inertia was found to be one of the variables that has a moderate relationship with intention (r= -.544). authors such as meutner et al. (2005) or polites & karahanna (2012) also found this factor to be a significant predictor of ssts usage. just like other individuals, 76 romanian consumers with high resistance to change usually refuse to buy new products or use new forms of technology. similar to previous findings such as lee et al.(2003), johnson et al. (2008) or gelderman et al. (2011), the research results showed that the need for interaction has a significant, moderate and negative relationship with intention (r= -.515). romanian consumers who value the opportunity of communicating with company employees tend to use ssts less frequently. looking back at the qualitative research, it seems that, unlike older consumers, younger individuals feel the need to interact mostly from a functional, utilitarian perspective (seeking information, asking for assistance, etc.). they would be willing to use ssts if these devices provided clear benefits. the quantitative data analysis revealed that uncertainty avoidance is negatively and moderately associated with the intention of using ssts (r= -.593). this confirms, park & jun’s (2003) and nilsson’s (2007) research. individuals coming from cultures characterized by high values on uncertainty avoidance are less likely to adopt new technologies. contrary to hofstede et al.’s (2010) findings, the results of this research suggest that romanians are characterized by a moderate level of uncertainty avoidance. the last variable moderately correlated with intention is ethnocentrism (r= -.407). ethnocentric consumers, and particularly the ones living in emerging economies such as romania, are sceptic when it comes to new forms of technology as these innovations are offered by foreign companies (steenkamp et al., 1999). the mean value of 4.5 (out of 7) would suggest that romanians are slightly ethnocentric. the attitude towards the past was found to have a weak connection with intention (r= .259). even if the mean score of 4.6 (out of 7) suggests that romanians have a slightly favourable attitude towards the past it is also possible that they acknowledge the benefits of ssts by comparison with the more traditional service delivery methods; hence the weak relationship. simon & usunier’s (2007) expectations were partially confirmed. experiential thinking was found to have a negative relationship with intention among romanian consumers. however, contrary to the hypothesis, rational thinking also had a negative association with intention. consumers with high rational thinking usually seek efficiency and focus on short term projects (simon & usunier, 2007). it could be possible that rational romanian individuals believe that ssts are less efficient than the alternatives. both correlations are very weak and,therefore, the results should be treated with caution. individualism and masculinity are negatively and very weakly correlated with intention. hofstede et al. (2008a) argue that these cultural dimensions should not be used on individuals, like in this present research, but included in cross-cultural studies. this could explain the very weak correlation between these two independent variables and intention. the current research also ended with findings of its own and new contributions to the sst literature. the first finding is represented by the factor labelled social changes which was unveiled during one of the semi-structured interviews. the respondent believed that one of the reasons why he adopted ssts was the turbulence of the world which surrounds him. he sees ssts as fit for the existing social realities in which people become increasingly distant from each other and replace human interaction with machines. the interviewee seems to fear of being rejected by other society members if he tries to oppose these changes. this finding is to some extent confirmed by polites & karahanna (2012) or venkatesh, thong & xu (2012) who identified subjective norm and social factors as two of the antecedents of ssts usage. nevertheless, the subjective norm refers to the individual’s perception about what the people close to him believe about him performing or not performing certain behaviours (ajzen, 1991). social factors are defined as ‘specific personal agreements that the individual has made 77 with others, in specific social situations’ (venkatesh, morris, davis & davis, 2003, p.430). neither of these definitions is compatible with the identified variable. the interviewee did not mention anything regarding the influence of the people who are close to him or reference groups and does not see the adoption of ssts as agreements made with others. on the contrary, he regards these devices as imposed to him by the ongoing social mutations and mentions that a fight against the system would be possible if individuals avoided choosing the most convenient solution (fitting into the existing social trends). second, a test of mediation was conducted in order to test if attitude moderates the relationship between the independent variables and the intention to use ssts. 9 out of 14 antecedent variables was mediated. complexity, need for interaction, relative advantage, previous experience, uncertainty avoidance and masculinity were partially mediated, whereas perceived risk, technology readiness and rational thinking were fully mediated. these nine factors have an indirect relationship, influencing intention through the attitude towards ssts. for instance, as the risks associated with a sst become greater, consumers will form a negative attitude towards the respective device, which in turn would lead to a decreased usage intention. curran & meutner (2005) also found that attitude mediates need for interaction, complexity, risk and relative advantage. considering the given results, this paper proposes a new model of sst adoption by consumers in emerging markets. figure 2 shows that of all the nine mediated variables included in the model, complexity, previous experience, relative advantage and technology readiness have the greatest influence on intention, with beta values of -.730, .613, .774 and .743, respectively. rational thinking, masculinity, uncertainty avoidance and need for interaction had the smallest impact with beta values of -.104, -.139, .143 and -.166. figure 2 − ssts intention to use model for consumers in emerging markets intention to use ssts attitude towards ssts perceived risk technology readiness rational thinking complexity need for interaction relative advantage previous experience uncertainty avoidance masculinity 78 4.1 theoretical implications first, this article provides a much needed insight into the factors which inhibit or stimulate the use of ssts in emerging markets. the results suggest that several determinants of ssts usage in western countries also apply to eastern european consumers. nevertheless, certain differences were revealed as well. second, the article proposes a model of the intention to use ssts by romanian consumers which is to our best knowledge the first of its kind. third, in contrast to previous studies which used student samples, both the quantitative and qualitative research were conducted with respondents coming from different demographic backgrounds, thus obtaining a diversity of opinions and assuring a better reliability of the findings. the study also investigated two types of ssts, belonging to distinct industries. therefore, the consumer’s overall views on ssts were less likely to be influenced by the service sector or the companies which provided these devices. finally, the series of interviews also revealed a new factor which has not been identified in previous studies: social changes. the future development of scales to measure this variable as well as its inclusion in forthcoming studies might prove suitable. 4.2 managerial implications complexity was found to have the strongest relationship with intention. therefore, diminishing the perceived difficulty of operating a sst should be the main focus for companies that aim to convince consumers to employ these technologies. if the sst is onsite, this could be done by providing clear instructions, preferably accompanied by pictures that describe the steps which need to be taken when using the device (bitner, ostrom, meutner & clancy, 2002). if the sst is off-site (for example online shopping or online banking) brochures or tutorials containing the same information could be offered to consumers, free of charge (sääksjärvi & samiee, 2011). the second strongest predictor of intention is the consumers’ previous experience with ssts. in order to build experience, consumers need to be encouraged to use these devices. if no previous experience exists, a good possible solution would be to associate the way in which the technology is operated with a similar and more widespread sst (moreau, markman & lehmann, 2001). for instance, an airline company trying to encourage the usage of its ticketing self-service kiosks could make an analogy to atms. relative advantage and perceived risk were also highly correlated with intention. the descriptive statistics showed that romanian consumers generally regard ssts as slightly advantageous and low in risk. the latter applies especially to the case of atms. however, romanian consumers still consider online shopping as riskier as and less beneficial than the “brick and mortar” alternative. in order to stimulate the use of ssts, a company could offer discounts, small gifts, free delivery or similar perks (bitner et al., 2002; collier & sherrell, 2010) but also highlight the intrinsic benefits of these technologies (e.g. convenience, safety, efficiency). personalizing the consumer’s experience with the sst could be another potential advantage. for instance, in online banking, this can be done by creating unique welcome pages for each customer. perceived risks could be reduced if permanent assistance were available from company employees and if money-back or product replacement guarantees were offered (robertson, mcquilken & kandampully, 2012). a list of recommendations for the remaining investigated variables can be found in table 15. 79 table 12 − managerial implications variable explanation managerial recommendations inertia consumers refuse to use ssts either because they perceive them as less advantageous than the alternative or they see themselves as too old to change their habits develop advertising messages which show older consumers satisfied after they operated ssts (featherman & wells, 2010). use fear/safety as a trigger mechanism. in the case of atms, promote the idea that people who carry cash are more exposed to robbers than card holders. need for interaction consumers refuse to use ssts because they feel the need to interact with store employees, either from a social or functional perspective initially, offer both the sst and the alternative human contact. do not force consumers to use the technology as the eliminated choice could become more attractive (reinders et al., 2008). assistance should be permanently available either on or offsite uncertainty avoidance consumers coming from cultures with high uncertainty avoidance are reluctant to use ssts amplify the sense of tangibility through pictures or scanning and sensory devices. in the case of online shopping, raise the visibility of rules on websites and display certifications from non-profit agencies or government bodies (lim et al., 2004). ethnocentrism consumers tend to reject products and technologies coming from foreign countries use ssts or ssts components manufactured in the country. explain that ssts increase the company’s efficiency and allow it to grow. thus, more jobs will be offered to consumers and the small local businesses, which depend on the company, will benefit as well. individualism/ collectivism the research revealed that individualism is negatively associated with intention. romania is closer to a collectivist society. use opinion leaders and public figures in advertising messages to promote the use of the respective sst (keegan & green, 2005). use young consumers to convince their friends and older family members to use ssts. masculinity/ femininity masculinity is negatively correlated with intention. romania was found to have a slightly masculine culture. introduce more exclusive ssts (for example airport ticketing kiosks specially dedicated to premium and business class travelers). offer exclusive ssts features or accessories (for instance a select range of credit cards or personalized welcome pages in online stores). attitude towards the past individuals believe that products and life, in general, were better in the past. however, romanian consumers only have an overall slightly above neutral score on this variable. stress the benefits which ssts provide by comparison with the old alternatives: ease of use, low risk, enjoyment, convenience etc. rational and experiential thinking styles romanian consumers with rational and experiential thinking styles are less likely to use ssts. introduce or update the relational attributes included in the design of ssts to overcome the need for interaction (simon & usunier, 2007) underline the technology’s ease of use, efficiency and convenience for consumers with rational thinking styles finally, some independent variables were mediated by attitude towards ssts. hence, when trying to manipulate these variables, managers should understand that they are most likely influencing the attitude towards ssts and not intention. therefore, when conducting marketing research, companies should consider analysing the effects of their marketing efforts on both variables. 80 4.3 limitations and future research the proposed research has several limitations. first, the study investigated the consumers’ intention of using ssts and not the actual use, which could only be analysed using observation techniques. authors such as gelderman et al. (2011) revealed that various situational circumstances such as crowding or perceived waiting time could actually deter consumers from using ssts, despite a positive intention. therefore, a further investigation into the situational factors which influence sst employment would be appropriate. second, quota, convenience and snowball sampling were used for the quantitative study. even if quota sampling could provide representative samples (proctor, 2005), the general consensus is that the results obtained from non-probability samples should not be generalized to the entire population (malhotra & birks, 2007; shiu et al., 2009). even though other authors such as hwang & lee (2012) or yoon (2009) also used hofstede’s cultural dimensions at the individual level, and the dimensions were statistically significant in the current research, this is against the author’s recommendations. the study revealed that individualism and masculinity only have a very weak influence on the intention to use ssts. therefore, upcoming papers could consider a cross-cultural comparison on sst usage in emerging markets. finally, most of the current studies on ssts focus on user adoption. however, a company’s long term success could be influenced by the continuous usage of these technologies (huh & kim, 2008). therefore, forthcoming research should investigate consumer post-adoption attitudes and behaviour towards ssts. 5. conclusion ssts have developed greatly in the last decades. this transformation is likely to continue in the future as the service sector will keep playing an increasingly important role in both developed and, especially, emerging economies. consistent with the increasing importance of technology, in general, and ssts in particular, numerous papers have been written on the factors which influence sst usage, technology acceptance or innovations adoption. nevertheless, the research investigating these phenomena in emerging markets which are structurally different from developed countries (sheth, 2011) is rather limited. the present work aimed to address this academic gap by conducting a research in an eastern european country, romania, in order to discover the determinants of sst employment in this country. the results revealed that eastern european consumers and western citizens have many communalities in terms of ssts adoption, but also several differences. the qualitative research also exposed the fact that romanian consumers do not regard observability and trialability as important antecedents of ssts employment. the paper brings a further contribution to the sst literature by proposing a novel “ssts intention to use model” for consumers in emerging markets. moreover, during one of the indepth interviews, a perhaps original determinant of sst usage was discovered. the factor, labelled social changes, could be worth investigating in future research. 81 references aims (2012). overview on the romanian business environment. bucharest, romania: aims executive search & consulting. ajzen, i. 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(2007). self-service technology effectiveness: the role of design features and individual trait. journal of the academy of marketing science, 35(4), 492-506. 6 _14-15_ perovic psychological pricing in modern retailing: hard-discounter chains of russia received: march 31, 2014 accepted: the main goal of this paper is to show if is possible to find a modern retail chain in one of the world largest economies that uses exclusively psychological competitive advantage, in order to predominantly direct consumer behavior. pricing, as a source of competitive advantage is the least explained in marketing literature, therefore it is important to contribute and show how psychologic advantage. it could be an evidence to support the firm belief which exists among many retailers that greater than expected demand occurs at psychological price points. we shall analyze different retail chains belonging using method of observation and choose one sector in order to check the hypothesis. hard discounters are chosen since they use pricing strategies as the most important element of marketing program, much mo russia has been chosen as the largest growing wine market in the world keywords: retail, price, strategy, discounter, positioning 1. introduction this paper shall focus on price tactic in wine sector of selected country (russia). russia is the choice because this country has the largest growth of wine consumption, according to world wine organization oiv and bk magazine, since it growth of 121% over the period 2000 of 62%, australia of 38%, and usa of 37%. price is a way of communication, which directs consumer behavior (schindler, 1989), and it is the sole quantitative eleme since it is the only one that makes revenue. psychological pricing is a concept where prices are set to odd-number prices to prevent bargains, or even number prices to imply quality (lamb et al. 2012). research performed by holdershaw psychological prices, and therefore this strategy needs to be examined more carefully. having in mind that psychological pricing is based on communication and rationality, this is an extra element to confirm communicational characteristics of prices in general. this is especially important to understand for wine marketing, since wine quality is, according to oczkowski psychological pricing in modern : the case of wine sector in discounter chains of russia nikola perovic university of donja gorica-podgorica, montenegro accepted: july 22, 2014 online published: abstract the main goal of this paper is to show if is possible to find a modern retail chain in one of the world largest economies that uses exclusively psychological pricing, as a dominant competitive advantage, in order to predominantly direct consumer behavior. pricing, as a source of competitive advantage is the least explained in marketing literature, therefore it is important to contribute and show how psychological pricing is a source of competitive advantage. it could be an evidence to support the firm belief which exists among many retailers that greater than expected demand occurs at psychological price points. we shall analyze different retail chains belonging to so call hard-discounters in russian federation using method of observation and choose one sector in order to check the hypothesis. hard discounters are chosen since they use pricing strategies as the most important element of marketing program, much more important than products, promotion or sales channels, while russia has been chosen as the largest growing wine market in the world. retail, price, strategy, discounter, positioning. this paper shall focus on price tactic in wine sector of selected country(russia). russia is the choice because this country has the largest growth of wine consumption, according to world wine organization oiv and bk magazine, since it growth of 121% over the period 2000-2012, compared to the growth in china of 67%, canada of 62%, australia of 38%, and usa of 37%. price is a way of communication, which directs consumer behavior (schindler, 1989), and it is the sole quantitative element of marketing mix since it is the only one that makes revenue. psychological pricing is a concept where prices number prices to prevent bargains, or even number prices to imply quality research performed by holdershaw (1997) has shown that retailers have bias in favor of psychological prices, and therefore this strategy needs to be examined more carefully. having in mind that psychological pricing is based on communication and rationality, this is an extra onfirm communicational characteristics of prices in general. this is especially important to understand for wine marketing, since wine quality is, according to oczkowski 83 psychological pricing in modern case of wine sector in discounter chains of russia nikola perovic podgorica, montenegro online published: september 26, 2014 the main goal of this paper is to show if is possible to find a modern retail chain in one of the pricing, as a dominant competitive advantage, in order to predominantly direct consumer behavior. pricing, as a source of competitive advantage is the least explained in marketing literature, therefore it is al pricing is a source of competitive advantage. it could be an evidence to support the firm belief which exists among many retailers that greater than expected demand occurs at psychological price points. we shall discounters in russian federation using method of observation and choose one sector in order to check the hypothesis. harddiscounters are chosen since they use pricing strategies as the most important element of re important than products, promotion or sales channels, while -russian federation (russia). russia is the choice because this country has the largest growth of wine consumption, according to world wine organization oiv and bk magazine, since it had 2012, compared to the growth in china of 67%, canada of 62%, australia of 38%, and usa of 37%. price is a way of communication, which directs nt of marketing mix since it is the only one that makes revenue. psychological pricing is a concept where prices number prices to prevent bargains, or even number prices to imply quality (1997) has shown that retailers have bias in favor of psychological prices, and therefore this strategy needs to be examined more carefully. having in mind that psychological pricing is based on communication and rationality, this is an extra onfirm communicational characteristics of prices in general. this is especially important to understand for wine marketing, since wine quality is, according to oczkowski 84 (2001) generally recognized to depend on subjective evaluations and cannot be precisely measured. the hypothesis of the paper is to show that is possible to find modern retail chain, hard-discounter, which completely focuses on psychological pricing as a main price tactic and positioning method in order to direct consumer behavior. therefore, the goal is to check hypothesis if there is only one retail chain of such type which has a sole price tactics of psychological pricing in the wine sector. that is important in order to identify the key element of competitive advantage of the chain, which uses psychological pricings. this can be an evidence to support the firm belief that exists among many retailers that demand increases at psychological price points (holdershaw et al. 1997). hinterhuber&liozu (2014) have published the research were they found, after interviews with 50 executives worldwide, that pricing is important source of competitive advantage, and also the least explored source. psychological pricings can bring many advantages to retail chains, such as increasing sales (holdershaw 1995), attracting potential business deals, growing profits and customer base by increasing their loyalty, since the essence of psychological pricing is to set “fair” prices. according to perner (2013) the prices are essential for marketing programs of hard-discounter retail chains, because of the intense competition among retailers, and increasing pressure to focus on volumes of sales more than margins on each sale. furthermore, the most recent research of mckinsey (2013) has shown that the most efficient retail businesses are those focused at price strategies in discounted stores. perception of consumers plays the key ingredient of psychological pricings because customers are guided by belief that they receive best value for their money. on the other hand, retailers very often, according to research of levy et al. (2004) were unaware of how their pricing strategy influences their overall image, since optimal pricing is not a static problem. it is important to make overview of different retail chains in russia, and to focus on harddiscounters, since they predominantly have been using prices, as the most important element of their marketing mix, in order to attract final consumers. all other retail chains, besides prices, focus as well on their higher service, more educated staff, brand values, merchandising, etc., and do not attract consumers solely on prices, which is, on the opposite, strategy of hard-discounter chains in russia, such as pyaterochka, as part of x5 system, magnit, dixy and monetka. since most of those retail chains at certain extent use psychological pricings, it is challenge to find one chain that solely uses this price tactic. if we are able to justify such goal, that should be defined as an important competitive factor of selected retail chain at the market of russia. in order to justify our goal, we shall use field method of retail observation and establish price reports in all analyzed retail chains. our field method shall be utilized in moscow, due to the fact that predominant part of wine trade has been achieved in the capital of the russian federation. since psychological pricing has been analyzed at most of marketing and international business literature, we shall link this knowledge with modern consumer behavior at one of the most interesting and growing market, such is the wine market of russian federation. 2. literature review from the early days, when william applebaum in journal of marketing, published in 1950, wrote article studying customer behavior in retail stores, customer and consumer behavior were in focus of marketing science. there were many articles covering topics of how wine consumers have been influenced by various factors at retail outlet. lockhin and hall (2003) have developed concept on wine involvement and its influence on behavior at a store in a process of wine purchasing. hollebeek et al. (2007) explained purchase intention as a function of price, price discount and region. according to them, wine region has been much more important as a decision factor for high involvement consumers. ritchie et al. (2010) were examining price as an important factor in wine purchasing. they used method of focus groups in supermarkets of united kingdom in order to understand the ability for wineries to attract consume supermarket shopper, who ordinarily purchases wine like any other grocery item. the authors have found that the way supermarkets communicated wine and their focus on price discounts have caused to have prices as analyzed connection between environmentally safe wines and the attitude towards wine purchasing. his article has proven than only small portion of wine population is willing to make decision towards purchase of those wines. on the other hand, literature covering topic of psychological pricings is very broad. in the international marketing management literature, authors like lamb et al. (2012) have explained psychological pricing among other pri tactics like discounts (quantity, cumulative and noncumulative, cash, functional, seasonal, promotional), value based, single price, price lining, leader pricing, price bundling and unbundling. rakita (2005) argues that psychological pricings is very high developed countries. according to lee and carter (2012) consumer nowadays expect high quality at low prices. they also carry so called reference price that is their standard of price, or the price they believe to be fair. psychological pricings were also called in literature as odd prices, magic prices, charm prices, irrational prices, intuitive prices or rule according to dalrymple & thompson (1969), sturdivant (1970); boyd & massy (1972); gabor (1977); monroe (1990); and rogers (1990). at the same time, as per schindler & wiman (1989) the use of odd pricing can be traced back over 100 years and from that period the use of psychological pricing in retailing has become widespread in many countries, including russia. the reason behind consumer perception of psychological or odd prices has been explained by brenner & brenner (1982) due to the fact that people have only a limited capacity for storing information. they believe that because consumers are exposed to a continuous flow of information on prices, they store only the more valuable message, the first digits of a number. also, research of gendall et al. (1997) and gendall (1998) has proven that psychological (odd) pricing generates greater than expected demand importance of psychological pricing for consumer behavior in retail, there is an evidence of its value even in analysis of mergers and acquisitions (agarwal&zeephongsekul, 2011). research provided in this article has focus on psyc highly relay on all previously mentioned literature. 3. factors of wine consumer behavior at the very beginning of this part, we need to distinguish difference between the terms customer and consumer. thought most of many of them do not make different explanation between consumer and customer behavior. therefore, we will focus on data regarding consumer behavior, regardless if the authors made any difference between those this paper. consumers are different in their behavior in process of wine purchasing, based on the level of their involvement. if they are high involved, beside the price, which is inevitabl of most decisions, consumer tend to look at brand, packaging (especially label design), country image, position at the shelf, winery owner and her/his prestige. generally, consumers who are involved can be attracted by any of six ps from wine marketing program (wagner et al. 2011). therefore, wine consumers react on product of price, price discount and region. according to them, wine region has been much more tor for high involvement consumers. ritchie et al. (2010) were examining price as an important factor in wine purchasing. they used method of focus groups in supermarkets of united kingdom in order to understand the ability for wineries to attract consumers. their interest was the low involvement, supermarket shopper, who ordinarily purchases wine like any other grocery item. the authors have found that the way supermarkets communicated wine and their focus on price discounts have caused to have prices as central part of retailer’s marketing program. barber (2012) has analyzed connection between environmentally safe wines and the attitude towards wine purchasing. his article has proven than only small portion of wine population is willing to owards purchase of those wines. on the other hand, literature covering topic of psychological pricings is very broad. in the international marketing management literature, authors like lamb et al. (2012) have explained psychological pricing among other pri tactics like discounts (quantity, cumulative and noncumulative, cash, functional, seasonal, promotional), value based, single price, price lining, leader pricing, price bundling and unbundling. rakita (2005) argues that psychological pricings is very often used in trade of according to lee and carter (2012) consumer nowadays expect high quality at low prices. they also carry so called reference price that is their standard of price, or the price hological pricings were also called in literature as odd prices, magic prices, charm prices, irrational prices, intuitive prices or rule according to dalrymple & thompson (1969), sturdivant (1970); boyd & massy (1972); (1990); and rogers (1990). at the same time, as per schindler & wiman (1989) the use of odd pricing can be traced back over 100 years and from that period the use of psychological pricing in retailing has become widespread in many countries, sia. the reason behind consumer perception of psychological or odd prices has been explained by brenner & brenner (1982) due to the fact that people have only a limited capacity for storing information. they believe that because consumers are exposed to a continuous flow of information on prices, they store only the more valuable message, the first digits of a number. also, research of gendall et al. (1997) and gendall (1998) has proven that psychological (odd) pricing generates greater than expected demand at retail stores. beside importance of psychological pricing for consumer behavior in retail, there is an evidence of its value even in analysis of mergers and acquisitions (agarwal&zeephongsekul, 2011). research provided in this article has focus on psychological pricing in russia, and will highly relay on all previously mentioned literature. 3. factors of wine consumer behavior at the very beginning of this part, we need to distinguish difference between the terms customer and consumer. thought most of researchers tend to explain consumer behavior, many of them do not make different explanation between consumer and customer behavior. therefore, we will focus on data regarding consumer behavior, regardless if the authors made two terms, since this differentiation is not beyond the scope of consumers are different in their behavior in process of wine purchasing, based on the level of their involvement. if they are high involved, beside the price, which is inevitabl of most decisions, consumer tend to look at brand, packaging (especially label design), country image, position at the shelf, winery owner and her/his prestige. generally, consumers who are involved can be attracted by any of six ps from wine ting program (wagner et al. 2011). therefore, wine consumers react on product 85 of price, price discount and region. according to them, wine region has been much more ritchie et al. (2010) were examining price as an important factor in wine purchasing. they used method of focus groups in supermarkets of united kingdom in order to understand rs. their interest was the low involvement, supermarket shopper, who ordinarily purchases wine like any other grocery item. the authors have found that the way supermarkets communicated wine and their focus on price discounts central part of retailer’s marketing program. barber (2012) has analyzed connection between environmentally safe wines and the attitude towards wine purchasing. his article has proven than only small portion of wine population is willing to owards purchase of those wines. on the other hand, literature covering topic of psychological pricings is very broad. in the international marketing management literature, authors like lamb et al. (2012) have explained psychological pricing among other pricings tactics like discounts (quantity, cumulative and noncumulative, cash, functional, seasonal, promotional), value based, single price, price lining, leader pricing, price bundling and often used in trade of according to lee and carter (2012) consumer nowadays expect high quality at low prices. they also carry so called reference price that is their standard of price, or the price hological pricings were also called in literature as odd prices, magic prices, charm prices, irrational prices, intuitive prices or rule-of-thumb prices according to dalrymple & thompson (1969), sturdivant (1970); boyd & massy (1972); (1990); and rogers (1990). at the same time, as per schindler & wiman (1989) the use of odd pricing can be traced back over 100 years and from that period the use of psychological pricing in retailing has become widespread in many countries, sia. the reason behind consumer perception of psychological or odd prices has been explained by brenner & brenner (1982) due to the fact that people have only a limited capacity for storing information. they believe that because consumers are exposed to a continuous flow of information on prices, they store only the more valuable message, the first digits of a number. also, research of gendall et al. (1997) and gendall (1998) has proven that at retail stores. beside importance of psychological pricing for consumer behavior in retail, there is an evidence of its value even in analysis of mergers and acquisitions (agarwal&zeephongsekul, 2011). hological pricing in russia, and will at the very beginning of this part, we need to distinguish difference between the terms researchers tend to explain consumer behavior, many of them do not make different explanation between consumer and customer behavior. therefore, we will focus on data regarding consumer behavior, regardless if the authors made two terms, since this differentiation is not beyond the scope of consumers are different in their behavior in process of wine purchasing, based on the level of their involvement. if they are high involved, beside the price, which is inevitable part of most decisions, consumer tend to look at brand, packaging (especially label design), generally, consumers who are involved can be attracted by any of six ps from wine ting program (wagner et al. 2011). therefore, wine consumers react on product 86 (perception of wine quality and previous organoleptic experience), price, placement (location), packaging (front label, back label, neck label, bottle and bottle shape, carton, extra package and awards), promotion (media, point of sales) and position (at the shelf and the side of the store). barber et al. (2006) have confirmed that the most important factor of wine purchasing decision, besides vintage and brand name, is a price. their research also have found that other factors that were important for consumers include country of origin and grape variety. according to bashar (2012) there are many factors, besides the prices, which influence conversion of store visitors to consumers, such as product quality and assortment, promotion, service, availability of products, and ambience of the store. shepherd and sparks (1994) defined three groups of factors that influence consumer’s choice: physical (geography, season, technology, economics); social (social, custom religion, social class, advertising, education); and physiological (heredity, allergy, acceptability, nutritional need). even earlier, similar model has been created by khan (1981), which includes seven categories influencing consumer’s choice in food/beverage sector: 1) personal factors such as influence of other persons, familiarity, and emotional meaning associated with food/beverages; 2) biological, physiological, and psychological factors such as age and gender; 3) extrinsic factors, such as advertising and seasonal variations; 4) intrinsic factors (of the food/beverages), such as appearance, odor, flavor, and texture; 5) cultural, religious and regional factors including geographic regions; 6) educational factors including nutrition education; and 7) socio economic factors, such as income and the cost of food/beverages. since this paper has a focus on hard-discounters and the consumers who choose this type of retail, the most important factor which influences consumer behavior is, without doubt, a price, due to the fact that most of wine consumers in hard-discounter chains tend to have low involvement in a process of wine purchasing. 4. psychological pricing and other price tactics for retail chains price tactics have their roots in behavioral economics and psychology (ahmetoglu et al. 2014). according to their research, retailers influence perceptions and direct consumer behavior, based on price tactics they implement. as stated earlier, psychological pricing is one of many tactics which modern companies, including retail chains, use in order to communicate with consumers. concept of price discrimination, which has been introduced by farris & quelch (1987) and narasimhan (1984) had a focus on explaining that price reductions could be efficient when sizable market segments were targeted. russian federation is therefore interesting due to the size of market, and development of concept of harddiscounters, which are explained in next part of this paper. at the other hand, shindler (1998) concluded that market segments have to have different price sensitivity in order to implement successful price tactics. we shall briefly describe all price tactics, according to general marketing literature of lamb et al. (2012), and focus on those used by retail chains: discounts (quantity, cumulative and noncumulative, cash, functional, seasonal, promotional), value based pricing, pricing products too low, single price, price lining, leader pricing, price bundling and unbundling, psychological pricing discounts: there are several different types of discounts, but the basic goal of any discount is to stimulate consumers to purchase the goods at irregular basis. besides trade credit, cash discounts provided for consumers, are among the most important financial managerial decisions (ting & value perception defined in discount policy of shops is the most important factor of consumer behavior in discount stores, which are in the focus of this paper. therefore is offered to consumers who purchases more than certain specified quantity (for examples in russia it is common to offer 1 bottle of wine free, who orders 10 bottles, so in total customer pays only 9 bottles, or she/he received 10% of d there are two basic types of quantity discounts, cumulative, which means that buyer gets discounts for all deliveries during certain period of time (month, quarter, per annum), and noncumulative which implies only to single order. while the other type is only focused to get instant larger demand from the consumers. on the other hand, there are cash discounts which imply lower price if consumers pay in cash. since modern chains use many loyalty cards that guarantee certain benefits, they are also motivated to grant discounts for cash in the situation when liquidity issues arise. functional discount determines different prices for different trade partners, and it is typical for cash and carry systems, since retail chains want to stimulate loyalty of certain type of (professional) customer, like a restaurant, hotel, bank, etc. seasonal discounts have function of stimulation of demand for products that are being sold in the period out of the sea stimulate consumption of red wines during summer, or white during the winter). seasonal discounts are important both for retail chains and producers in order to keep optimal stocks at the store during the whole year. promotional pricing received from supplier in order to better position its product at retailer’s shelves. it is usually used for secondary positions at shelves, and special advertisements in retailer’s booklets. value-based pricing: the co set a price which is believed to be valued by its consumers as fair. customers’ cognition is the crucial factor in this type of pricing ( become even more important in the period of the recent economic downturn and by adoption of the new technologies, as stated by grewal et al. (2012). nowadays, consumers are offered not just a price but to understand the value of the product. for example, in t walmart’s competitors were using this approach in order to explain to customers that they are receiving more value by purchasing certain product at prices, which were more beneficial compared to walmart. this concept is specially important in period recent global crisis, when many products were offered at same price but the package has been larger, with so called gratis goods (for example consumers paid for 5 kg of certain detergent, but received 5.5 kg, or 0.5 kg as gratis), wh pricing products too low period, it can maintain very low prices. this price tactics, as well as single and line pricing, lie on consumers' trusting belief however, this is only shortcompanies that have a goal to be acquired by larger retail chains can use this approach, and price bundling and unbundling, there are several different types of discounts, but the basic goal of any discount is to stimulate consumers to purchase the goods at irregular basis. besides trade credit, cash discounts provided for consumers, are among the most important financial & chung, 2014). at the same time, zielke (2014) has shown that value perception defined in discount policy of shops is the most important factor of consumer behavior in discount stores, which are in the focus of this paper. therefore is offered to consumers who purchases more than certain specified quantity (for examples in russia it is common to offer 1 bottle of wine free, who orders 10 bottles, so in total customer pays only 9 bottles, or she/he received 10% of discount to base price). there are two basic types of quantity discounts, cumulative, which means that buyer gets discounts for all deliveries during certain period of time (month, quarter, per annum), and noncumulative which implies only to single order. the first type stimulates consumer loyalty, while the other type is only focused to get instant larger demand from the consumers. on the other hand, there are cash discounts which imply lower price if consumers pay in cash. since alty cards that guarantee certain benefits, they are also motivated to grant discounts for cash in the situation when liquidity issues arise. functional discount determines different prices for different trade partners, and it is typical for cash and carry systems, since retail chains want to stimulate loyalty of certain type of (professional) customer, like a restaurant, hotel, bank, etc. seasonal discounts have function of stimulation of demand for products that are being sold in the period out of the season (for example to stimulate consumption of red wines during summer, or white during the winter). seasonal discounts are important both for retail chains and producers in order to keep optimal stocks at the store during the whole year. promotional pricing means certain allowance to retailer received from supplier in order to better position its product at retailer’s shelves. it is usually used for secondary positions at shelves, and special advertisements in retailer’s booklets. : the concept implies that retailer first looks at competitors and than set a price which is believed to be valued by its consumers as fair. customers’ cognition is the crucial factor in this type of pricing (alinezhadsarokolaee et al., 2012). this concept has ome even more important in the period of the recent economic downturn and by adoption of the new technologies, as stated by grewal et al. (2012). nowadays, consumers are offered not just a price but to understand the value of the product. for example, in t walmart’s competitors were using this approach in order to explain to customers that they are receiving more value by purchasing certain product at prices, which were more beneficial compared to walmart. this concept is specially important in period of recession, such as recent global crisis, when many products were offered at same price but the package has been larger, with so called gratis goods (for example consumers paid for 5 kg of certain detergent, but received 5.5 kg, or 0.5 kg as gratis), which they have perceived as higher value. pricing products too low: when a retailer wants to cover large market share in short period, it can maintain very low prices. this price tactics, as well as single and line pricing, on consumers' trusting beliefs and purchase intentions, according to white -term approach and cannot be profitable in a long run. new companies that have a goal to be acquired by larger retail chains can use this approach, and 87 there are several different types of discounts, but the basic goal of any discount is to stimulate consumers to purchase the goods at irregular basis. besides trade credit, cash discounts provided for consumers, are among the most important financial chung, 2014). at the same time, zielke (2014) has shown that value perception defined in discount policy of shops is the most important factor of consumer behavior in discount stores, which are in the focus of this paper. therefore, quantity discount is offered to consumers who purchases more than certain specified quantity (for examples in russia it is common to offer 1 bottle of wine free, who orders 10 bottles, so in total customer there are two basic types of quantity discounts, cumulative, which means that buyer gets discounts for all deliveries during certain period of time (month, quarter, per annum), and the first type stimulates consumer loyalty, while the other type is only focused to get instant larger demand from the consumers. on the other hand, there are cash discounts which imply lower price if consumers pay in cash. since alty cards that guarantee certain benefits, they are also motivated to grant discounts for cash in the situation when liquidity issues arise. functional discount determines different prices for different trade partners, and it is typical for cash and carry systems, since retail chains want to stimulate loyalty of certain type of (professional) customer, like a restaurant, hotel, bank, etc. seasonal discounts have function of stimulation son (for example to stimulate consumption of red wines during summer, or white during the winter). seasonal discounts are important both for retail chains and producers in order to keep optimal stocks at means certain allowance to retailer received from supplier in order to better position its product at retailer’s shelves. it is usually used for secondary positions at shelves, and special advertisements in retailer’s booklets. ncept implies that retailer first looks at competitors and than set a price which is believed to be valued by its consumers as fair. customers’ cognition is the ). this concept has ome even more important in the period of the recent economic downturn and by adoption of the new technologies, as stated by grewal et al. (2012). nowadays, consumers are offered not just a price but to understand the value of the product. for example, in the usa walmart’s competitors were using this approach in order to explain to customers that they are receiving more value by purchasing certain product at prices, which were more beneficial of recession, such as recent global crisis, when many products were offered at same price but the package has been larger, with so called gratis goods (for example consumers paid for 5 kg of certain detergent, ich they have perceived as higher value. : when a retailer wants to cover large market share in short period, it can maintain very low prices. this price tactics, as well as single and line pricing, s and purchase intentions, according to white & yuan(2012). term approach and cannot be profitable in a long run. new companies that have a goal to be acquired by larger retail chains can use this approach, and 88 they are only focused to get more consumers, and larger market share, hoping to compensate all losses once an acquisition has been concluded. single price: this tactic sets all goods and services at one price such as concept “buy everything for 1 dollar”. idea behind this concept is to save time to consumers and to focus their attention to limited assortment. the largest problems that have retailers performing this tactic is how to maintain the costs, especially in case of inflation, which has been very important obstacle of economical development in russia for the previous two decades. price lining: the concept of price linings is to set few prices-lines of each product category and to determine all items within these categories. in this case all products belong to one of few price categories. for example, entry wines for 200 rubles, middle segment for 300 rubles, higher middle segment with price of 400 rubles, and luxury wines with price of 500 rubles. this tactic, although being simple for consumers and therefore saving their time, brings many possible problems. retailers can always keep larger stock of products which they purchased at lower than average prices, or change line and its assortment, or they could even have very fixed lines and its structure, but to risk their long-term profitability, due to often increases of wine production costs, as result of specifics of every vintage. leader pricing: the logic of this tactic is to set at very low level (sometimes below its costs, which can be illegal in russia) prices of certain products, which should attract consumers to store, and than refocused their mind to completely another items, that are priced at level which brings overall sufficient profitability to retailer. prices that are set low are always related to already established brands in order to easily attract consumers. this tactic is also called loss-leader pricing, because loss made at certain items has been compensated by profit from sales of another items. there is a theoretical approach developed for the lossleader pricing (in & wright, 2014) where companies promote low prices (below cost) for certain products in order to attract consumers for other products which are not promoted by low prices, but the consumers get perception that these products are also priced fairly. price bundling: when two or more products are being sold and marketed as one sku (stock keeping unit), it is a case of price bundling. for example, in wine sector it is common to sell item constituted of bottle of wine and a glass for red, white or sparkling wine. in many cases, consumers are offered not one bottle of wine, but the whole case of 6 or 12 bottles (in the usa and canada standard case has 12 bottles). when products are sold in a bundle, it is harder for consumers to compare prices, and therefore they do not tend to have a belief that they receive lower value. even more, previous research showed that consumers are more certain of the quality of the bundled products (kwon & jang, 2011). therefore, selling in a bundle could increase general demand of products. completely opposite is tactic of unbundling, when consumers want to know the price of every item, previously sold in the bundle. this case usually happens in periods of economic downturns. psychological pricing: the concept has been previously explained in this paper, and is also called odd-even pricing. basic logic behind psychological pricing is influence of prices to consumer’s perception in order not to bargain, which is result of odd prices, or to value the product as prestige quality, which is the result of even prices. when odd numbers are used, as we shall see in the results of price observations in russia, prices are usually set 1 ruble lower than round figure (100,150, 170, 200, etc.) consumers should position products with such prices as fairly defined, without any need to bargain. consumers were positioning products’ prices as better value when retail chains have used odd psychological pricings. 5. overview of the modern retail in russia there are four main types of the supermarket chains, hypermarket chains, cash and carry systems, and hard-discounters. supermarket is a large form of the traditional grocery store, with self beverage and household items. supermarket is smaller a to hypermarket. hypermarket is covering more than 10,000 square meters and is combination of supermarket and department store. it has, under one roof, full assortment of food and beverage items, as well as other general and carry system is a wholesale warehouse with focus on limited number of professional customers, which usually belong to any of these: shops, restaurants, professional users, caterers, institutional buyers, etc. customers settle the invoice on the spot in cash, and carry the goods by themselves. they enter cash and carry center only after validation of their individual id cards. hard-discounters have main focus on price, which should be low during whole year. usually prices tend to be 20% lower than at supermarkets, but that depends of category of products. in russia there are four retail chains belonging to this type, as shall be later explained. importance of retail for total wine sales in russia, acc euromonitor 2011, comes from the fact that off russia. table 1on-trade vs. off-trade in russia off/on off-trade on-trade total source: euromonitor, 2011 among the following chains, if we exclude first four which are hard will be analyzed later) and fifth since it does not carry wines, specially four are important, and among them two are foreign based: russian based: o’key and lenta. table 2 retail chains in russia no retailer 1 x5 retail group 2 tander 3 dixy group 4 monetka 5 sistema regionmart 6 auchan group 7 o'key group 8 metro group 9 lenta 10 coop source: http://www.russiaretail.com/russian_retail_data.shtml 5. overview of the modern retail in russia there are four main types of the modern retail in russia: cash and carry systems, and supermarket is a large form of the traditional grocery store, with self beverage and household items. supermarket is smaller and with limited assortment compared to hypermarket. hypermarket is covering more than 10,000 square meters and is combination of supermarket and department store. it has, under one roof, full assortment of food and beverage items, as well as other general merchandise. it is also called “bigis a wholesale warehouse with focus on limited number of professional customers, which usually belong to any of these: shops, restaurants, professional users, uyers, etc. customers settle the invoice on the spot in cash, and carry the goods by themselves. they enter cash and carry center only after validation of their discounters have main focus on price, which should be low during e year. usually prices tend to be 20% lower than at supermarkets, but that depends of category of products. in russia there are four retail chains belonging to this type, as shall be importance of retail for total wine sales in russia, according to data research group euromonitor 2011, comes from the fact that off-trade counts for 93% of all wines sold in trade in russia value sales % volume sales % 83.5 92.7 16.5 7.3 100 100 among the following chains, if we exclude first four which are hard will be analyzed later) and fifth since it does not carry wines, specially four are important, and among them two are foreign based: auchan (france) and metro (germany), and two are russian based: o’key and lenta. retail chains in russia country of origin chains sales (rub m) russia pyaterochka 283,948* russia magnit 287,732 russia dixy 68,901 russia monetka 35,220 russia chibis 13,421 france auchan 205,147 russia o'key 93,134 germany real 29,508 russia lenta 50,940 germany selgros 4,284 source: http://www.russiaretail.com/russian_retail_data.shtml 89 supermarket is a large form of the traditional grocery store, with self-service of food, nd with limited assortment compared to hypermarket. hypermarket is covering more than 10,000 square meters and is combination of supermarket and department store. it has, under one roof, full assortment of food and -box market”. cash is a wholesale warehouse with focus on limited number of professional customers, which usually belong to any of these: shops, restaurants, professional users, uyers, etc. customers settle the invoice on the spot in cash, and carry the goods by themselves. they enter cash and carry center only after validation of their discounters have main focus on price, which should be low during e year. usually prices tend to be 20% lower than at supermarkets, but that depends of category of products. in russia there are four retail chains belonging to this type, as shall be ording to data research group trade counts for 93% of all wines sold in volume sales % among the following chains, if we exclude first four which are hard-discounters (they will be analyzed later) and fifth since it does not carry wines, specially four are important, and auchan (france) and metro (germany), and two are store count 2,525 5,006 868 326 121 48 42 18 42 5 90 german based metro group with its cash and carry format, as well as french hypermarket chain auchan, have entered russian market in 2002. metro has been implemented its internationalisation strategy with focus to escape the over saturation of its home market. metro also owns the real hypermarket and the media markt electronics chains, and consequently creates majority of its turnover outside its home country. on the other hand, french based retail chain auchan has been focused to position shopping experience as a more convenient version of a stroll around an outdoor market, with constantly positioning its optimal price-quality ratio. auchan is also the principal initiator of the mega malls. o’key group launched its first hypermarket in st. petersburg in 2002, very quickly it became the retail leader of that region. from that period, fast growing has been its strategy. the plan is to have its stores in all of 25 largest russian cities by 2015. lenta is another hypermarket chain, which started its expansion in st petersburg from 1993. lenta has strategy in providing customers with high quality goods, a large selection and the low by eliminating the middleman where possible. today lenta is present in 37 cities in russia and has 16 hypermarkets. the most important factor of success of retail chains in russia, both domestic and foreign, has been their ability to frame profitability into a long-term perspective. this factor is critical in order to understand retail business philosophy in all emerging markets. we shall focus on hard-discounters because we want to examine pricing strategies, not brand, which is also important factor in consumer behavior. consumers who shop at discounters are predominantly focused on low prices and therefore hard-discounter retail chains are the suitable laboratories to examine psychological pricings. the following are hard-discounters in russia: pyaterochka, dixy, monetka and magnit. it is interesting to confirm that all existing hard-discounters are russian based. having in mind that foreign retail chains do posses higher level of know-how, based on their high level of internalization and consequently high level of transfer of knowledge, people, materials, money, as well as already established brands, it has been reasonable that russian based chains were creating their consumer strategy predominantly focusing at prices, in order to create competitive niche. on the other hand, government has protected this price-based strategy with high entry barriers, in the form of complicated title registration procedures for hard-discounters. therefore, it can be concluded that foreign advantage in the hard-discount sector has not jet been achieved, and that many challenges will arise in the future, when foreign based hard-discounters enter the “scene”. 6. price observation at the hard-discounters in the following four tables we shall see results of price observations in hard-discounters in russia. we have used in-person single price observation, and five stores were randomly chosen from every of four retail chains belonging to the type of hard-discounters. totally 20 stores were analyzed. period of observation was the last week in may of 2014. the single observation has been sufficient since the prices were the same inside one chain at the time of observation. at the same time, due to the fact that a policy of assortment varies among harddiscounters, we could not have the same number of wines observed in every chain. in order to eliminate branding bias, wines have been numerated, not described by the brand name. the goal is to check hypothesis if there is only one retail chain of such type which has a sole price tactics of psychological pricing in the wine sector. psychological pricing, as explained earlier, in the case of odd numbers, and as we shall see in the results of price observations in russia, commonly means that prices were set precisely1 ruble lower than round figure (lower than 100,150, 170, 200, etc.). table 3 case of dixie (5 stores) type of wine red wine 1 red wine 2 red wine 3 red wine 4 white wine 1 white wine 2 sparkling wine 1 the case of dixie shows that company is not using psychological pricing as sole price tactic as per concept of psychological pricing we have explained earlier, since all prices were not set one ruble lower than round figures, but either higher or lower. table 4 case of magnit (5 stores) type of wine red wine 1 red wine 2 red wine 3 red wine 4 white wine 1 magnit, as showin in the table 4, has been using psychological pricing, but not as a sole price tactic. table 5 case of pyatorochka (5 stores) type of wine red wine 1 red wine 2 red wine 3 red wine 4 white wine 1 white wine 2 sparkling wine 1 pyatorchka does not use, as shown in tactic. table 6 case of monetka (5 stores) type of wine red wine 1 red wine 2 white wine 1 sparkling wine 1 as it has been showed in the table 6, we have checked most of the wine categories (red, white, sparkling) we can confirm that for all wines only psychological pricing has been utilized in hard-discounter chain monetka. all prices were set just one ruble lo figures. this is very important aspect of competitive advantage of monetka, and we believe that it is valuable for this retail chain to continue with such concept. case of dixie (5 stores) retail shelf price in rubles 340 161 279.70 323 218 234 253 shows that company is not using psychological pricing as sole price tactic as per concept of psychological pricing we have explained earlier, since all prices were not set one ruble lower than round figures, but either higher or lower. case of magnit (5 stores) retail shelf price in rubles 217 409.10 349 114.90 183.40 magnit, as showin in the table 4, has been using psychological pricing, but not as a sole case of pyatorochka (5 stores) retail shelf price in rubles 225 265 290 355 297.15 275 265 pyatorchka does not use, as shown in table 5, psychological pricing as its sole price case of monetka (5 stores) retail shelf price in rubles 189 249 149 129 as it has been showed in the table 6, we have checked most of the wine categories (red, white, sparkling) we can confirm that for all wines only psychological pricing has been discounter chain monetka. all prices were set just one ruble lo figures. this is very important aspect of competitive advantage of monetka, and we believe that it is valuable for this retail chain to continue with such concept. 91 retail shelf price in rubles shows that company is not using psychological pricing as sole price tactic as per concept of psychological pricing we have explained earlier, since all prices were retail shelf price in rubles magnit, as showin in the table 4, has been using psychological pricing, but not as a sole retail shelf price in rubles table 5, psychological pricing as its sole price retail shelf price in rubles as it has been showed in the table 6, we have checked most of the wine categories (red, white, sparkling) we can confirm that for all wines only psychological pricing has been discounter chain monetka. all prices were set just one ruble lower than round figures. this is very important aspect of competitive advantage of monetka, and we believe 92 7. conclusions, implications and limitations russia has been the largest growing wine market globally, as per the data presented in this paper. among retail chains that operate in this country, hard-discounters are specially depending on price tactics that were described in the paper. psychological pricings bring advantages to these chains in many aspects, like increasing demand, attracting new business deals, growing profits and customer base by increasing customer loyalty. research that concerned positive effects of psychological pricing as a source of competitive advantage, has been presented in the paper. as per hollebek et al. (2007), wine regions are more important behavioral factor for high-involvement consumers. since this paper has a focus on the harddiscounters, where consumers tend to be low-involvement, other factors are much more important than wine regions. psychological pricing, as one of the price tactics, is important factor of consumer behavior at a store, according to ritchie et al. (2010). this paper has provided contribution because this factor is even more important at the hard-discounters, which were analyzed here. at the other hand, this paper provides primary data based on in-personal single price observation that has been performed in all of four hard-discounters of russia and it has shown than only monetka is solely utilizing psychological pricing as its tactic. therefore it is considered to be very important source of competitive advantage of this retail chain. paper also discussed studies that have shown that price innovation, as a source of competitive advantages for modern companies, will be more utilized in the future. therefore, this paper could contribute to managerial decisions, especially at retail companies, to more focus on psychological pricing as a source of their future competitive advantage. at the other hand, this paper could have social contribution. since russia has “dealcoholisation” as the new concept introduced few years ago, analysis of wine consumer behavior and retail tactics that increase such consumption, were recognized in russia as one of the ways to succeed in reducing the number of heavy drinkers by changing the structure of alcohol consumption toward wine and less alcoholic spirit products (40,2014). the future research can follow up with other sectors, such as food, beer, spirits, etc., and analyze if psychological pricing can be important factor of competitive advantage in other sectors as well. at the other hand, we were focused on hard-discounters. having in mind that there are four major types of retail that have been operating in russia in 2014, research can be performed of psychological pricing in supermarkets, hypermarkets or even cash and carry centers. also, besides psychological pricing, we can make research of any other, previously discussed price tactics, for any of retail type, which have been defined and explained in this paper. limitations of this paper predominantly come from the size of sample (20 stores) and the fact that all of them have been located in moscow. also, as the wine consumption in the capitol of russian federation has the largest part of total consumption in this country, a research can be obtained in other large cities of russia, like st petersburg, niznji novgorod, etc. at the same time, as have explained in part 5, at this moment all hard-discounters have been russian based, with russian ownership. government has protected this retail type with high entry barriers, in the form of complicated title registration procedures for harddiscounters. therefore, it can be concluded that foreign advantage in the hard-discount sector has not jet been achieved, and that many challenges will arise in the future, when foreign based hard-discounters enter high growing russian market. references agarwal,n., & zeephongsekul,p. 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(2010). shortjournal of nutrition related attributions, journal of retailing and consumer services, volume 21, 96 1 _15-08_ amron determinants of corporate performance: a study on furniture companies in jepara indonesia received: june 29, 2014 accepted: the aims of this research were to analyze orientation, leader’s characteristics, market orientation, and innovation industries in jepara, indonesia. the samples in this research were 110 small and medium enterprises. based on sem analysis results, the sev learning orientation has significant effect on has significant effect on innovation; on corporate performance; (4) leader’s characteristics (5) market orientation has s significant effect on corporate performance; corporate performance. after the test and analysis, it was found hypotheses were accepted and two out of them were rejected keywords : corporate performance 1. introduction market orientation approach assists organization to adjust with its environment, and it is used as an effort to develop competitive advantages. therefore, a more organizational market will be more capable of accessing its goal. consequently, a orientation more than other strategic approaches to be successful. orientation is also required to be able to support the market and behavioral strength in organization. actually, learning orientation known as the acceptance of learning process in organization enables a company to continue the creation of the knowledge needed for marketing its products, technology, and relevant processes, and it is highly associated with introduction and action against market opportunity in an unstable environment (slater and narver, 1995). the condition of highly competitive and dynamic competition demands international journal of economic behavior, vol 5, n. 1, pp determinants of corporate performance: a study on furniture companies in jepara indonesia dian nuswantoro university, semarang, indonesia dian nuswantoro university, semarang, indonesia accepted: october 8, 2014 online published: abstract the aims of this research were to analyze corporate performance through learning orientation, leader’s characteristics, market orientation, and innovation indonesia. the samples in this research were 110 small and medium enterprises. based on sem analysis results, the seven research hypothesis used were learning orientation has significant effect on corporate performance; (2) learning orientation ignificant effect on innovation; (3) leader’s characteristics do not have significant effect (4) leader’s characteristics have significant effec (5) market orientation has significant effect on innovation; (6) market orientation has corporate performance; (7) innovation does not have significant effect on performance. after the test and analysis, it was found that five out of the seven hypotheses were accepted and two out of them were rejected. corporate performance, innovation, market orientation, leader’s characteristics market orientation approach assists organization to adjust with its environment, and it is used as an effort to develop competitive advantages. therefore, a more organizational market will be more capable of accessing its goal. consequently, a company requires market orientation more than other strategic approaches to be successful. in addition, learning orientation is also required to be able to support the market and behavioral actually, learning orientation known as the acceptance of learning process in organization enables a company to continue the creation of the knowledge needed for , technology, and relevant processes, and it is highly associated with introduction and action against market opportunity in an unstable environment (slater and narver, 1995). the condition of highly competitive and dynamic competition demands international journal of economic behavior, vol 5, n. 1, pp. 3-14 3 determinants of corporate performance: a study on furniture companies in jepara indonesia amron a. dian nuswantoro university, semarang, indonesia mahmud m. university, semarang, indonesia online published: march 12, 2015 performance through learning orientation, leader’s characteristics, market orientation, and innovation in furniture indonesia. the samples in this research were 110 small and medium en research hypothesis used were; (1) (2) learning orientation not have significant effect significant effect on innovation; (6) market orientation has (7) innovation does not have significant effect on that five out of the seven leader’s characteristics market orientation approach assists organization to adjust with its environment, and it is used as an effort to develop competitive advantages. therefore, a more organizational-oriented company requires market in addition, learning orientation is also required to be able to support the market and behavioral-oriented vision actually, learning orientation known as the acceptance of learning process in organization enables a company to continue the creation of the knowledge needed for , technology, and relevant processes, and it is highly associated with introduction and action against market opportunity in an unstable environment (slater and narver, 1995). the condition of highly competitive and dynamic competition demands 14, 2015 4 aggressive and innovative attitudes. besides, the tight competition also affects companies to be more flexible, adaptive, and responsive. the emergence of innovation or innovation product is essentially to meet market demands so that innovation product is one of competitive advantages for companies. innovation products are believed to be able to increase sales, profit, and competitiveness of a business organization, but the development of innovation products also means expensive products and risks for a company. therefore, an appropriate and accurate coordination is required among the departments in a company to produce appropriate products for market. hadjimanolis (2002) linked the owner’s and corporate characteristics to innovation, and found the positive effect on corporate performance measured by profitability, size, market share, and sales growth. thus, based on the research, the final result of innovation was corporate performance. han and rajendra (1998) stated that innovation product has positive effects on corporate performance. the researches in relation with leader’s characteristic to market orientation were conducted by jaworski and kohli (1993), and the results were; leader factor affected market orientation. furthermore, the roles of senior manager are the important factor in supporting market orientation development. by adapting the insights and researches above, this research was conducted to the furniture industries in jepara regency, central java province. the reasons and considerations were; first, according to sadler (2004), the research on small medium enterprises has no functional separation in small businesses and organizational work. they are easier to explore, and the entrepreneurship and managerial competencies can be found in each manager individually. in addition, small businesses are considered to contribute significantly in innovation. then, sadler (2004) also suggested that the research in small companies is full of individuals running their operational, managerial, and entrepreneurial functions. the second reasons and considerations were that furniture industry is one of major trade commodities and export activities in central java mostly located in jepara regency, and until recently they are still actively involved in export and trading activities. central java province, since 2001, has launched the program to develop export and trade with the purpose to encourage the development of trade and non oil and gas export of regional superior products that will affect economic development and employment. as the center for wooden furniture industry in indonesia, jepara regency has a very important role in national economy. according to roda et al., (2007), there were 15,271 furniture industries in jepara and employed 176,470 workers. based on the data of the center bureau of statistic (bps) of jepara regency in 2007, total furniture trade from jepara in 2007 reached 37,894,523.92 kg of furniture with the production value of us$ 94,640,782.15. loebis and schmits (2005) stated that wooden furniture industry is one of industries that can survive in economic crisis in 1997. it was found from the furniture industry growth in jepara and the increase of employment rate. the number of wooden furniture industries in 1997 was 2,439 and the number of the industry in 2007 increased to 3,710 (the cooperative, trade, and industry agency of jepara regency, 2008). similarly, the number of employment in 1997 was 38,264 workers and increased to 49,192 workers in 2007. considering the contribution provided by the furniture industry, furniture industry must get attention, not only in the market aspect of teak wood furniture in jepara but also in the aspects of corporate performance and marketing. as the description, the fluctuation of export activities in jepara regency, based on the empirical data on the potency of furniture industry in 2009-2011, can be seen in table 1 below: table 1 – report of export value in jepara regency, no year value (in us$ millions) 1 2009 101. 2 2010 131. 3 2011 138. source: http://disperindag.jeparakab.go.id/index.php/web/data/9 table 1 shows that the number of the destination countries from 2009 to 2011. similarly, dropped from 2010 to 2011. however, the value increased from based on the source of the regional government, the decrease of export volume was caused by the quantity of rejected furniture consumers. the rejected products were priced cheaply. this statement was in line with the managements’ in jepara regency who stated that every product which was not suitable with consumers’ orders was not pa e.g. only 80%. therefore, it is necessary to improve the products concerning the requirements required by consumers. the furniture industries in central java are only considered as the tailo not have clear basic design, just imitate, minimum innovation, and tend to be controlled by buyers. in addition, the decrease of export volume was caused by the crisis which struck the european countries as the export destination countri 2. corporate performance there have been many studies performance. this study was form of conceptual and empirical research keskin, & byrne, 2009), (rosenbusch, brickmann, 2011). they introduced changes in organization structure or improving performance levels. an e performance shows that highthe level of innovation in their social and technical systems relationship between the types of innovation and corporate performance. in this study, corporate performance was divided into performances, and innovation organizational innovations. the findings have revealed positive effects of innovation on furniture industries. they also show innovative performance as a mediator role between types of innovation and performance aspects. the findings support the strategy of innovation as a key driver of corporate performance and should be executed as an integral part of a business strategy to improve operational performance (gunday et al., 2011). significant corporate performance can be achieved if and manages innovation from a strategic perspective. salomo et. al., (2008) showing performance mediated by the innovation of a new product portfolio of the company. exploratory and exploitative inn companies need to introduce innovations in the exploration of dynamic environment so that they will find the premium market export value in jepara regency, 2009 2011 value (in us$ millions) number of destination countries number of exporters .04 106 1.39 105 .04 105 http://disperindag.jeparakab.go.id/index.php/web/data/9 shows that the number of the destination countries for furniture export decreased . similarly, the number of exporters increased from 2009 however, the value increased from 2009 to 2011 based on the source of the regional government, the decrease of export volume was caused by the quantity of rejected furniture since they did not meet the quality required by consumers. the rejected products were priced cheaply. this statement was in line with the managements’ in jepara regency who stated that every product which was not suitable with consumers’ orders was not paid fully (100%), but it was priced based on its incompatibility, e.g. only 80%. therefore, it is necessary to improve the products concerning the requirements the furniture industries in central java are only considered as the tailo not have clear basic design, just imitate, minimum innovation, and tend to be controlled by in addition, the decrease of export volume was caused by the crisis which struck the european countries as the export destination countries. corporate performance there have been many studies recognizing the importance of innovation on discussed in a variety of academic research perspective form of conceptual and empirical research; (prajogo, 2006), (salomo et al., 2008), (akgun, byrne, 2009), (rosenbusch, brickmann, & bausch, 2010) and (gunday changes in organization structures and processes with a view or improving performance levels. an empirical study of organizational innovation and -performing organizations have a stronger relationship between ir social and technical systems. the empirical types of innovation and corporate performance. in this study, was divided into innovative, production, market and financial innovation was classified into four types; product, process, marketing and the findings have revealed positive effects of innovation on corporate also show innovative performance as a mediator role between vation and performance aspects. the findings support the strategy of innovation as a key driver of corporate performance and should be executed as an integral part of a business strategy to improve operational performance (gunday et al., 2011). erformance can be achieved if a company prioritizes innovation innovation from a strategic perspective. it was demonstrated in a study by showing that the orientation of innovation has an indirect effect on erformance mediated by the innovation of a new product portfolio of the company. exploratory and exploitative innovation have positive effects on firm performance companies need to introduce innovations in the exploration of dynamic environment so that hey will find the premium market segment to develop and survive. mean 5 number of exporters 265 290 276 for furniture export decreased 2009 to 2010, and then 2011. based on the source of the regional government, the decrease of export volume was since they did not meet the quality required by consumers. the rejected products were priced cheaply. this statement was in line with the managements’ in jepara regency who stated that every product which was not suitable with id fully (100%), but it was priced based on its incompatibility, e.g. only 80%. therefore, it is necessary to improve the products concerning the requirements the furniture industries in central java are only considered as the tailors because they do not have clear basic design, just imitate, minimum innovation, and tend to be controlled by in addition, the decrease of export volume was caused by the crisis which struck the the importance of innovation on corporate discussed in a variety of academic research perspectives in the et al., 2008), (akgun, & bausch, 2010) and (gunday et al., and processes with a view of trying mpirical study of organizational innovation and performing organizations have a stronger relationship between the empirical study studied the types of innovation and corporate performance. in this study, innovative, production, market and financial product, process, marketing and performance in the also show innovative performance as a mediator role between the vation and performance aspects. the findings support the strategy of innovation as a key driver of corporate performance and should be executed as an integral part of a business strategy to improve operational performance (gunday et al., 2011). company prioritizes innovation demonstrated in a study by that the orientation of innovation has an indirect effect on erformance mediated by the innovation of a new product portfolio of the company. n firm performance. companies need to introduce innovations in the exploration of dynamic environment so that meanwhile, in a less 6 competitive environment, companies can keep their current business systems with an exploitative innovation of low cost risk which is more beneficial to improve performance companies (li et al., 2010). corporate performance is the achievement of a company's business objectives as established by the maximum benefit to be able to sustain growth and development. the corporate performance indicators consist of four indicators, i.e. sales, profit, new product growth, and employee productivity. 2.1. the role of learning orientation, innovation on corporate performance several studies on the relationship of learning orientation, innovation and performance can be seen from the research results of the researchers (calantone et al., 2002 and aragon et al., 2007). in global competition, innovation acts as a key driver to address the issues of quality, quantity and speed. companies strive to optimize their design search and new values in the form of new products, processes or ways of doing business. the effectiveness of management in the innovation process requires a set of innovation balance related to all drivers of innovation such as leadership, culture and community participation and results associated with financial innovation and when to enter the market. innovation uses all inputs, such as leadership, employee participation process, innovation strategy, innovation resources, customer feedback process, portfolio of innovation projects, and supplier participation to produce the products of innovation process. the results consist of customer, employee, organizational and overall performance impacts (dervitsiotis, 2010). innovation is a multidimensional concept used as a framework for analyzing business performance, firm innovation and related contextual factors. thus, innovation is defined as product, process, and organizational innovations, and management systems (neely et al., 2001). in the context of innovation, it is deemed to affect company's capacity to innovate and the actual level of innovation. innovation does not only refer to a result or a new idea but also the process of emerging ideas (gupta, tesluk, & taylor, 2007). this definition also has some similarities in terms of innovation as a process and as a result (crossan and apaydin, 2010). innovation positively affects business performance (carmen et al., 2009), and the innovations of products and processes have a strong and positive relationship with vendor performance (murat ar, ilker and baki, birdogan, 2011). previous researchers had extensively discussed the effect of innovation on corporate performance (hernandez delgado-ballester espallardo, 2009 and salomo et al., 2008). for example, the empirical research show that innovation has a positive effect on company performance, such as innovation, production, marketing and financial performances (gunday et al., 2011). based on the literature review on the kinds of innovation, understanding innovation in an organization must distinguish between how innovation is implemented and what the results of innovation that will ultimately affect corporate performance. in determining corporate, an innovation process must precede the results of innovation. therefore, to adjust the proposed framework, the definition of innovation is "an interactive process that involves multidimensional organizational factors held or carried through the stages of the innovation process in producing innovation outcomes, such as products, services, processes and business models which are relatively new to the organization" (suriati et al., 2011). 3. research method 3.1. samples the data used in this research was primary data, and the sampling technique was purposive sampling. the samples in this research were 110 companies in order that the data obtained was representative enough to use the analysis technique of structure equation model (sem). 3.2. operational definition and measurement the operational definition and measurement following table: table 2 – operational definition and measurement variables learning orientation a process in which the members of an organization develop mutual values and knowledge based on their own and other’s past experiences. the learning orientation measured moorman and miner (2011), commitment to study, mutual vision, mind openness, and sharing knowledge among organizations leader’s characteristics it is the attitudes of leaders in communicating, the attitudes to risk, educational level, mobility level, the attitudes toward changes and the actions taken that will affect their subordinates. the indicators of leader’s characteristics and salomo et al.,(2008) measures innovation, manager’s experience, and risk taking. market orientation an orientation concept focuses on the cr high value for consumers. the indicators of market orientation measured (1990) and oudan (2012) measures orientation, and inter innovation an introduction to tools, legal system, products or services, and new production process technology, administration system, structure, or planning program to be adopted by an organization. the innovation measured (1998) and carmen et al., (2009) measures innovation, and technical innovation corporate performance it is a measurement of success or achievement achieved by a company measured every certain period of time. the indic measured and lawler operational measures growth, and new product growth, and employee’s productivity concerning the above explanation, the correlation can be described in the form of the following relationship of the theor and measurement definition and measurement of this research could be explained in the operational definition and measurement operational definition a process in which the members of an organization develop mutual values and knowledge based on their own and other’s past experiences. the learning orientation measured refers to sinkula et al., (1997) ; moorman and miner (1998) and nikoomaram (2011), with the operational measures, i.e.: commitment to study, mutual vision, mind openness, and sharing knowledge among organizations. it is the attitudes of leaders in communicating, the attitudes to risk, educational level, mobility level, the attitudes toward changes and the actions taken that will affect their subordinates. the indicators of leader’s characteristics refer to hadjimanolis (2002) and salomo et al.,(2008), with the operational measures, i.e.: commitment, knowledge on innovation, manager’s experience, and risk taking. an orientation concept focuses on the creation of high value for consumers. the indicators of market orientation measured refer to narver and slater ) and oudan (2012), with the operational measures, i.e.: customer’s orientation, competitor’s orientation, and inter-functional coordination. an introduction to tools, legal system, products or services, and new production process technology, administration system, structure, or planning program to be adopted by an organization. the indicators of innovation measured refer to hurley and thomas ) and carmen et al., (2009), with the operational measures, i.e.: innovation culture, administration innovation, and technical innovation. it is a measurement of success or achievement achieved by a company measured every certain period of time. the indicators of performance measured refer to harris and ogbonna (2001) ; bae and lawler (2000); gunday et al., (2011), with the operational measures, i.e.: corporate growth, profit growth, and new product growth, and employee’s productivity. the above explanation, the correlation can be described in the form of the theoretical frameworks variables (figure 1): 7 be explained in the measurement 1 to 10 (totally disagree – totally agree) 1 to 10 (totally disagree – totally agree) 1 to 10 (totally disagree – totally agree) 1 to 10 (totally disagree – totally agree) 1 to 10 (totally disagree – totally agree) the above explanation, the correlation can be described in the form of the 8 figure 1 – theoretical framework 3.3. analysis technique the research analysis used structure equation model (sem) of the computerization package amos 16. the selection of the causal modeling of amos described the associations hypothesized between the constructs explaining causalities that included staged causality. by considering the complexity of data measurement, the technique proposed was multivariate technique of sem. concerning the presence of ability in developing the model, it is still efficient statistically to have more than one dependent and independent variables when the other multivariate techniques, such as multiple regression, factor analysis, multivariate analysis of variance and discrimination analysis, can only explain one single association in a particular time. therefore, sem computerization program was chosen in analyzing the relevant research data by answering the research questions, like the tools used in previous research. a complete sem modeling basically consists of measurement model and structure model. structure model is a model on relational structure that forms and explains inter-factor causality (ghozali, 2008). to make a complete modeling, several measures to do are: 1. theoretical-based model development 2. composing path diagram 3. path diagram conversion into equation 4. selecting matrix input and analysis technique 5. assessing problem identification 6. evaluating the criteria of goodness-of-fit 7. model interpretation and modification. leader’s characteristic learning orientation market orientation inovationn corporate performance 4. results and discussion 4.1. structural equation model (sem) model feasibility test was entirely conducted by using the analysis of model (sem) which was also used to analysis the hypothesis proposed. the summary of the model feasibility test of confirmatory factor analysis is as follows (table 3). table 3 – the results of model feasibility test goodness of fit index chi-square <152.09 (5%, 125) probability rmsea gfi agfi tli cfi cmin/df source: processed primary data the results of the data processing analysis show that all constructs used to make a research model in the analysis process of sem full model meet goodness of fit. the size of goodness of fit showing the fit condition is caused by the chi square score of 122.684 which is smaller than the determined cut probability value of 0.542 or more than 0.05. this value d the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; tli (1.002), cfi (1.000), cmin/df (0.981), rmsea (0.000), and they meet the criteria of goodne and agfi (0.845) are still in tolerance limit so that they can be accepted. the calculation results to the criteria of goodness of fit in the program of amos 16 show that the confirmatory analysis and s accepted in accordance with the fit model with the chi smaller than the determined cut than 0.05. this value does not show the difference between the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; tli (1.002), cfi (1.000), cmin/df (0.981), rmsea (0.000), and goodness of fit. in other hand, the values of gfi (0.887) and agfi (0.845) are still in tolerance limit so that they can be accepted. based on the fit model, the test can be conducted to the five hypothesis proposed in this research. 4.2. hypothesis test 1 h1: learning orientation has positive effect on the results of this research estimation parameter of the two variable relations was 0.459 results with cr value = 3.083 that meets the requirement of >1.96, with the probability = 0.002 that meets the requirement of test probability of below 0.05. . results and discussion structural equation model (sem) model feasibility test was entirely conducted by using the analysis of model (sem) which was also used to analysis the hypothesis proposed. the summary of the model feasibility test of confirmatory factor analysis is as follows (table 3). the results of model feasibility test using confirmatory factor analysis cut-off value analysis results <152.09 (5%, 125) 122.684 >0.05 0.542 <0.08 0.000 >0.90 0.887 >0.90 0.845 >0.90 1.002 >0.95 1.000 <2.00 0.981 the results of the data processing analysis show that all constructs used to make a research model in the analysis process of sem full model meet the determined . the size of goodness of fit showing the fit condition is caused by the chi square score of 122.684 which is smaller than the determined cut-off value (152.09) with the probability value of 0.542 or more than 0.05. this value does not show the difference between the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; tli (1.002), cfi (1.000), cmin/df (0.981), rmsea the criteria of goodness of fit. in other hand, the values of gfi (0.887) and agfi (0.845) are still in tolerance limit so that they can be accepted. the calculation results to the criteria of goodness of fit in the program of amos 16 show that the confirmatory analysis and structural equation modeling in this research can be accepted in accordance with the fit model with the chi-square score of 122.684 which is smaller than the determined cut-off value (152.09) with the probability value of 0.542 or more does not show the difference between the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; tli (1.002), cfi (1.000), cmin/df (0.981), rmsea (0.000), and meets the criteria of . in other hand, the values of gfi (0.887) and agfi (0.845) are still in tolerance limit so that they can be accepted. based on the fit model, the test can be conducted to the five hypothesis proposed in this research. rientation has positive effect on corporate performance indicate that h1 in the research is acceptable because estimation parameter of the two variable relations was 0.459 and the test shows significant ith cr value = 3.083 that meets the requirement of >1.96, with the probability = 0.002 that meets the requirement of test probability of below 0.05. 9 structure equation model (sem) which was also used to analysis the hypothesis proposed. the summary of the model feasibility test of confirmatory factor analysis is as follows (table 3). factor analysis model evaluation good good good marginal marginal good good good the results of the data processing analysis show that all constructs used to make a determined criteria of . the size of goodness of fit showing the fit condition is caused by the chioff value (152.09) with the oes not show the difference between the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; tli (1.002), cfi (1.000), cmin/df (0.981), rmsea . in other hand, the values of gfi (0.887) the calculation results to the criteria of goodness of fit in the program of amos 16 show tructural equation modeling in this research can be square score of 122.684 which is with the probability value of 0.542 or more does not show the difference between the sample’s and population’s covariance matrix estimated. the other size of goodness of fit also shows good condition, i.e.; meets the criteria of . in other hand, the values of gfi (0.887) and agfi (0.845) are still in tolerance limit so that they can be accepted. based on the fit model, the test can be conducted erformance research is acceptable because the he test shows significant ith cr value = 3.083 that meets the requirement of >1.96, with the probability = 10 the relation between learning orientation and corporate performance data respondents indicated that the mean of learning orientation index is high with the indicators of mind openness and placed the highest position index in the variable of learning orientation. it was then followed by the commitment to study and share knowledge between organizations, and the last is mutual vision. these data indicate that the respondents’ learning orientation was good enough so that it supported the improvement of corporate performance. it is in accordance with the research of calantone et al (2002) and aragon et al (2007). 4.3. hypothesis test 2 h2: learning orientation has positive effect on innovation the estimation parameter of the two variable relations was 0.367. the test shows significant results with cr value = 4.981 that meets the requirement of >1.96, with the probability = 0.000 that meets the requirement of test probability of below 0.05. thus, h2 in this research can be accepted. the relation between learning orientation and innovation from the research conducted, it can be concluded that the second hypothesis can be accepted. the mean of learning orientation index is high with the indicator of mind openness and places the highest position index in the variable of learning orientation. it is then followed by the commitment to study and sharing knowledge among organizations, and the last is mutual vision. the respondents’ opinions with high mean of index and the results of data processing show that the respondents’ learning orientation is very good so that it supports the improvement of corporate innovation. it is in accordance with the research of hurley and thomas (1998) stating that learning orientation is an antecedent of innovation, and learning orientation is positively associated with innovation. however, it is different from the research results of sinkula (1999) suggesting that learning orientation has direct effect on performance, but it also has indirect effect on product innovation. 4.4. hypothesis test 3 h3: leader’s characteristic does not have significant effect on corporate performance hypothesis h3 in this research is rejected, the test shows significant results with cr value = 0.260 that does not meet the requirement of >1.96, and with the probability = 0.795 that does not meet the requirement of test probability of below 0.05. meanwhile, the calculation result of the estimation parameter of the two variable relations was 0.037. the relation between leader’s characteristics and corporate performance hypothesis h3 is not accepted in this research, it means leader’s characteristic does not have the significant role so that it does not affect corporate performance. the mean of leader’s characteristic index is medium with the indicator of innovation knowledge and places the highest position index in the variable of leader’s characteristic. it is then followed by risk taking and manager’s experience, and the last is commitment. the respondents’ opinions with the medium mean of index and the results of data processing show that the respondents’ leader’s characteristic are quite good so that it supports the improvement of corporate performance. research of jaworski and kohli (1993) support or attention of top management to employees make the employees be more sensitive and responsive to market which finally influences corporate perfo 4.5. hypothesis test 4 h4: leader’s according the facts of this research, they show variable relations was 0.280. the tests show significant results meets the requirement of >1.96 with significant probability. h4 in this research can be accepted. the relation between leader’s characteristics the facts of this research show leader’s characteristic has significant role so that it can affect innovation. the mean of leader’s characteristic index is high knowledge and places the highest position index in the variable of leader’s characteristic. results of this research are in line with the research of daellenbach et al et al., (2009) stating that the characteristics have positive effect on commitment to 4.6. hypothesis test 5 h5: market hypothesis h5 in this research can be accepted variable relations is 0.344, and t meets the requirement >1.96 with the probability of 0.003 the relation between market orientation the implications of the research data are the mean of market orientation index is high research, and the market orientation has significant role so that it can affect innovation. in addition, when it is viewed from the indicators, the competitor’s orientat position index in the variable of market orientation which is then followed by inter coordination and customer’s orientation. market orientation is highly important to innovation (oudan, 2012). 4.7. hypothesis test 6 h6: market orientation has positive effect on the effect of market orientation estimation parameter to the two variable relations of 0.459. accepted because the tests show significant results with cr value = 2.304 that meets the the respondents’ opinions with the medium mean of index and the results of data processing show that the respondents’ leader’s characteristic are quite good so that it supports the improvement of corporate performance. the facts this research shows research of jaworski and kohli (1993) and gunday et al., (2011) stating that continuous support or attention of top management to employees make the employees be more sensitive and responsive to market which finally influences corporate performance. leader’s characteristic has positive effect on innovation this research, they show that the estimation parameter of the two variable relations was 0.280. the tests show significant results with cr value = 3.293 that meets the requirement of >1.96 with significant probability. the facts of this study show in this research can be accepted. the relation between leader’s characteristics and innovation research show that the forth hypothesis can be accepted. in this research, leader’s characteristic has significant role so that it can affect innovation. the mean of leader’s characteristic index is high when it is viewed from the indicator of innovation ces the highest position index in the variable of leader’s characteristic. are in line with the research of daellenbach et al., (1999) stating that the leader’s characteristic of a team management and ceo characteristics have positive effect on commitment to innovation. market orientation has positive effect on innovation in this research can be accepted because the estimation par and the tests show significant results with cr value = 3.083 that meets the requirement >1.96 with the probability of 0.003 (below 0.05). the relation between market orientation and innovation ications of the research data are the mean of market orientation index is high research, and the market orientation has significant role so that it can affect innovation. in hen it is viewed from the indicators, the competitor’s orientation places the highest position index in the variable of market orientation which is then followed by inter coordination and customer’s orientation. the variable of market orientation indicates that the market orientation is highly important to do by the furniture companies in jepara to perform rientation has positive effect on corporate performance the effect of market orientation on corporate performance can be seen in the the two variable relations of 0.459. h6 in this research can be he tests show significant results with cr value = 2.304 that meets the 11 the respondents’ opinions with the medium mean of index and the results of data processing show that the respondents’ leader’s characteristic are quite good so that it supports shows are in line with the stating that continuous support or attention of top management to employees make the employees be more sensitive nnovation he estimation parameter of the two with cr value = 3.293 that this study show that forth hypothesis can be accepted. in this research, leader’s characteristic has significant role so that it can affect innovation. the mean of when it is viewed from the indicator of innovation ces the highest position index in the variable of leader’s characteristic. the (1999) and carmen of a team management and ceo nnovation he estimation parameter of the two he tests show significant results with cr value = 3.083 that ications of the research data are the mean of market orientation index is high in this research, and the market orientation has significant role so that it can affect innovation. in ion places the highest position index in the variable of market orientation which is then followed by inter-functional he variable of market orientation indicates that the do by the furniture companies in jepara to perform erformance be seen in the results of the in this research can be he tests show significant results with cr value = 2.304 that meets the 12 requirement of >1.96, with the probability = 0.021 that meets the test probability requirement of below 0.05. it shows that market orientation affects corporate performance. this research result is in line with the research of baker and sinkula (1999) that market orientation has positive effect on organization’s performance and will result in competitive advantage for a long period of time (slater and naver, 1995; noble et al., 2002 and salomo et al., 2008). 4.8. hypothesis test 7 h7: innovation does not have significant effect on corporate performance the results of this research indicate that h7 in this research is rejected because of the following facts; the estimation parameter of the two variable relations is -0.278 and the tests does not show significant results with cr value = -1.003. it does not meet the requirement of >1.96, and the probability = 0.316 does not meet the test probability requirement of below 0.05. it shows that innovation does not affect corporate performance directly. this research results are in line with the research of olson and bokor (1995) and hadjimanolis and dickson (2000) stating that the level of corporate innovation does not have significant effect on corporate performance measured by sales growth. 5. conclusion the research results can conclude that there was a significant relationship between learning orientation and market orientation on corporate performance. on the other hand, leader’s characteristics and innovation did not significantly influence corporate performance. it is possible because the research found that most of jepara furniture companies only served the design orders with specified motive of the buyers (importers). therefore, jepara furniture companies have no chance to develop their innovative designs and motives in serving their buyers (importers). the results also show that learning orientation, leader’s characteristics and market orientation have significant relationship to innovation. it indicates that, to increase innovation, jepara furniture companies need to make the right policy at the variable of learning orientation, leader’s characteristics and market orientation. meanwhile, in an effort to improve the corporate performance, it is suggested that jepara furniture companies should create the policies that take into account the variables of learning and market orientation so that jepara furniture companies’ performance can be increased. this research is also expected to be a reference for other researchers interested in studying in the field of marketing, especially related to corporate's marketing performance. references 1. akgun, a. e., keskin, h., & byrne, j. 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(2008). 42. ijeb-14-08 brahmana moon phase as the cause of monday irrationality: case of asean day of received: august 28, 2013 many day-of-the week anomaly papers have suggested investor of highly differentiated returns on mondays; yet, rarely found a paper has empirically investigated it. therefore, this paper proposes moon irrational behaviour. this proposition is based phase occurred more often on mondays compared to other days; an indication of a causal relationship. by taking indonesia, the period of 1999-2010, this paper found the asean stock markets, (2) the moon phase and its interaction with mondays has significantly influenced the monday effect, and (3) a full moon on monday has significant negative influenced on monday returns. in conclusion, the stimulation by moon phase forms affection bias, and the resulting outcome is the irrational stock market behavior. keywords: moon effect, day 1. introduction the belief that phases of the moon affect behavior dates back to ancient times. however, the debate about lunar effect on the human body and mind has been a hugely argued anecdotally as well as empirically in literature. lunacy research is not scientifically encouraging and explaining human behavior. this supported by research findings which found there is no relationship between moon phase and behavior (i.e. guiterrez-garcia and tusell, 1997; chapman and morrell, 2000; biermann, 2005; brahmana et al, 2011). in another side, several scholars found the evidence of this lunar stand point is that similar to the behavior of the ocean, the gravity o moon phase as the cause of monday irrationality: case of asean day of the week anomaly rayenda khresna brahmana universiti malaysia sarawak, malaysia chee universiti sains malaysia, penang zamri ahmad universiti sains malaysia, penang accepted: january 22, 2014 online published: abstract the week anomaly papers have suggested investor behaviour as the explanation of highly differentiated returns on mondays; yet, rarely found a paper has empirically investigated it. therefore, this paper proposes moon-induced mood as the determinant of that irrational behaviour. this proposition is based on our preliminary findings that phase occurred more often on mondays compared to other days; an indication of a causal indonesia, malaysia, thailand, and the philippines s paper found: (1) there is evidence of a monday effect across all the asean stock markets, (2) the moon phase and its interaction with mondays has significantly influenced the monday effect, and (3) a full moon on monday has significant ed on monday returns. in conclusion, the stimulation by moon phase forms affection bias, and the resulting outcome is the irrational stock market behavior. : moon effect, day-of-week-anomaly, irrational behavior, asean that phases of the moon affect behavior dates back to ancient times. however, the debate about lunar effect on the human body and mind has been a hugely argued anecdotally as well as empirically in literature. for instance is campbell (1983) who asserts that lunar lunacy research is not scientifically encouraging and explaining human behavior. this supported by research findings which found there is no relationship between moon phase and garcia and tusell, 1997; chapman and morrell, 2000; biermann, in another side, several scholars found the evidence of this lunar-lunacy behavior. their imilar to the behavior of the ocean, the gravity of the moon creates an 51 moon phase as the cause of monday irrationality: case of asean day of the week anomaly khresna brahmana universiti malaysia sarawak, malaysia chee-wooi hooy malaysia, penang, malaysia zamri ahmad universiti sains malaysia, penang, malaysia online published: february 5, 2014 behaviour as the explanation of highly differentiated returns on mondays; yet, rarely found a paper has empirically induced mood as the determinant of that on our preliminary findings that the full moon phase occurred more often on mondays compared to other days; an indication of a causal philippines as samples during (1) there is evidence of a monday effect across all the asean stock markets, (2) the moon phase and its interaction with mondays has significantly influenced the monday effect, and (3) a full moon on monday has significant ed on monday returns. in conclusion, the stimulation by moon phase forms affection bias, and the resulting outcome is the irrational stock market behavior. anomaly, irrational behavior, asean that phases of the moon affect behavior dates back to ancient times. however, the debate about lunar effect on the human body and mind has been a hugely argued anecdotally for instance is campbell (1983) who asserts that lunar lunacy research is not scientifically encouraging and explaining human behavior. this is supported by research findings which found there is no relationship between moon phase and garcia and tusell, 1997; chapman and morrell, 2000; biermann, lunacy behavior. their f the moon creates an 52 impact on human behavior as 80% of the human body consists of water. the outcome of this moon phase circumstance to humans is the deviant behavior which has already been largely investigated in psychology (see huston and passerello, 1971; cuningham, 1979; katzeff, 1981; nogueira, 1982; kelly et al, 1996; wilkinson, 1997; barr, 2000; kanth et al., 2012). the moon phase might also influence an investor’s behavior and generate irrationality in his or her stock trading (see dichev and janes, 2001; sivakumar and satyanarayan, 2009; gao, 2009). interestingly, our pre-investigation found that the full moon occurs more on mondays (see figure 1). this moon cycle anomaly is consistent with the day-of-the week anomaly (hereafter dowa) in finance where it is reciprocated with other psychological studies about moon-caused irrationality. if the dowa shows the anomaly during mondays, with the full moon occurring more on mondays, it is only logical to hypothesize that the full moon affects the behavior. figure 1 – the frequency of full moon and new moon in short, there are four important pieces of information found during our preinvestigation: (1) the literature shows a moon phase might affect investor behavior in the same way that it affects human behaviour, (2) a full moon phase occurs more on mondays, (3) there is a dowa in the stock market, showing that monday returns are significantly different from other trading days, and (4) in finance literature, monday returns of a dowa can be explained by using trading behavior perspectives. compiling this information, this paper hypothesizes that a moon phase which occurs more on mondays is the determinant of a dowa. this study emphasizes in examining the role of full moon on the day-of the week anomaly (dowa). dowa is a market anomaly which has been thoroughly investigated since the first seminal paper: french (1980). it remarked that the stock price returns on a certain day (usually monday) have been highly and negatively differentiated from other days of the week. much research has addressed trading behaviour as an explanation of the dowa (see abraham and ikenberry, 1994; wong et al., 2006); however, empirical investigation is rarely found in this particular research. this research is in line with debondt and thaler (1995) who suggested that finance theory has to be based on the evidence of the participants’ psychology, which in this case is a moon-induced mood. in psychology literature, one of the early studies on the effects of moon 0 5 10 15 20 25 30 35 mon tue wed thu fri sat sun full new phase on human behaviour was conducted by was that lunar phases, especially during full moon phases, affect human moods and change them to be more depressive or more emotionally disturbed or be chang cuningham (1979) investigated the role of temperature and the moon on human moods and found that the full moon phases affect the generosity of humans. the effects of the moon phases significantly affect violent behavior (katzeff, 1981), work a 1982), strange behavior (kelly et al, 1996), and anxiety and depression (wilkinson, 1997). barr (2000) stated that the moon is a comprehensive source of mood changes. in medical science, the mood of humans is shown by increasing ps and other deviant behaviors during the full moon phase. furthermore, barr concluded that the moon cycle has a significant relationship with the quality of life of humans in terms of moods. in summary, those psychology research significant in inducing deviant behavior, irrationality, depression, or mood disturbances in humans. empirical results have also finance. one early study was major us stock index over the previous countries over 30 years and found however, the research proved that the trading volume. herbst (2007) cycle and market returns. the demonstrated how the moon cycle inconsistently explained either daily returns or the price volatility of the dow jones index. relationship between the moon and concluded that the moon relationship between the moon over 16 years and concluded that showed that the returns were relatively the full moon phase. additionally, liu garch model and the bayesian lunar phase affects daily stock varied across the nation. liu full moon periods. based on these empirical results and theories, it can be concluded that the moon cycle affects moods of the decision making of market participants. the role of the moon on investor behavior can be explained by using three major theories, namely, ellis’ abc model, the somatic market theory and forgas’ (1995) affection infusion model (aim). ellis’ abc model addressed these stimulating events as the activation of irrational behavior in humans. in this matter, the moon phase gravity wa activated irrationality of investors in decision making. meanwhile, the somatic marker theory explains that strong threats from the environment create bodily reactions that reinforce sustained panic (tvede, 2002). relating to this rese and reinforces sustained panic in a form of irrational decision making. lastly, forgas’s (1995) aim described how the affection from external environments (in our research it is the full moon affection) was infused into the information processing and created biased decision making. elaborating on those theories, the flow of the full moon affects investors is that investors are stimulated by the full moon’s gravity on mondays. having this stimulus, investor experiences affection bias and shows moon result, it generates the dowa. depicted in figure 2, the hypothesis is reasonable and logical. this is aligned with our objective which is phase on human behaviour was conducted by huston and passerello (1971). was that lunar phases, especially during full moon phases, affect human moods and change them to be more depressive or more emotionally disturbed or be chang cuningham (1979) investigated the role of temperature and the moon on human moods and moon phases affect the generosity of humans. the effects of the moon phases significantly affect violent behavior (katzeff, 1981), work accident rates (nogueira, 1982), strange behavior (kelly et al, 1996), and anxiety and depression (wilkinson, barr (2000) stated that the moon is a comprehensive source of mood changes. in medical science, the mood of humans is shown by increasing psychotic disorders, violence, and other deviant behaviors during the full moon phase. furthermore, barr concluded that the moon cycle has a significant relationship with the quality of life of humans in terms of moods. in summary, those psychology research papers have found that the role of the full moon is significant in inducing deviant behavior, irrationality, depression, or mood disturbances in have also proven that the moon cycles influence decision conducted by dichev and janes (2001). they the previous 100 years and all the major stock found that the moon cycle was aligned with the research proved that the moon cycle did not affect the return (2007) also conducted research on the relationship the results of the relationships were various and demonstrated how the moon cycle inconsistently explained either daily returns or the price volatility of the dow jones index. sivakumar and satyanarayan (2009) moon cycle and the bombay stock exchange returns over 17 years cycle was linked with returns. gao (2009) also moon cycle and market returns in two major chinese that lunar phases affected stock returns. further, relatively lower in the new moon phase and moon phase. additionally, liu (2009) conducted research on 12 bayesian approach. his/her results indicated that stock returns, in particular that the impacts of the showed that there is a higher volatility of stock based on these empirical results and theories, it can be concluded that the moon cycle affects moods of the decision making of market participants. the role of the moon on investor behavior can be explained by using three major eories, namely, ellis’ abc model, the somatic market theory and forgas’ (1995) affection infusion model (aim). ellis’ abc model addressed these stimulating events as the activation of irrational behavior in humans. in this matter, the moon phase gravity wa activated irrationality of investors in decision making. meanwhile, the somatic marker theory explains that strong threats from the environment create bodily reactions that reinforce sustained panic (tvede, 2002). relating to this research, full moon gravity affects investors, and reinforces sustained panic in a form of irrational decision making. lastly, forgas’s (1995) aim described how the affection from external environments (in our research it is the full d into the information processing and created biased decision making. elaborating on those theories, the flow of the full moon affects investors is that investors are stimulated by the full moon’s gravity on mondays. having this stimulus, ces affection bias and shows moon-induced mood behavior, and as a it generates the dowa. depicted in figure 2, the hypothesis is reasonable and logical. this is aligned with our objective which is to investigate whether the moon phase, proxy of 53 huston and passerello (1971). their conclusion was that lunar phases, especially during full moon phases, affect human moods and change them to be more depressive or more emotionally disturbed or be changed normally. cuningham (1979) investigated the role of temperature and the moon on human moods and moon phases affect the generosity of humans. the effects of the moon ccident rates (nogueira, 1982), strange behavior (kelly et al, 1996), and anxiety and depression (wilkinson, barr (2000) stated that the moon is a comprehensive source of mood changes. in ychotic disorders, violence, and other deviant behaviors during the full moon phase. furthermore, barr concluded that the moon cycle has a significant relationship with the quality of life of humans in terms of moods. papers have found that the role of the full moon is significant in inducing deviant behavior, irrationality, depression, or mood disturbances in decision making in they investigated the indices of 24 other the market returns. return volatility and relationship between the moon and inconsistent. he demonstrated how the moon cycle inconsistently explained either daily returns or the price (2009) investigated the returns over 17 years also investigated the chinese stock markets further, gao (2009) also relatively higher in countries using the that the existence of the impacts of the lunar phases were stock returns during based on these empirical results and theories, it can be concluded that the the role of the moon on investor behavior can be explained by using three major eories, namely, ellis’ abc model, the somatic market theory and forgas’ (1995) affection infusion model (aim). ellis’ abc model addressed these stimulating events as the activation of irrational behavior in humans. in this matter, the moon phase gravity was the stimuli and it activated irrationality of investors in decision making. meanwhile, the somatic marker theory explains that strong threats from the environment create bodily reactions that reinforce arch, full moon gravity affects investors, and reinforces sustained panic in a form of irrational decision making. lastly, forgas’s (1995) aim described how the affection from external environments (in our research it is the full d into the information processing and created biased decision making. elaborating on those theories, the flow of the full moon affects investors is that investors are stimulated by the full moon’s gravity on mondays. having this stimulus, induced mood behavior, and as a it generates the dowa. depicted in figure 2, the hypothesis is reasonable and logical. to investigate whether the moon phase, proxy of 54 moods, can explain the the day-of-the-week anomaly (dowa). based on the literature review, our proposition is “moon mood is the determinant of the day of week anomaly”. this study addresses an intriguing but interesting question: is there any relationship between the moon and the day-of-weekend anomaly? it defers to other studies in three ways, first, it investigates the relationship between the moon phase and the dowa. second, the moon phase dummy in this research was only taken if it was a peak phase. lastly, the psychology theory was introduced as the underlying cause as a way of explaining the relationship. the rest of paper is organized as follows. the research method is addressed in section 2; data is addressed in section 3; the findings and results are discussed in section 4; the conclusion is detailed in section 5. figure 2 – theoretical framework 2. research design 2.1 procedures several phases were conducted in this paper to check the relationship between moods (moon phase as the proxy) and dowa. first, the existence of the monday effect of the dowa was investigated (see equation 1). after the dowa was found, the relationship between market returns and moon phases was examined. in this phase, the mean difference and t-statistic was used to check the level of influence. then, a modified french’s (1980) regression model was utilized with one lag to investigate the relationship between the dowa and the moon phase (see equation 2). for a robustness check, the effect of the monday’s moon on monday’s return was revisited (see equation 3). the model is described below. 2.2 day-of-weekend anomaly model the day-of-weekend anomaly is run by replicating the seminal model of french (1980): tttttttt rdfridthudweddtuer εγγγγα ++++++= −14321 (1) where: rt is return of the stock at t-time. tdtue , tdwed , tdthu , and tdfri are tuesday dummy, wednesday dummy, thursday dummy, and friday dummy, respectively. to eliminate the variance error, a one-day lagged was introduced. 2.3 moon phase and day-of-weekend anomaly model this research employs equation 2 by introducing the dummy variable interaction to test the relationship between moon phases on dowa. in this model, there are two dummy variables ( tdme , tdmoon ), one dummy interaction, and one elimination ( 1−tr ). the model is: tt dmer αα += 21 where tdme is monday effect dummy as the proxy of dowa. 1 if it is monday, and 0 if otherwise. tdmoon is the moon phase dummy. 1 if it is full moon peak, and 0 if otherwise. 1−tr is the one-lagged return or the return of the period t 2.4 moon on monday and monday returns model this research investigates in detail the association betwee monday return as the robustness. closing prices and opening prices were used to calculate the monday returns. the friday return was introduced as the one eliminate the variance error. open close monday monday log α=         1 where closemonday is the monday closing price. price. closefriday is the friday closing price. is the moon phase dummy where 1 if it is full moon, and 0 if otherwise. 3. data this research used 4 stock markets; indonesia, malaysia, philippines, and thailand, as samples. the period was from january 1999 until december 2010 as a daily basis of returns. the market returns data was retrieved from thomson datastream. meanwhile, the moon phase calendar is retrieved from www.moonconnection.com reliable, the moon had to first be checked cyclically 4. results 4.1 descriptive results based on table 1, from the descriptive results two main issues arise. first, in terms of returns, the mean of the daily returns in the asean volatility, the asean-4 markets that the probability of losing is higher than the probability of returns. this description depicts the distribution of normal returns. 1 most of seminal papers of moon research use this website or www.lunarphases.com. 2 the result does not appear in this research. we can give it by request. ), one dummy interaction, and one-lagged return as the vari ). the model is: ttttt rdmoondmedmoon ααα +++ −4 * 43 )( is monday effect dummy as the proxy of dowa. 1 if it is monday, and 0 the moon phase dummy. 1 if it is full moon peak, and 0 if otherwise. lagged return or the return of the period t-1. 2.4 moon on monday and monday returns model this research investigates in detail the association between the moon on monday and the monday return as the robustness. closing prices and opening prices were used to calculate the monday returns. the friday return was introduced as the one-lagged return in the model to open close t friday friday logdmoon αα   ++ 32 is the monday closing price. openmonday is the monday opening is the friday closing price. openfriday is the friday opening price. is the moon phase dummy where 1 if it is full moon, and 0 if otherwise. this research used 4 stock markets; indonesia, malaysia, philippines, and thailand, as samples. the period was from january 1999 until december 2010 as a daily basis of returns. the market returns data was retrieved from thomson datastream. meanwhile, the moon phase calendar is retrieved from www.moonconnection.com1. for the sample to be reliable, the moon had to first be checked cyclically2. (dichev and janes, 20 based on table 1, from the descriptive results two main issues arise. first, in terms of returns, the mean of the daily returns in the asean-4 markets is relatively small. in terms of 4 markets have a relatively high dispersion of returns. this indicates that the probability of losing is higher than the probability of returns. this description depicts the distribution of normal returns. most of seminal papers of moon research use this website or www.lunarphases.com. the result does not appear in this research. we can give it by request. 55 lagged return as the variance error tε+−1 (2) is monday effect dummy as the proxy of dowa. 1 if it is monday, and 0 the moon phase dummy. 1 if it is full moon peak, and 0 if otherwise. n the moon on monday and the monday return as the robustness. closing prices and opening prices were used to calculate the lagged return in the model to t topen ε+   (3) is the monday opening is the friday opening price. tdmoon this research used 4 stock markets; indonesia, malaysia, philippines, and thailand, as samples. the period was from january 1999 until december 2010 as a daily basis of market returns. the market returns data was retrieved from thomson datastream. meanwhile, the . for the sample to be . (dichev and janes, 2003). based on table 1, from the descriptive results two main issues arise. first, in terms of returns, 4 markets is relatively small. in terms of have a relatively high dispersion of returns. this indicates that the probability of losing is higher than the probability of returns. this description depicts 56 table 1 – descriptive results of the market returns each countries indonesia malaysia philippines thailand mean 0.0529 0.0247 0.0099 0.0267 maximum 7.9212 6.0250 17.5597 11.1567 minimum -10.3754 -9.4968 -12.2683 -14.8395 std. dev. 1.5554 1.0539 1.4469 1.5814 note: numbers stated in the table is the returns of market in percentage 4.2 evidence of the day-of-weekend anomaly in asean common sample group statistics in equation 1 were used on the asean-4 stock market to investigate whether the returns were generated in calendar time. the calendar-time hypothesis surmises that the expected market returns are the same for each day. furthermore, this hypothesis surmises that if a certain day has a high return, the following day should also have the same rate of return. thus, our results reject this calendar time hypothesis and are able to claim the existence of a dowa. panel a depicts the difference between the returns for monday and the returns for other days of the week in the asean-4 markets. it describes the returns of mondays and shows that they were mostly in the negative region, while the returns of the other days were null or positive over all markets. it also demonstrates that the market returns were not constant throughout the week nor had the same relative level of return. in addition, to have high negative returns for mondays indicates the monday effect of a dowa. panel a – descriptive of daily returns each countries indonesia monday tuesday wednesday thursday friday mean -0.2243 0.0834 0.0318 0.1177 0.2366 maximum 5.9673 5.5013 7.9212 7.2258 7.1630 minimum -10.3571 -7.6977 -10.3754 -5.9361 -6.9055 std. dev. 1.7320 1.3788 1.5651 1.4090 1.4460 malaysia monday tuesday wednesday thursday friday mean -0.1438 0.0936 0.0487 0.0571 0.0676 maximum 4.1893 4.1224 4.6056 5.8765 6.0250 minimum -9.4968 -3.8421 -6.1453 -3.7681 -4.8907 std. dev. 1.2435 0.9267 1.0374 0.9580 1.0220 philippines monday tuesday wednesday thursday friday mean -0.0457 -0.0059 0.0095 0.0954 0.0609 maximum 17.5597 9.8178 4.4725 4.1948 4.6940 minimum -12.2683 -5.5163 -7.9201 -6.0067 -8.3306 std. dev. 1.8430 1.3029 1.3293 1.2662 1.2588 thailand monday tuesday wednesday thursday friday mean -0.2626 0.0162 0.0266 0.0245 0.2882 maximum 5.3921 10.1012 11.1567 10.7700 8.5950 minimum -10.4974 -14.8395 -6.8790 -6.7197 -9.6062 std. dev. 1.5267 1.5678 1.6801 1.4536 1.5182 note: numbers stated in the table is the returns of market in percentage panel a shows three important findings. first, mean returns on mondays show a highly negative difference in the asean-4 markets. meanwhile, other days have stable positive mean returns which indicate the of the maximum and minimum that irrational behavior occurs implicitly of the dowa. lastly, the volatility days indicating the dowa anomaly table 2 confirms the evidence of the dowa. it documents that all asean markets experienced the calendar anomaly between 1999 and 2010, which is in line with the prior research of jaffe & westerfield (1985), lakonishok & maberly (1990), agrawal & tandon (1993), kok & wong (2004), wong et al., (2006), and chandra (2006). monday returns was negative and significantly associated with the market returns. additionally, the negative coefficient on monday increased to positive returns and dimini again when it closed on friday. the coefficient of the model was found to be significant at a 1% level. as seen in table 2, the evidence of dowa shows that we can continue to the next level of our research. 4.3 the full moon and new moon differences now we can proceed to the differences between full moon and new moon returns. it is important to examine the significant differences between these two phases. if the full moon effect on the returns is the same as the effect of the new moon phase, it indica moon phase has no effect on returns. furthermore, it implies that the cyclical movement of the moon is ordinary without any impact. to investigate this in detail, the mean difference, standard deviation, and, t-test must be checked. table 2 – the french's (1980) dowa model result indonesia intercept/mon coefficient -0.0023*** std. error 0.0007 tuesday coefficient 0.0034*** std. error 0.0010 wednesday coefficient 0.0027*** std. error 0.0009 thursday coefficient 0.0036*** std. error 0.0012 friday coefficient 0.0045*** std. error 0.0010 t-1 coefficient 0.1584*** std. error 0.0200 r-squared 0.0332 f-value 16.6773*** note: *** is significant in 1% level.; t in terms of the mean difference, table 3 shows that the full moon mean returns are different compared to new moon mean returns, which are twice as high as or more than full moon mean returns, while confirms the psychology literature, the full moon phase pr aggressive behavior. a hypothetical explanation is that there are negative returns during the full moon day. likewise, the standard deviation of the new moon is also lower than the full the dowa, specifically, the monday effect. minimum on mondays is relatively higher than other occurs implicitly on mondays. this spread also indicates volatility of monday returns are relatively higher anomaly existence on the asean-4 markets. table 2 confirms the evidence of the dowa. it documents that all asean markets experienced the calendar anomaly between 1999 and 2010, which is in line with the jaffe & westerfield (1985), lakonishok & maberly (1990), agrawal & ndon (1993), kok & wong (2004), wong et al., (2006), and chandra (2006). monday returns was negative and significantly associated with the market returns. additionally, the negative coefficient on monday increased to positive returns and dimini again when it closed on friday. the coefficient of the model was found to be significant at a 1% level. as seen in table 2, the evidence of dowa shows that we can continue to the next 4.3 the full moon and new moon differences now we can proceed to the differences between full moon and new moon returns. it is important to examine the significant differences between these two phases. if the full moon effect on the returns is the same as the effect of the new moon phase, it indica moon phase has no effect on returns. furthermore, it implies that the cyclical movement of the moon is ordinary without any impact. to investigate this in detail, the mean difference, test must be checked. the french's (1980) dowa model result indonesia malaysia thailand 0.0023*** -0.0014*** -0.0026*** 0.0007 0.0005 0.0007 0.0034*** 0.0022*** 0.0030*** 0.0010 0.0007 0.0010 0.0027*** 0.0018*** 0.0027*** 0.0009 0.0006 0.0009 0.0036*** 0.0022*** 0.0035*** 0.0012 0.0008 0.0012 0.0045*** 0.0020*** 0.0055*** 0.0010 0.0007 0.0010 0.1584*** 0.0941*** 0.0549*** 0.0200 0.0202 0.0203 0.0332 0.0621 0.0334 16.6773*** 3.7910*** 7.0824*** *** is significant in 1% level.; t-1 is lagged one return in terms of the mean difference, table 3 shows that the full moon mean returns are different compared to new moon mean returns, which are twice as high as or more than full moon mean returns, while confirms the psychology literature, the full moon phase pr aggressive behavior. a hypothetical explanation is that there are negative returns during the full moon day. likewise, the standard deviation of the new moon is also lower than the full 57 second, the spread days, which means indicates the existence higher compared to other table 2 confirms the evidence of the dowa. it documents that all asean-4 stock markets experienced the calendar anomaly between 1999 and 2010, which is in line with the jaffe & westerfield (1985), lakonishok & maberly (1990), agrawal & ndon (1993), kok & wong (2004), wong et al., (2006), and chandra (2006). the mean of monday returns was negative and significantly associated with the market returns. additionally, the negative coefficient on monday increased to positive returns and diminished again when it closed on friday. the coefficient of the model was found to be significant at a 1% level. as seen in table 2, the evidence of dowa shows that we can continue to the next now we can proceed to the differences between full moon and new moon returns. it is important to examine the significant differences between these two phases. if the full moon effect on the returns is the same as the effect of the new moon phase, it indicates that the moon phase has no effect on returns. furthermore, it implies that the cyclical movement of the moon is ordinary without any impact. to investigate this in detail, the mean difference, philippines -0.0005*** 0.0007 0.0002*** 0.0009 0.0011*** 0.0009 0.0004*** 0.0011 0.0010*** 0.0009 0.1095*** 0.0202 0.0535 6.6574*** in terms of the mean difference, table 3 shows that the full moon mean returns are different compared to new moon mean returns, which are twice as high as or more than full moon mean returns, while confirms the psychology literature, the full moon phase promotes aggressive behavior. a hypothetical explanation is that there are negative returns during the full moon day. likewise, the standard deviation of the new moon is also lower than the full 58 moon. the t-test indicates that aggressiveness during the full moon phase is higher compared to in the new moon phase. the t-test difference was conducted to evaluate it further in a statistical manner. table 3 the returns of full moon and new moon in asean-4 stock markets indonesia malaysia philippines thailand mean daily return new moon 0.0835 0.0509 0.0136 0.0337 full moon 0.0227 0.0013 0.0062 0.0196 standard deviation new moon 1.4643 1.0512 1.4436 1.5721 full moon 1.6143 1.0564 1.4518 1.5915 note: numbers stated in the table is the returns of market in percentage by conducting the paired t-test, our results show an interesting effect. based on table 4, the full moon phase had a different effect on market returns compared to the new moon phase, which implies that there are distinguished returns between a full moon and a new moon phase in indonesia, malaysia, the philippines, and thailand. this could also imply that the asean4 stock market investors are irrational by following their moon phase affection; a confirmation of the mean difference result. table 4 – t-statistic results indonesia standard errors -4.83 t-stats -2.43** malaysia standard errors -5.97 t-stats -2.44** philippines standard errors -12.07 t-stats -3.14*** thailand standard errors -8.6 t-stats -2.91*** note: **, *** denote the significant at the 5%, and 1% respectively 4.4 the role of the moon phase on the day-of-the week anomaly the next procedure is to investigate the relationship between moon phases and market returns by introducing the dummy interaction of the monday effect and the monday moon. the interaction between the monday dummy effect and the moon phase dummy indicates the role of the monday’s moon phase effect. it is noteworthy that this model was constructed under the dummy interaction model. hence, the moon dummy variable was been found to be significantly influenced by the returns. if the moon significantly affects the returns, it will lead to a second question; on which day does the moon have the most influence? to prove this hypothesis, equation model 2 was employed to see if there was a relationship between the moon and market returns. this research is designed so that the entire distribution of the new moon returns and full moon returns plot into a frequency distribution table (see figure 3). the distribution of the returns is depicted as new moon and full moon in the pooled data of the asean-4 markets. over 44 country-years on a daily basis were observed. in total, the observation was 4892 days for the full moon period and 4836 days for the new moon period. the asean-4 stock markets were grouped into 2% return intervals to provide a density of the frequency distribution of the returns. interestingly, the results are different from the previous research of dichev and janes (2003) where the new moon returns and full moon returns were relatively different shapes. in terms of dispersion, (2003), in which the shift looks end for a normal distribution. confirms that certain moon implicitly shows that moon phases moon on market behavior. to relationship by employing equation 3. the role of the full moon on monday encourages the this irrationality generates the dowa as the outcome. the interaction of the monday effect variable and the full moon variable is used to prove there is a relationship. panel b shows the significant relationship between relationship exists between the full moon and the dowa. this relationship is in line with the previous results of annuar and shamser (1987), ho (1990), wong, hui and chan (1992), aggarwal and rivoli (1994), agrawal and tandon (1996), and sadorsky (2006). figure 3 – frequency distribution of the returns of moon phases panel b consists of four tables. each table shows the regression result each country of asean-4. it addresses the coefficient, probability, and r stands for the monday effect, the moon represents the full moon dummy; m*moon represents the dummy interaction; and rmin1 is the one lag return. a different relational conclusion for each independent variable can be observed in panel b. in terms of the monday dummy, a significant relationship is shown in the market returns of each asean-4 countries. the relationships were negatively significant at a 5 confirmed the previous results about the monday effect on the asean meanwhile, the relationships between the full moon phase and market returns also shows a negatively significant association. it was negatively significant at markets of indonesian, malaysian, and the philippines with a coefficient of 0.06 respectively. in addition, the relation between the full moon and thailand stock market returns was significant at a 10% level with highlights the role of the full moon on market returns. by introducing the dummy interaction, it was found that the full moon on mondays had an effect on the market. thailand and the philippines had a negative a 5% level, while it was negatively significant at a 10% level for the stock markets of indonesia and malaysia. this is in line with our hypothesis and plots, whereas, the full moon -4.01% -6% -6.01% -8% -8.01% -10% < -10% different in peak shape (kurtosis) and in their increase / decrease dispersion, the skewness is similar to the results of looks regular and clean throughout the entire right distribution. the shape difference between the new moon phases have different impacts on returns phases influence the market; an indication of the effect of the to check the relationship robustly, this study employing equation 3. the role of the full moon on monday encourages the irrational behavior of investor, and this irrationality generates the dowa as the outcome. the interaction of the monday effect le and the full moon variable is used to prove there is a relationship. panel b shows the significant relationship between this interacting variable on market returns implying that a relationship exists between the full moon and the dowa. this relationship is in line with the previous results of annuar and shamser (1987), ho (1990), wong, hui and chan (1992), oli (1994), agrawal and tandon (1996), foo and kok (2000), and basher frequency distribution of the returns of moon phases panel b consists of four tables. each table shows the regression result 4. it addresses the coefficient, probability, and r stands for the monday effect, the moon represents the full moon dummy; m*moon represents the dummy interaction; and rmin1 is the one lag return. ifferent relational conclusion for each independent variable can be observed in panel b. in terms of the monday dummy, a significant relationship is shown in the market returns of 4 countries. the relationships were negatively significant at a 5 confirmed the previous results about the monday effect on the asean meanwhile, the relationships between the full moon phase and market returns also shows a negatively significant association. it was negatively significant at a 5% level in the stock markets of indonesian, malaysian, and the philippines with a coefficient of 0.06 respectively. in addition, the relation between the full moon and thailand stock market returns was significant at a 10% level with coefficient value of -0.03. this relationship highlights the role of the full moon on market returns. by introducing the dummy interaction, it was found that the full moon on mondays had an effect on the market. thailand and the philippines had a negatively significant relationship at a 5% level, while it was negatively significant at a 10% level for the stock markets of indonesia and malaysia. this is in line with our hypothesis and plots, whereas, the full moon 6% 7.99% 4%5.9 9% 2% 3.99% 0% 1.99% -2% -0.01% -2.01% -4% new full 59 increase / decrease rate the results of dichev and janes right side and left tail moon and full moon returns behavior. it also market; an indication of the effect of the study investigated the irrational behavior of investor, and this irrationality generates the dowa as the outcome. the interaction of the monday effect le and the full moon variable is used to prove there is a relationship. panel b shows the this interacting variable on market returns implying that a relationship exists between the full moon and the dowa. this relationship is in line with the previous results of annuar and shamser (1987), ho (1990), wong, hui and chan (1992), foo and kok (2000), and basher panel b consists of four tables. each table shows the regression result of equation 2 from 4. it addresses the coefficient, probability, and r-square. the me stands for the monday effect, the moon represents the full moon dummy; m*moon ifferent relational conclusion for each independent variable can be observed in panel b. in terms of the monday dummy, a significant relationship is shown in the market returns of 4 countries. the relationships were negatively significant at a 5% level, and confirmed the previous results about the monday effect on the asean-4 stock markets. meanwhile, the relationships between the full moon phase and market returns also shows a a 5% level in the stock markets of indonesian, malaysian, and the philippines with a coefficient of -0.10, -0.02, and 0.06 respectively. in addition, the relation between the full moon and thailand stock market 0.03. this relationship by introducing the dummy interaction, it was found that the full moon on mondays had an ly significant relationship at a 5% level, while it was negatively significant at a 10% level for the stock markets of indonesia and malaysia. this is in line with our hypothesis and plots, whereas, the full moon 0 2000 4000 6000 8000 10000 >10%8% 9.99% 60 phase occurs more on mondays. those occurrences of full moon on mondays affect the investors decision making through their mood; as an outcome, the dowa occurs in those asean-4 stock markets. table 1 of panel b describes the results of the indonesian stock market. first, the monday effect is significantly associated with market returns, signaling the dowa. the relationship was at a 5% significance level with a coefficient value of -0.06. the negative sign strengthens the dowa indication as it is identical to with the french (1980) dowa model. the moon phase dummy was also found to significantly influence the market returns at a 5% level with a coefficient value of -0.10. this indicates that the full moon has a role in manipulating market returns. if the full moon occurs the indonesian stock market returns might fall to 0.1%. the interaction variable of the monday effect and moon phase implies that the moon phase and monday effect plays a role in the indonesian stock markets, where it was negatively significant at 10% with a coefficient value of -0.28. therefore, it can be concluded that the numbers of full moon occurs on mondays is the determinants of dowa. the malaysian stock market result is shown in table 2 of panel b. similar to the indonesian stock market results, there is an indication of the role of the moon phase on the dowa. the monday variable effect shows a significant level at 1%; whereas, the moon phase had a significant level at 5%. the values were also similar to the indonesian result where it was -0.09 and -0.02 for the monday effect and the full moon dummy, respectively. the dummy interaction shows a significant relationship to market returns at a 10% level which implies that it might be the full moon on monday which causes the monday irrationality (dowa) in the malaysian stock market. table 3 of panel b addresses the result of the thai stock market. it shows a negatively significant relationship between the monday effect and the market returns at a 1% level where the coefficient was -0.14. meanwhile, the full moon dummy variable was significant at 10% level, and the coefficient value was -0.03, confirms the evidence of the dowa and supports our hypothesis about the full moon being the driver of the dowa. the dummy interaction was significant at a 5% level with coefficient of -0.11. in other words, the full moon on monday in thailand affected the investors’ decision making on monday. in the last table of panel b, the result of the philippines stock market was addressed. again, the result comes to the same conclusion as the other tables in panel b. a negatively significant relationship was found from the entire list of regressors (monday effect, moon phase, and dummy interaction) on the market returns of the philippines at a 5% level, which means monday’s full moon had an effect on the dowa in the philippine market. if the full moon occurs on a monday, the philippines stock market might have dowa with a 0.04% drop in of market returns. in terms of the r-square value, the indonesian stock market had the largest r-square. at the same time, the philippine market has the smallest value. the indonesian r-square was 3.64%, and the philippines value was 1.86%. in addition, malaysia had a 3.31% value and thailand had a 2.87% value. this indicates that the regressor can be used to explain the model. note that the small number of r-square values in our model is a common fad as our model was constructed under a dummy variable interactive model. in summary, the moon phase has played a role in the monday effect of the asean-4 dowa between 1999 and 2010. the interaction between the monday moon and monday effect has had a negative association to market returns. panel b – the results of moon phases and market returns variable coefficient in d o n e s ia c 0.08 me -0.06 moon -0.10 m*moon -0.28 rmin1 0.1557 r-squared 0.0364 t h a il a n d c 0.013 me -0.14 moon -0.03 m*moon -0.11 rmin1 0.0511 r-squared 0.0287 note: c is the intercept; me is the monday dummy; moon is the moon dummy; rmin1 is the lagged returns. 4.6 monday moon and monday returns as a robustness check, the role of monday’s full further by using equation model 3. the returns were based on the daily return, by taking the opening and closing price.3 the random walk model was adopted as the control variable for the estimation4. table 5 addresses the results of equation 3 which consists of the regression coefficient values, probability value, r-squared value, f test value, and the probability result of the f test. in terms of r-squared, the value lies between 1.2% and, inclusive of 2.5% where the indonesian stock market returns are explained by the moon, while the philippines returns are at a lower value. this range is considered normal for an event study with a dummy variable model. the f-value of the model in each market shows a high value where we c the model cannot be rejected. in conclusion, it may be stated that the model can be used to explain the relationship between the full moon phase and market returns. table 5 documents that the indonesian, malaysian, and the philippines stock mark were negatively and significantly influenced by the moon phase at a 5% level. meanwhile, the significant level of the relationship between the thailand stock market and the moon phase was only 10%. the full moon on monday was a negatively significant i indonesian stock market returns on mondays where the coefficient value was meanwhile, the coefficient values were between monday full moon and monday stock returns of the malaysian, philippine stock market, respectively. the negative sign shows that the monday full moon might cause a bearish monday (dowa) in every asean friday’s returns in each market showed a significant relationship to level. it can be concluded that the monday full moon has a negative impact on monday returns. the affection bias, which was generated by the full moon, influences investment decisions. it was deemed that gravity during the full 3 if the standard calculation is used divided by previous closing price, it will be weekly returns. we do this to avoid 4 we adopted the random walk model by adding one the results of moon phases and market returns coefficient prob. variable coefficient 0.0621 m a l a y s ia c 0.012 0.0349 me -0.09 0.0440 moon -0.02 0.0745 m*moon -0.05 0.0000 rmin1 0.1555 r-squared 0.0331 0.0023 p h il ip p in e s c 0.013 0.0047 me -0.05 0.0687 moon -0.06 0.0125 m*moon -0.04 0.0119 rmin1 0.1125 r-squared 0.0186 note: c is the intercept; me is the monday dummy; moon is the moon dummy; rmin1 is the lagged 4.6 monday moon and monday returns as a robustness check, the role of monday’s full moon on the dowa was investigated further by using equation model 3. the returns were based on the daily return, by taking the the random walk model was adopted as the control variable for results of equation 3 which consists of the regression coefficient squared value, f test value, and the probability result of the f squared, the value lies between 1.2% and, inclusive of 2.5% where the nesian stock market returns are explained by the moon, while the philippines returns are at a lower value. this range is considered normal for an event study with a dummy variable value of the model in each market shows a high value where we c the model cannot be rejected. in conclusion, it may be stated that the model can be used to explain the relationship between the full moon phase and market returns. table 5 documents that the indonesian, malaysian, and the philippines stock mark were negatively and significantly influenced by the moon phase at a 5% level. meanwhile, the significant level of the relationship between the thailand stock market and the moon phase was only 10%. the full moon on monday was a negatively significant i indonesian stock market returns on mondays where the coefficient value was meanwhile, the coefficient values were -0.0024, -0.00108, and -0.00136 for the relationship between monday full moon and monday stock returns of the malaysian, philippine stock market, respectively. the negative sign shows that the monday full moon might cause a bearish monday (dowa) in every asean-4 stock markets. furthermore, friday’s returns in each market showed a significant relationship to monday’s returns at a 1% it can be concluded that the monday full moon has a negative impact on monday returns. the affection bias, which was generated by the full moon, influences investment decisions. it was deemed that gravity during the full moon caused irrationality in an investor’s is used, which is the normal logarithm of that day’s closing price closing price, it will be weekly returns. we do this to avoid any biased e adopted the random walk model by adding one-lagged returns, which is in this case is 61 coefficient prob. 0.012 0.0421 0.09 0.0088 0.02 0.0312 0.05 0.0644 0.1555 0.000 0.0331 0.013 0.0445 0.05 0.0387 0.06 0.0349 0.04 0.0482 0.1125 0.0000 0.0186 note: c is the intercept; me is the monday dummy; moon is the moon dummy; rmin1 is the lagged-one moon on the dowa was investigated further by using equation model 3. the returns were based on the daily return, by taking the the random walk model was adopted as the control variable for results of equation 3 which consists of the regression coefficient squared value, f test value, and the probability result of the f squared, the value lies between 1.2% and, inclusive of 2.5% where the nesian stock market returns are explained by the moon, while the philippines returns are at a lower value. this range is considered normal for an event study with a dummy variable value of the model in each market shows a high value where we can surmise the model cannot be rejected. in conclusion, it may be stated that the model can be used to table 5 documents that the indonesian, malaysian, and the philippines stock markets were negatively and significantly influenced by the moon phase at a 5% level. meanwhile, the significant level of the relationship between the thailand stock market and the moon phase was only 10%. the full moon on monday was a negatively significant influence on indonesian stock market returns on mondays where the coefficient value was -0.0282. 0.00136 for the relationship between monday full moon and monday stock returns of the malaysian, the thai, and the philippine stock market, respectively. the negative sign shows that the monday full moon 4 stock markets. furthermore, monday’s returns at a 1% it can be concluded that the monday full moon has a negative impact on monday returns. the affection bias, which was generated by the full moon, influences investment moon caused irrationality in an investor’s closing price which is then ed results. lagged returns, which is in this case is friday returns. 62 monday trading behavior; which is in line with the forgas (1985) affection infusion model, and also with our previously demonstrated results. hence, the full moon occurring on monday is a determinant of dowa. table 5 – the results of monday moon and monday returns items indonesia malaysia thailand philippines c 0.0307** 0.0168** -0.000176* 0.00765* moon -0.0282** -0.0024** -0.00108* -0.00136** friday 0.156625*** 0.1530*** 0.047878*** 0.112058*** r-squared 0.0251 0.0243 0.002369 0.012678 f-value 30.9025 29.9407 2.854432 15.43509 prob(f-statistic) 0.0000 0.0000 0.057784 0.0000 note: *, **, *** is significant in 10%, 5%, and 1% level c is the equation intercept; moon is the moon dummy; friday is the friday returns. the figures stated are the coefficient value. 5. conclusion the moon is believed to be one of the factors of moods. in the abnormal psychology field, the affective influences of the moon-mood can affect cognitive decision making. as proven by previous empirical results, the affect of the moon on moods can also affect economic behavior. this study aims to investigate the role of the moon on irrational behavior of calendar anomalies. by using ellis’ abc model plus the somatic marker and forgas’ affection infusion model, this research able to explain the day-of-the week anomaly (dowa) in a psychological manner. our findings are divided into 3 sections: (1) the existence of the dowa, (2) the relationship between the moon and market returns, and (3) the relationship between the moon and the dowa. first, it can be stated that the dowa initially existed in the asean-4 stock markets. the high negative returns on mondays were different to returns on other days, and the regression results confirmed this conclusion. further, based on these results, we surmised that the type of dowa, which occurred in the entire stock market, was the monday effect. second, the possibility of an explanation of the moon on market returns was mentioned. figures 1 depicts that there are some links between the phase of the moon and the behavior of market returns. these links were then investigated further. the results showed that there was a negatively significant relationship between the interaction of the moon phase, monday effect, and the dowa. these results can also be used as an explanation of the dowa from a behavioral perspective. for a more robust investigation we ran the equation model of the relationship between monday full moon and monday returns (equation 3). we detained the “real” monday returns by using the opening and closing price as the measurement for these returns. the purpose was to grasp the power of moon phase on monday’s behavior. further, we utilized the random walk by introducing the one-lagged day returns to control the model, which, in this case, was friday. fascinatingly, we found that the monday moon was connected to the monday returns, thus confirming our first results. this means that the moon phases significantly influences the dowa. in summary, our findings are as follows. first, full moon occurred more often on mondays from 1999 to 2010. this occurrence generated the deviant behavior caused by the affection bias, which became the activating event for an investor to be more irrational on mondays compared to others days. in other words, the moon phase is the stimulant of investor trading behaviors. second, the moods induced by moon phases caused a biased decision making; which in economics called “irrational the day-of-the week anomaly. our regression model and the t of it implying that the moon phase affection bias (caused by the moon the findings can be discussed using the above three mentioned theories (ellis’ abc, somatic marker, and forgas’ aim). using as follows: activating event (a): full moon on monday beliefs and cognition process (b) • investor a: “i feel tired with my stock performance. just sell it” o • investor a: “i feel it is the time to sell” inferences about the event consequences (c): overweighted on the selling side causing day of the week anomaly (dowa) feelings: depressed, aggressive behaviors: investor made pressure on the market and caused monday irrati of the week anomaly). the relationship between the moon phase and dowa can also be explained as a somatic marker. in this hypothesis, if there is a strong threat from an external factor (in our case full moon gravity), it can create a human r moon occurrences anomaly (more full moon on monday than other days) forces the human body to be more heuristically biased in decision making. hence, dowa occurs as a consequences of it. lastly, using forgas’ affect infusion model (aim), our result can be explained as follow. the first process in aim is “direct access” where the full moon hit the investor frequently on monday. the second stage is the “motivational process”. this occurs when the affect of the full moon gives a biological issue in the human body through its gravity. the influence of a full moon on human biology leads to irrationality. the third stage is “heuristic infusion” where the irrationality drives the investor to make biased deci aim is “substantive procession”, which is the infusion process of affection bias causing biased decision making which is portrayed in dowa. in summary, it can be claimed of the day-of-the week anomaly other psychological biases such as cognitive dissonance or from the point of view of market microstructure. 2. before employing the whole equation, the cyclical process of moon phases has to be checked. it is very important to put the dummy moon phase in the equation. we employed equation 4 that used continuous lunar impact sinusoidal model to test for the cycli according to this model, the lunar effect reaches a peak at the time of the full moon and bottoms out at the time of the new moon, following a cosine curve with a period of 29.53 days (the mean length of a lunar cycle). the edge of the new moo of the full moon is the last quarter. dichev and janes (2003) model was replicated for equation 4, which can be written as: irrational behavior”. this irrational behaviour was portrayed by the week anomaly. our regression model and the t-test delivered the evidences phase plays a role on trading behavior. in more simple words, moon phase) produces the day-of-the week anomaly. the findings can be discussed using the above three mentioned theories (ellis’ abc, somatic marker, and forgas’ aim). using ellis’ abc model, the relationships were analyzed : full moon on monday beliefs and cognition process (b): mood disturbance investor a: “i feel tired with my stock performance. just sell it” or investor a: “i feel it is the time to sell” inferences about the event: hedonic utility : overweighted on the selling side causing day of the week anomaly : depressed, aggressive, hedonic, moody : investor made pressure on the market and caused monday irrati of the week anomaly). the relationship between the moon phase and dowa can also be explained as a somatic marker. in this hypothesis, if there is a strong threat from an external factor (in our case full moon gravity), it can create a human reaction that reinforced panic or heuristic bias. the full moon occurrences anomaly (more full moon on monday than other days) forces the human body to be more heuristically biased in decision making. hence, dowa occurs as a g forgas’ affect infusion model (aim), our result can be explained as follow. the first process in aim is “direct access” where the full moon hit the investor frequently on monday. the second stage is the “motivational process”. this occurs when the t of the full moon gives a biological issue in the human body through its gravity. the influence of a full moon on human biology leads to irrationality. the third stage is “heuristic infusion” where the irrationality drives the investor to make biased decision. the last stage of aim is “substantive procession”, which is the infusion process of affection bias causing biased decision making which is portrayed in dowa. claimed that the moon phase and the affection anomaly in the asean-4 stock markets. future research might look at other psychological biases such as cognitive dissonance or from the point of view of market 2. before employing the whole equation, the cyclical process of moon phases has to be checked. it is very important to put the dummy moon phase in the equation. we employed equation 4 that used continuous lunar impact sinusoidal model to test for the cycli according to this model, the lunar effect reaches a peak at the time of the full moon and bottoms out at the time of the new moon, following a cosine curve with a period of 29.53 days (the mean length of a lunar cycle). the edge of the new moon is the first quarter, and the edge of the full moon is the last quarter. dichev and janes (2003) model was replicated for equation 4, which can be written as: 63 this irrational behaviour was portrayed by test delivered the evidences in more simple words, the anomaly. the findings can be discussed using the above three mentioned theories (ellis’ abc, the relationships were analyzed investor a: “i feel tired with my stock performance. just sell it” : overweighted on the selling side causing day of the week anomaly : investor made pressure on the market and caused monday irrationality (day the relationship between the moon phase and dowa can also be explained as a somatic marker. in this hypothesis, if there is a strong threat from an external factor (in our case full eaction that reinforced panic or heuristic bias. the full moon occurrences anomaly (more full moon on monday than other days) forces the human body to be more heuristically biased in decision making. hence, dowa occurs as a g forgas’ affect infusion model (aim), our result can be explained as follow. the first process in aim is “direct access” where the full moon hit the investor frequently on monday. the second stage is the “motivational process”. this occurs when the t of the full moon gives a biological issue in the human body through its gravity. the influence of a full moon on human biology leads to irrationality. the third stage is “heuristic sion. the last stage of aim is “substantive procession”, which is the infusion process of affection bias causing bias are the drivers markets. future research might look at other psychological biases such as cognitive dissonance or from the point of view of market 2. before employing the whole equation, the cyclical process of moon phases has to be checked. it is very important to put the dummy moon phase in the equation. we employed equation 4 that used continuous lunar impact sinusoidal model to test for the cyclical pattern. according to this model, the lunar effect reaches a peak at the time of the full moon and bottoms out at the time of the new moon, following a cosine curve with a period of 29.53 days n is the first quarter, and the edge of the full moon is the last quarter. dichev and janes (2003) model was replicated for 64 ttt d cosr επβα +     += 53.29 2* (4) where rt is the daily 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(2006) are investor moonstruck? lunarphase and stock returns. 66 10 _14-25_ abiodun quality dimensions, value, service cost and recommendation behaviour: evidence from the nigerian cellular abolaji joachim abiodun, kenneth sola adeyemi, received: may 27, 2013 accepted: the present study proposed and test a model that connects both affective and cognitive factors in cellular service to customers’ recommendation behavior. results of the analysis of data collected through questionnaire from 293 respondents with cellular phones and active account in the nigerian cellular industry indicate that core cellular service dimensions, service cost (price) and hedonic values are significant determinants of customers’ recommendation behavior. in addition, the study found that customer service and utilitarian value exert negative effect on recommendation behavior. it seems that strengthening the performance of service providers on core service attributes, service cost (price) and the entertainment and emotion evoking aspects of cellular service is of more value in partnering with customer to enlarge customer base through recommendation keywords: quality dimension service cost; recommendation behaviour; hedonic value; utilitarian value; cellular phone; service attribute 1. introduction there is a growing recognition of the pivotal role of cellular communication in the economic landscape of most countries in sub use largely account for the increased adoption of cellular communication, even among the poor and less educated segment of the populace. indeed, cellular communication has revolutionized the way people live and relate in close and culturally knit societies that exist in most societies in the region. besides, it has proved to be a veritable panacea in circumventing the seemingly intractable transportation problems which are the result regional planning approaches of succeeding governments in the region. consequently, cellular industry in the region can be aptly described as a growth industry with increasing potentials buoyed by the socio-cultural orientation of th of families and the huge market at the bottom of the pyramid. quality dimensions, value, service cost and recommendation behaviour: evidence from the nigerian cellular industry abolaji joachim abiodun, kenneth sola adeyemi, adewale omotayo covenant university, nigeria accepted: january 27, 2014 online published: abstract the present study proposed and test a model that connects both affective and cognitive factors customers’ recommendation behavior. results of the analysis of data collected through questionnaire from 293 respondents with cellular phones and active account in the nigerian cellular industry indicate that core cellular service dimensions, (price) and hedonic values are significant determinants of customers’ recommendation behavior. in addition, the study found that customer service and utilitarian value exert negative effect on recommendation behavior. it seems that strengthening the rmance of service providers on core service attributes, service cost (price) and the entertainment and emotion evoking aspects of cellular service is of more value in partnering with customer to enlarge customer base through recommendation. quality dimension service cost; recommendation behaviour; hedonic value; utilitarian value; cellular phone; service attribute. there is a growing recognition of the pivotal role of cellular communication in the economic countries in sub-saharan africa (ssa). accessibility, low cost and ease of use largely account for the increased adoption of cellular communication, even among the poor and less educated segment of the populace. indeed, cellular communication has nized the way people live and relate in close and culturally knit societies that exist in most societies in the region. besides, it has proved to be a veritable panacea in circumventing the seemingly intractable transportation problems which are the result of the poor urban and regional planning approaches of succeeding governments in the region. consequently, cellular industry in the region can be aptly described as a growth industry with increasing potentials cultural orientation of the people, the rising levels of disposable income of families and the huge market at the bottom of the pyramid. 139 quality dimensions, value, service cost and recommendation behaviour: evidence from the nigerian cellular industry abolaji joachim abiodun, kenneth sola adeyemi, adewale omotayo osibanjo covenant university, nigeria online published: february 12, 2014 the present study proposed and test a model that connects both affective and cognitive factors customers’ recommendation behavior. results of the analysis of data collected through questionnaire from 293 respondents with cellular phones and active account in the nigerian cellular industry indicate that core cellular service dimensions, (price) and hedonic values are significant determinants of customers’ recommendation behavior. in addition, the study found that customer service and utilitarian value exert negative effect on recommendation behavior. it seems that strengthening the rmance of service providers on core service attributes, service cost (price) and the entertainment and emotion evoking aspects of cellular service is of more value in partnering quality dimension service cost; recommendation behaviour; hedonic value; there is a growing recognition of the pivotal role of cellular communication in the economic saharan africa (ssa). accessibility, low cost and ease of use largely account for the increased adoption of cellular communication, even among the poor and less educated segment of the populace. indeed, cellular communication has nized the way people live and relate in close and culturally knit societies that exist in most societies in the region. besides, it has proved to be a veritable panacea in circumventing of the poor urban and regional planning approaches of succeeding governments in the region. consequently, cellular industry in the region can be aptly described as a growth industry with increasing potentials e people, the rising levels of disposable income 140 the growth and potentials of cellular industry has attracted the interests of government, business communities and academic researchers’ interest. government sets the regulatory framework that guides competitive conduct of operators, protects customers and increases competition; researchers attention on the other hand are been focused on different aspect of the industry (oyeniyi and abiodun, 2008, 2010, abiodun and oyeniyi, 2012; oghojafor, mesikez, omoera, and bakare, 2012.). it has been argued that the industry in nigeria in particular has attracted national and international cellular providers. the industry’s competitive landscape is characterized by intense competition as a result of new customers in new geographical areas, product and service duplication, customers’ defection or switching, new system features, schemes and technological advancement in services. service providers are interested in painstakingly building sustainable competitive advantage that enhances their financial performance. these unique characteristics of the cellular market have not only made quality in service delivery critically important but have indicated these as drivers of customers’ satisfaction and recommendation behavioural intentions. from strategy standpoint, service quality attributes are critical input to a firms’ resource allocation strategy and quality improvement efforts (gustafsson and johnson, 2004). traditionally, cellular firms differ in their ability to develop competitive tactics around key service features in order to secure a link with customers’ satisfaction; and satisfied customers’ base in order to establish partnership in enlarging the market size. however, quality is a multi-dimensional construct and the general antecedents have been studied across industries as well as the interconnection between service quality and customers satisfaction. indeed, customer satisfaction as a function of the consequence of quality is not a flawed presumption nor is it out-of-range that satisfaction should affect post-purchase behaviours. however, the inter-connections between cognitive factors such as service quality, customers’ satisfaction, recommendations’ intentions and affective factors: hedonic and utilitarian dimensions of value in the cellular industry have not, in general, been well documented empirically in literature from transition economies in africa. therefore, in terms of statistical evidence, little seems, to exist regarding how service quality and affective factors like hedonic and utilitarian dimensions relate to recommendations’ behavioural intentions. the dearth of empirical studies integrating these concepts cannot be compensated for by the fact that similar studies exist in developed economies. this argument becomes valid because accepting theories and theoretical interconnections of other cultures without empirical validation in other climes especially in transition economies such as we have in subsaharan africa where unique cultures significantly impact on customers’ behaviour, may not be appropriate (lai, griffin and babin, 2009). therefore, the present study extends cellular communication research in nigeria and examines the interconnections between cognitive factors such as quality dimensions, service cost and recommendation behavioural intention and affective dimensions of values. the objective of the current research is to provide an insight into quality of service dimensions as drivers of customers’ recommendation behaviours and the interconnections of affective factors with cognitive aspect of cellular service. a guiding question is: do cognitive and affective factors significantly relate or determine recommendation behaviours in the cellular industry? 2. conceptual development and hypotheses 2.1. service quality and recommendation intention conceptually, service quality is often viewed as a set of service dimensions evaluated relative to customers’ expectations and perceptions (schembri and sandberg, 2011). the implication is that, quality is the outcome of an evaluation of several attributes of a service controlled by a supplier (baker and crompton 2000) (2004), quality is conceptualized as a the increasing importance of the service sector in national economies has made service quality an important concept in in service industry (byers and led better understand the antecedent post-purchase behavior, it is often considered variable (palmer and cole, 1995; zahorik and rust, 1992). for example, studies seem to hold service quality as an indicator of customers’ satisfaction which is being related to post purchase behaviours like loyalty, word yoo, 2008; festus and hsu,2006). high quality, it seems, correlate with high customers’ satisfaction (cronin, brady and hult, 2000), albeit, the relative importance of service quality factors on customer satisfaction is found to differ across different et al, 2009 posited that the connection between quality and satisfaction hold across cultures; and these provide more explanation to variance in customers’ loyalty. a predominant view in literature is that service quality drives customer satisfaction indicating that satisfaction and recommendation are normally considered as higher order constructs (brady and robertson, 2001; lai et al, 2009). conceptually, quality is adjudged and expressed through product or service. customers’ perception of providers’ performance on key attributes of cellular communication services defines overall quality. quality or performance perceived is the outcome of experience of interacti services. attributes of cellular services may be taken to include inter alia; call clarity, network coverage, price structure and customer support service (kim, 2000; kim, park and jeong 2004). quality in the context of cellular communications industry extend the traditional definition of service quality to incorporate aspects that are relevant to cellular services (kheiry and alirezapour, 2012). customer service may be distinguished from core service component in that it supports core service element by providing care, intimacy and communication to strengthen service performance perceptions (gremler, 1995). it is cellular service provider strategic effort at securing interpersonal relationship built on interaction with customers. c and its members’ feedback about performance and serves as input in customers’ retention and management of post-purchase behaviours (turner and krizek, according to turner et al (2006), feedback from customers’ satisfaction provides organizational stakeholder information that has potential for customers’ retention as well as the development of new ones. literature indicates that satisfaction affects individuals’ motivations to recommend services or products (lam, shankar, erramilli and murthy, 2004, morgan and rego, 2006). indeed, customers who have positive post service impression about service features are willing to reco (palmatier, dant, grewal and evans 2006). indeed, subscribers’ recommendations to others are positive and desirable outcome of service experience which from service providers’ perspective indicate subscribers’ commitment to partner market. research evidences suggest the cost of attracting new customers and increased saturation of the market has made customers’ recommendations to others a strategic option for telecommunication providers (abiodun, oyeni quality is the outcome of an evaluation of several attributes of a service by a supplier (baker and crompton 2000). consequently, according to petrick quality is conceptualized as a measure of the provider’s performance. the increasing importance of the service sector in national economies has made service quality an important concept in the literature. indeed, quality has become a strategic concern byers and lederer, 2001; vanniarajan and gurunathan, 2009 antecedent and consequence of competitive advantage and strengthen often considered important to measure service quality as er and cole, 1995; zahorik and rust, 1992). for example, studies seem to hold service quality as an indicator of customers’ satisfaction which is being related to post purchase behaviours like loyalty, word-of-mouth or re-purchase behaviours (lee, lee and yoo, 2008; festus and hsu,2006). high quality, it seems, correlate with high customers’ satisfaction (cronin, brady and hult, 2000), albeit, the relative importance of service quality factors on customer satisfaction is found to differ across different service industries (vanniarajan, et al, 2009). however, lai, et al, 2009 posited that the connection between quality and satisfaction hold across cultures; and these provide more explanation to variance in customers’ loyalty. a predominant view in re is that service quality drives customer satisfaction indicating that satisfaction and recommendation are normally considered as higher order constructs (brady and robertson, conceptually, quality is adjudged and expressed through basic features and attributes of a product or service. customers’ perception of providers’ performance on key attributes of cellular communication services defines overall quality. quality or performance perceived is the outcome of experience of interacting with various dimensions and attributes of cellular services. attributes of cellular services may be taken to include inter alia; call clarity, network coverage, price structure and customer support service (kim, 2000; kim, park and jeong in the context of cellular communications industry extend the traditional definition of service quality to incorporate aspects that are relevant to cellular services (kheiry and alirezapour, 2012). customer service may be distinguished from core service omponent in that it supports core service element by providing care, intimacy and communication to strengthen service performance perceptions (gremler, 1995). it is cellular service provider strategic effort at securing interpersonal relationship built on customers’ response to service attributes provides organizations and its members’ feedback about performance and serves as input in customers’ retention and purchase behaviours (turner and krizek, 2006). according to turner et al (2006), feedback from customers’ satisfaction provides organizational stakeholder information that has potential for customers’ retention as well as the development of new ones. literature indicates that satisfaction with service dimensions, affects individuals’ motivations to recommend services or products (lam, shankar, erramilli and murthy, 2004, morgan and rego, 2006). indeed, customers who have positive post service impression about service features are willing to recommend services to others (palmatier, dant, grewal and evans 2006). indeed, subscribers’ recommendations to others are positive and desirable outcome of service experience which from service providers’ perspective indicate subscribers’ commitment to partner with providers in enlarging the research evidences suggest the cost of attracting new customers and increased saturation of the market has made customers’ recommendations to others a strategic option for telecommunication providers (abiodun, oyeniyi and osibanjo, 2012) 141 quality is the outcome of an evaluation of several attributes of a service, primarily consequently, according to petrick performance. the increasing importance of the service sector in national economies has made service literature. indeed, quality has become a strategic concern vanniarajan and gurunathan, 2009). in order to and consequence of competitive advantage and strengthen service quality as a core er and cole, 1995; zahorik and rust, 1992). for example, studies seem to hold service quality as an indicator of customers’ satisfaction which is being related to post purchase behaviours (lee, lee and high quality, it seems, correlate with high customers’ satisfaction (cronin, brady and hult, 2000), albeit, the relative importance of service quality factors on customer satisfaction service industries (vanniarajan, et al, 2009). however, lai, et al, 2009 posited that the connection between quality and satisfaction hold across cultures; and these provide more explanation to variance in customers’ loyalty. a predominant view in re is that service quality drives customer satisfaction indicating that satisfaction and recommendation are normally considered as higher order constructs (brady and robertson, basic features and attributes of a product or service. customers’ perception of providers’ performance on key attributes of cellular communication services defines overall quality. quality or performance perceived is ng with various dimensions and attributes of cellular services. attributes of cellular services may be taken to include inter alia; call clarity, network coverage, price structure and customer support service (kim, 2000; kim, park and jeong in the context of cellular communications industry extend the traditional definition of service quality to incorporate aspects that are relevant to cellular services (kheiry and alirezapour, 2012). customer service may be distinguished from core service omponent in that it supports core service element by providing care, intimacy and communication to strengthen service performance perceptions (gremler, 1995). it is cellular service provider strategic effort at securing interpersonal relationship built on recurrent ustomers’ response to service attributes provides organizations and its members’ feedback about performance and serves as input in customers’ retention and according to turner et al (2006), feedback from customers’ satisfaction provides organizational stakeholder information that has potential for customers’ retention as well as service dimensions, affects individuals’ motivations to recommend services or products (lam, shankar, erramilli and murthy, 2004, morgan and rego, 2006). indeed, customers who have positive postmmend services to others (palmatier, dant, grewal and evans 2006). indeed, subscribers’ recommendations to others are positive and desirable outcome of service experience which from service providers’ with providers in enlarging the research evidences suggest the cost of attracting new customers and increased saturation of the market has made customers’ recommendations to others a strategic option 142 2.2 hedonic and utilitarian values literature is in agreement with conventional wisdom that perceived value should be related to post-service positive impression or satisfaction. research evidence shows that the perceived value by customer correlates with satisfaction (oh, 2000) and customers’ satisfaction becomes more managerially useful in the light of integration with perceived value (woodruff, 1997). preponderance of evidence is that, perceived value holds more explanatory power to repurchase intention than quality or satisfaction (cronin, brady, and hult 2000; oh, 2000). value for cellular services may be for utilitarian or hedonic purpose. utilitarian value is taskrelated and rational such as the accomplishment of work or business-related calls, time saving-device or emergencies (batra and ahtola, 1991, babin, et al, 1994, aoki and downes, 2003). materials are often acquired at least, in part, for their usefulness; other higher purposes for such acquisition are, in most cases, considered secondary. hedonic value relates to responses evoked during service experience; it is both personal and subjective and results from fun and playfulness (holbrook and hirschman, 1982, babin et al, 1994). in line of the logic of maslow’s motivations theory, hedonic values may assume additional dimension of importance in affecting behavior if the utilitarian aspects have been reasonably satisfied. for example, if many cellular providers compare reasonably on basic communications aspect of the competitive domain may reside on the hedonic aspect of their services. the entertainment and emotional content of cellular services constitute the hedonic worth, such as example enjoyment and chat with friends (lee and murphy, 2006). however, while we may assume that the utilitarian value should be most prominent customers’ need in cellular services, the advent of hedonic-friendly hand-held devices and providers’ emphasis clearly indicates hedonic potentials of cellular services. consequently, determining the antecedent of satisfaction in cellular phone use, should include the consideration of both utilitarian and hedonic aspect given the cultural and family orientation of some societies. studies indicate that, youth tend to show higher hedonic consumption of cellular services (wajcman and beaton, 2004. lee et al, 2008). understanding users’ evaluation of cellular services ought to integrate both the cognitive aspect such as quality and the affective factors since service providers have shown more intense use of both factors in competitive conduct. based on the preceding literature evidence, the following research model and hypotheses have been proposed for empirical verification. h1: service costs (prices) positively affect recommendation behavior in the cellular industry. h2: core service dimensions are significant predictor of recommendation behavior. h3: customer service is a significant predictor of recommendation behavior in the cellular industry. h4: utilitarian value of cellular service is a significant explanatory variable of recommendation behavior. h5: hedonic value exert significant predictive power on recommendation behavior. the proposed correlation between these hypotheses can be seen from the high-level view in figure 1 below. figure 1 proposed research model 3. materials and methods consistent with the study’s focus, we utilized survey research design. survey research design was adopted because it is not only economical but feasible in addressing the research problem of interest. data for the study was obtained from two hundred and ni respondents with cellular phones and active accounts in lagos, the commercial and economic capital of nigeria, and at another location on the outskirt of the city. the choice of these study locations is largely purposeful and influenced b heterogeneous nature the population which is more or less a miniature of the country with most tribes in the country represented. furthermore, the outskirt location in the area has a private university within its environ. indeed, the population in th locations can be described as not only socially heterogeneous but homogeneous in terms of awareness and use of cellular services with somewhat refined taste or service expectations from cellular providers. we may as well describe t usage and expectations of improved services. thus, the study area is made up of people who are conversant with the assortment of providers’ cellular service offerings. respondents in this study, in most cases, sub than one service providers. the advent of multi rates within a network had largely encouraged this practice. these practices among subscribers impose significant competitiv retention of subscribers and tactical moves to make their network the preferred choice. respondents’ argument for simultaneously subscribing to more than one service provider is premised on the need to hedge against erratic call signals and call drops. in most developing economy where telecommunications providers need to provide energy that power fixed communication equipment, call drops and erratic signals are common phenomenon. it may, therefore, be r respondents as valid expression of their evaluation of the perceptions of cellular services in service cost core service customer service utilitarian hedonic proposed research model materials and methods consistent with the study’s focus, we utilized survey research design. survey research design was adopted because it is not only economical but feasible in addressing the research problem of interest. data for the study was obtained from two hundred and ni respondents with cellular phones and active accounts in lagos, the commercial and economic capital of nigeria, and at another location on the outskirt of the city. the choice of these study locations is largely purposeful and influenced b heterogeneous nature the population which is more or less a miniature of the country with most tribes in the country represented. furthermore, the outskirt location in the area has a private university within its environ. indeed, the population in these conveniently locations can be described as not only socially heterogeneous but homogeneous in terms of awareness and use of cellular services with somewhat refined taste or service expectations from cellular providers. we may as well describe these locations as pacesetters in cellular usage and expectations of improved services. thus, the study area is made up of people who are conversant with the assortment of providers’ cellular service offerings. respondents in this study, in most cases, subscribe to and utilize the services of more than one service providers. the advent of multi-sim hand-held terminals and reduced call rates within a network had largely encouraged this practice. these practices among subscribers impose significant competitive pressures on cellular providers as they strive for retention of subscribers and tactical moves to make their network the preferred choice. respondents’ argument for simultaneously subscribing to more than one service provider is edge against erratic call signals and call drops. in most developing economy where telecommunications providers need to provide energy that power fixed communication equipment, call drops and erratic signals are common phenomenon. it may, therefore, be reasonable to accept the evaluative opinions of these respondents as valid expression of their evaluation of the perceptions of cellular services in recommen dation h h h h h 143 consistent with the study’s focus, we utilized survey research design. survey research design was adopted because it is not only economical but feasible in addressing the research problem of interest. data for the study was obtained from two hundred and ninety three (293) respondents with cellular phones and active accounts in lagos, the commercial and economic the choice of these study locations is largely purposeful and influenced by the heterogeneous nature the population which is more or less a miniature of the country with most tribes in the country represented. furthermore, the outskirt location in the area has a ese conveniently-sampled locations can be described as not only socially heterogeneous but homogeneous in terms of awareness and use of cellular services with somewhat refined taste or service expectations hese locations as pacesetters in cellular usage and expectations of improved services. thus, the study area is made up of people who are conversant with the assortment of providers’ cellular service offerings. scribe to and utilize the services of more held terminals and reduced call rates within a network had largely encouraged this practice. these practices among e pressures on cellular providers as they strive for retention of subscribers and tactical moves to make their network the preferred choice. respondents’ argument for simultaneously subscribing to more than one service provider is in most developing economy where telecommunications providers need to provide energy that power fixed communication equipment, call drops and erratic signals are common easonable to accept the evaluative opinions of these respondents as valid expression of their evaluation of the perceptions of cellular services in recommen dation 144 the industry (osuagwu, 2003). besides, it indicate respondents’ judgments of service providers’ performance on the dimensions specified in the research instrument. the research instrument utilized in the data collection was a set of structured questionnaire focused on key research variables in the study. the variables were developed from literature and supported by anecdotal and empirical evidence: service quality dimensions, value (hedonic and utilitarian), service cost and recommendations’ behavioural intentions. each of the main variables was measured using multi-item indices with each item scaled on a 7-point likert scale to enable respondents indicate the intensity of their reactions for each item. service quality was operationalized along two main sub-dimensions: customer service and core components of cellular service, for example, voice clarity over the network, call drop during calls, network coverage, among others. customers’ services relate to the competence, responsiveness, information quality and complaints handling procedures of customers’ service personnel. these service dimensions are normally specified in service literature as indicator of quality in service. the logic is that although cellular users may not regularly interact with customer service personnel, one or two unpleasant encounters or poor complaints handling procedure may impact negatively on customers’ perceptions of service and influence subsequent decisions or relationship with the provider. in a transition economy with significant proportion of the populace on or below poverty line, the cost of service has implications for the acquisition, use and continuity of cellular service and may be a potent determinant of subscribers’ satisfaction or quality perception. some of the questionnaire items were adapted from measure validated from prior studies. these items, however, were adapted with reference to the context of the present studies, therefore, the question items designed for the study benefited immensely from literature, specifically from the works of babin et al,1994, stone, good and baker-eveleth, 2007, eshghi, haughton and topi, 2007, bhattacherjee, 2001). question items on hedonic and utilitarian values were scaled so that respondents could react to the frequency to which they found cellular service usage as taskrelated or the use evoked emotions or they enjoyed the entertainment content. scale identification was slightly varied so that ‘not at all’ was ascribed 1 and ‘always’ was ascribed 7. the costs of cellular services scaled included call rates and charges, short messages (sms) charges and internet charges. generally, all the items showed good reliability results as indicated by the cronbach alpha scores which ranged from 0.8 to 0.9: core service (0.89), service cost (0.84), customer service (0.93), recommendation intention (0.93), hedonic value (0.82), and utilitarian value (0.80). we may reasonably conclude that the factor possesses adequate convergence. data analysis procedure was done with spss version 19.0 for windows and amos 19.0 software was also utilized to perform statistical analysis of some aspect of the data set. in addition, the overall fit of the study model was assessed using various fit indices. 4. results and discussion as shown in table 1, the effective sample for the study consists of 128 males and 165 females, indicating that 56.3% of the respondents were females. the profile of the sample indicates that 225 respondents are above 20years with 129 respondents or 44% of the sample located in the articulate age group of 30 and above. in terms of value, these age groups are more likely to emphasize the hedonic aspect in their usage of cellular service. significant proportions of the respondents are married (45%) or had been in married relationship at a time (19 respondents are divorcees) with 48% of the sample been unmarried. most of the respondents have means of livelihood: paid employment, 100 (34%); self-employed, 74(25%) and students, 119 (40%). with reference to the bac to usual limitations associated with the research approach utilized, the sample may be considered as representing a rich data set. table 1 – sample profile variables age < 20 years 21 – 40 years 41 and above gender males females marital status married single once married (divorced) employment status paid/salaried job self-employed/un students/unemployed the result of the structural models with standardized parameter estimates as schematically presented below indicate the hypothesized impact of the study variables on recommendations behavior (see figure 2) . the model as conceptualized, reasonably indicate that the latent variables in the study showed moderate explanatory power for recommendation behavior in the cellular industry. the model showed that service costs, customers service, hedonic value, utilitarian value, and core service dimensions account f recommendation behaviours. overall, the values of the fit index indicate that the research model did not achieve acceptable fit on some indices as common in studies. notwithstanding, more indices suggest that overall it is an accepta compared favourably or better than model fit indices in similar studies (kim et al, 2004, ali, waseemullah, ahmed and akram, 2009). the fit index indicates the following result: (rmsea=0.09, cmin/df=3.272, cfi= 0.902, ifi=.902 model with chi-square = 648.453 significant chi-square value, however, it is argued that chi index in practice, because it is affected by sample an 3.272 indicates the acceptability of model fit as the value is within the acceptable value limit of less than 5 (schumaker and lomax, 2004, kremelberg, 2011). the research model proposed that service features or (price) are significant predictors of customers’ willingness to recommend cellular services. the parameter estimates (standardized, figure 2 and regression weight, table 2) indicate that cellular providers’ performance significant predictor (h2:β= 0.458, p<001) with service cost or price (h1: and hedonic value (β=0.383,p<0.005) being next in predictive ability of customers recommendation. generally, the v effect on customers’ recommendation behaviours with service cost, core service and hedonic value being the significant predictors of recommendation behavior. customers support service activi (h4) customers derived from cellular use were found to exert negative predictive influence on recommendations. however, the hypothesized impact of customer service is not statistically significant. students, 119 (40%). with reference to the background of participants in the study and subject to usual limitations associated with the research approach utilized, the sample may be considered as representing a rich data set. category frequency years 68 40 years 163 41 and above 62 males 128 females 165 married 142 single 132 once married (divorced) 19 paid/salaried job 100 employed/un-salaried job 74 students/unemployed 119 the result of the structural models with standardized parameter estimates as schematically presented below indicate the hypothesized impact of the study variables on recommendations behavior (see figure 2) . the model as conceptualized, reasonably indicate that the latent variables in the study showed moderate explanatory power for recommendation behavior in the cellular industry. the model showed that service costs, customers service, hedonic value, utilitarian value, and core service dimensions account for 64% of variance of recommendation behaviours. overall, the values of the fit index indicate that the research model did not achieve acceptable fit on some indices as common in studies. notwithstanding, more indices suggest that overall it is an acceptable model fit which compared favourably or better than model fit indices in similar studies (kim et al, 2004, ali, waseemullah, ahmed and akram, 2009). the fit index indicates the following result: (rmsea=0.09, cmin/df=3.272, cfi= 0.902, ifi=.902). minimum was achieved in the square = 648.453, d/f = 174, p = .000; traditionally, we would want a non square value, however, it is argued that chi-square is not a very good fit index in practice, because it is affected by sample and model size. the cmin/df value of 3.272 indicates the acceptability of model fit as the value is within the acceptable value limit of less than 5 (schumaker and lomax, 2004, kremelberg, 2011). the research model proposed that service features or attributes, perceived value and cost (price) are significant predictors of customers’ willingness to recommend cellular services. the parameter estimates (standardized, figure 2 and regression weight, table 2) indicate that cellular providers’ performance on core cellular service dimensions is the most β= 0.458, p<001) with service cost or price (h1:β β=0.383,p<0.005) being next in predictive ability of customers recommendation. generally, the variables considered in the study exert statistically significant effect on customers’ recommendation behaviours with service cost, core service and hedonic value being the significant predictors of recommendation behavior. customers support service activities (h3) of the cellular providers and the utilitarian value ) customers derived from cellular use were found to exert negative predictive influence on recommendations. however, the hypothesized impact of customer service is not statistically 145 kground of participants in the study and subject to usual limitations associated with the research approach utilized, the sample may be frequency percent 23.2 55.6 21.2 43.7 56.3 48.5 45.1 6.5 34.1 25.3 40.6 the result of the structural models with standardized parameter estimates as schematically presented below indicate the hypothesized impact of the study variables on recommendations behavior (see figure 2) . the model as conceptualized, reasonably indicates that the latent variables in the study showed moderate explanatory power for recommendation behavior in the cellular industry. the model showed that service costs, customers service, or 64% of variance of recommendation behaviours. overall, the values of the fit index indicate that the research model did not achieve acceptable fit on some indices as common in studies. ble model fit which compared favourably or better than model fit indices in similar studies (kim et al, 2004, ali, waseemullah, ahmed and akram, 2009). the fit index indicates the following result: was achieved in the ; traditionally, we would want a nonsquare is not a very good fit d model size. the cmin/df value of 3.272 indicates the acceptability of model fit as the value is within the acceptable cmin/df value limit of less than 5 (schumaker and lomax, 2004, kremelberg, 2011). attributes, perceived value and cost (price) are significant predictors of customers’ willingness to recommend cellular services. the parameter estimates (standardized, figure 2 and regression weight, table 2) indicate on core cellular service dimensions is the most = 0.458, p<001) with service cost or price (h1:β= 0.452,p<0.001); =0.383,p<0.005) being next in predictive ability of customers ariables considered in the study exert statistically significant effect on customers’ recommendation behaviours with service cost, core service and hedonic ) of the cellular providers and the utilitarian value ) customers derived from cellular use were found to exert negative predictive influence on recommendations. however, the hypothesized impact of customer service is not statistically 146 figure 2 structural model with standardized parameter estimates these variables (h3: customer service β= -0.096, p> 0.1; h4: utilitarian value β= -0.197, p<0.005) does not positively impact or engender customers’ willingness to recommend, suggesting some mediating variables would be required to convert them to recommendations behavior. however, if the prevailing assumption that customer satisfaction as a lower construct to recommendation is accepted, the result here seems inconsistent with earlier studies which found positive relationship between customer support services and customer satisfaction (ali et al, 2009; kim et al, 2004). table 2 summary of research hypotheses result estimate s.e. c.r. p hypotheses recom � hedonic .383 .125 3.068 .002 h5 accept recom � customer_service -.096 .097 -.991 .322 h3 reject recom � core_service .458 .084 5.428 *** h2 accept recom � utilitarian -.197 .110 -1.799 .072 h4 reject recom � service_cost .452 .099 4.542 *** h1 accept the finding, however, corroborates the assertion that satisfied customer may not become loyal nor subsequently recommend (jones and sasser 1995). indeed, in most transition economies cellular providers are reasonably comparable with respect to customer services activities; therefore, the contributory roles of customer support activities in securing competitive advantage may not be that significant. hedonic value (h5) has significant direct effect on recommendation behavior than utilitarian value (h4) of cellular services which showed an inverse or negative predictive relationship. customers seem to value the entertainment content and emotions evoked by the use of cellular services such that, the utilitarian aspect is taken for granted. a cellular service, by nature, is expected to fulfill utilitarian value that customers may perhaps only take notice of, if it fails on that line. or the cmin/df= 3.727 gfi= 0.83 comparative fit index (cfi) = 0.902 normed fit index (nfi) = 0.87 root mean square error of approximation (rmsea) = 0.09 incremental fit index (ifi) = 0.902 best explanation could be found in the culture and unique nuclear and extended family system that prevail in the setting of the study. 5. managerial implications and conclusion the main thrust of the study is to relate both affective and cognitive factors in service management to recommendation behaviour in the cellular industry. evidently, company’s performances on key service provides practical insight to the interconnection between service attributes and the beneficial impact of service attributes in making customers’ base partner in enlarging the market of the cellular industry. the implication for service management is that customers’ perceptions of company’s performance on key dimension of service attributes is an important antecedent of recommendation behavior which further serves as a strategic driver of product diffusion; and a source of competitive strength. competitive advantage through recommendation or partnership with customer base may be derived from effective performance on core service dimensions. however, similarity in augmented service packages (customer service) may not offer real advantage in terms securing customers’ recommendation. in addition, perceived task of cellular service is weak as a tool for ensuring that service providers’ customer base partner in enlarging the market. subscribers, possibly, take the utilit providers’ performances on this aspect are comparatively similar. hedonic dimension of value, on the contrary, indicates beneficial customer recommendation advantage which suggests the need for cellular providers to monitor performance not only on key cellular features but also the entertainment and emotion features of their service. indeed, the direct effect of the hedonic aspect of cellular service on recommendation behavior indicates that subscribers may be signific recommend cellular service by considerations that are neither economic, functional nor task related. it seems evident that given the cultural and economic settings within which cellular companies perform on service attributes and servic is a strategic building block to customers’ recommendation behavior or partnership with customer for market expansion. it may be reasonable to suggest that one of the competitive domain for cellular service provi consequently, it may be suggested that management need to focus its effort in enhancing the entertainment and emotion evoking aspects of cellular service as means to securing subscribers partnership for market expansion. future research effort may seek to explore the income, age, gender and culture on hedonic aspects of cellular service. hedonic aspects of cellular service might show varied impact on recommendat groups, culture or income levels. both managers and academics will benefit from empirical insight of the effect of hedonic value which might show variations across age on income levels. best explanation could be found in the culture and unique nuclear and extended family system he study. managerial implications and conclusion the main thrust of the study is to relate both affective and cognitive factors in service management to recommendation behaviour in the cellular industry. evidently, company’s performances on key service attribute indicates perceived quality, therefore, the study provides practical insight to the interconnection between service attributes and the beneficial impact of service attributes in making customers’ base partner in enlarging the market of the lar industry. the implication for service management is that customers’ perceptions of company’s performance on key dimension of service attributes is an important antecedent of recommendation behavior which further serves as a strategic driver of product diffusion; and a source of competitive strength. competitive advantage through recommendation or partnership with customer base may be derived from effective performance on core service dimensions. however, similarity in augmented service packages (customer service) may not offer real advantage in terms securing customers’ recommendation. in addition, perceived task-related or utilitarian value of cellular service is weak as a tool for ensuring that service providers’ customer base partner in enlarging the market. subscribers, possibly, take the utilitarian aspect for granted when providers’ performances on this aspect are comparatively similar. hedonic dimension of value, on the contrary, indicates beneficial customer recommendation advantage which suggests the need for cellular providers to monitor erformance not only on key cellular features but also the entertainment and emotion features of their service. indeed, the direct effect of the hedonic aspect of cellular service on recommendation behavior indicates that subscribers may be significantly influenced to recommend cellular service by considerations that are neither economic, functional nor task related. it seems evident that given the cultural and economic settings within which cellular companies perform on service attributes and service cost (price), the hedonic aspect of value is a strategic building block to customers’ recommendation behavior or partnership with customer for market expansion. it may be reasonable to suggest that one of the competitive domain for cellular service providers seem to be in the hedonic aspect of their services. consequently, it may be suggested that management need to focus its effort in enhancing the entertainment and emotion evoking aspects of cellular service as means to securing for market expansion. future research effort may seek to explore the impact of demographic variables such as income, age, gender and culture on hedonic aspects of cellular service. hedonic aspects of cellular service might show varied impact on recommendation behavior among different age groups, culture or income levels. both managers and academics will benefit from empirical insight of the effect of hedonic value which might show variations across age on income 147 best explanation could be found in the culture and unique nuclear and extended family system the main thrust of the study is to relate both affective and cognitive factors in service management to recommendation behaviour in the cellular industry. evidently, company’s attribute indicates perceived quality, therefore, the study provides practical insight to the interconnection between service attributes and the beneficial impact of service attributes in making customers’ base partner in enlarging the market of the lar industry. the implication for service management is that customers’ perceptions of company’s performance on key dimension of service attributes is an important antecedent of recommendation behavior which further serves as a strategic driver of product and service competitive advantage through recommendation or partnership with customer base may be derived from effective performance on core service dimensions. however, similarity in augmented service packages (customer service) may not offer real advantage in terms of related or utilitarian value of cellular service is weak as a tool for ensuring that service providers’ customer base partner arian aspect for granted when hedonic dimension of value, on the contrary, indicates beneficial customer recommendation advantage which suggests the need for cellular providers to monitor erformance not only on key cellular features but also the entertainment and emotion-evoking features of their service. indeed, the direct effect of the hedonic aspect of cellular service on antly influenced to recommend cellular service by considerations that are neither economic, functional nor task related. it seems evident that given the cultural and economic settings within which cellular e cost (price), the hedonic aspect of value is a strategic building block to customers’ recommendation behavior or partnership with customer for market expansion. it may be reasonable to suggest that one of the competitive ders seem to be in the hedonic aspect of their services. consequently, it may be suggested that management need to focus its effort in enhancing the entertainment and emotion evoking aspects of cellular service as means to securing impact of demographic variables such as income, age, gender and culture on hedonic aspects of cellular service. hedonic aspects of ion behavior among different age groups, culture or income levels. both managers and academics will benefit from empirical insight of the effect of hedonic value which might show variations across age on income 148 key to research variables a1 network coverage b6 internet charges a2 calls clarity c1 recommend to friends and relations a3 network availability c2 recommend to acquaintances a4 connectivity without call dropping c3 explain benefits to friends and others a5 personalized attention d1 use only services i must a6 courtesy d2 use to accomplish goals a7 competence d3 use services i really need a8 communication of network’s technical problem d4 use mainly for work related issues a9 customer service willingness to resolve complaints d5 enjoy use of mobile services b2 call rates and charges d6 in comparison time used on mobile is truly enjoyable b5 sms charges references abiodun, a. j, oyeniyi, o j & osibanjo, o. a. 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(1992), “modeling the impact of service quality on profitability: a review in swantrz, t.a., bower, d.e., and brawn, s.w., (eds) 7 _14-18_ liviu 97 convergence and optimum currency area, as advanced economic integration liviu catalin andrei national university of political sciences and public administration, romania received: april 16, 2014 accepted: july 22, 2014 online published: september 8, 2014 abstract in 1961, in the earlier stage of the european integration, professor bela balassa proposed a five successive phase model. today, the half century experience on integration and corresponding literature issued lets us see rather two big phases (instead of five). the one would be the incipient integration, that came to enlarge the economic openess and internationalization and shaped: (i) free trade area (fta) and (ii) customs union; the other would be the advanced integration, in which internationalization would be replaced by the unique-common market and other two commandments would replace or just reshape the older fta and customs union into: (iii) economic convergence and (iv) optimal currency area. the last two will be emphasized by our paper, as for their current description-analysis in the literature. keywords: european type integration; incipient & advanced integration phases; customs union; economic convergence; monetary union; fiscal union; optimum currency area. 1. introduction i would like this paper to continue the previous one (andrei, 2012), for the preoccupation on the european integration outline, as considered update. in résumé, polemics were with the integration model of balassa (1961) through here criticizing at least all: (i) the economic and monetary union that had been assumed to have ended the integration process; (ii) integration, as not only successive, but also distinct phases from one-another; (iii) limiting integration to its ‘liberal’ part of development (i.e. through common-unique market, competition, economic union and common currency – whereas today the ‘other european economics’, the non-liberal one of budgets, policies, structural funds and policy, cohesion, sustained and regional development and others has become as obvious as the liberal component of the european integration. also in résumé, our retort to the balassa’s model – more precisely, to the ‘liberal’ component of the economic integration – comprises only two big (development) phases, meaning the (a) incipient and (b) advanced integrations, as in the following table 1. 98 table 1 -outline of the (european) integration process integration incipient advanced basic structure international unique-common market commandments free trade area convergence* customs union optimum currency area * see several types of convergence considered in the literature: economic, political and institutional. just mentioning that these phases proposed are no longer assumed as so deeply distinct from one-another, as in the model of balassa – i.e. even the primary free trade area phase might contain germs of the optimum currency area (oca), as it will be read below. my previous paper here referred did conclude on a presumable ‘end of integration’ for a moment in which specific contradictory aspects would end, when the eu (or just the ‘euro’) area would work like all states federations and when the institutional inventory will become complete, as it is in individual federations or just states. as for this paper, a certain ‘drawingback’ is preferred in the sense that details of such a time-development will dominate. convergence and optimum currency area(oca) will be here below debated as specific to the advanced phase of integration, as free trade area and customs union stay specific to both the early phase of the eu and to all the other than eu integration options world-wide. there is not only similarity between the two phases of integration – i.e. convergence and oca are different issues than the free trade area and customs union, as described below in our text. some space limits impose to our approach to stay close to conceptual developments in the literature, meaning distant from either details on the eu-euro-zone, or debate on current crisis. 2. the economic convergence concept in the literature 2.1 definition and perception there are three definitions of the economic convergence in the literature (frankel, 2004): (i) synchronization of business cycles – against asymmetry shocks1; (ii) similarity of economic structures – e.g. weight of agriculture and industry in total gdp; (iii) similarity of productivity and non-tradable weight in the total economy. iancu (2005, p.6) completes such portraying through considering the internal distinction among: real, nominal and institutional types of convergence – of which the economic convergence stops to the first two of these. equally through its conceptual approach, convergence equalizes a structural similarity between national economies (dinga, 20082, pp. 17-19), assumes a list of quantifying indicators (dinga, 2008, p. 19) and lays in the proximity of other (economic) terms like: similitude, harmonizing, complementarities and even redundancy (dinga, 2008, p. 21). the same literature indicates three perceptions of the economic convergence. the one points on the ‘market forces’ and stays related to the neoclassical theory of economic growth. the second one in line considers rather a ‘non-convergence’ finding of the contemporary era. thirdly and finally, convergence is seen as possible on the competition market, but the 1 this is a term rather proper the other concept approached in this paper -i.e. the optimum currency area --, but this remark is for once more illustrating the proximity between these two concepts in the today understanding. 2 and on-line: http://www.edinga.ro/files/studii/7_ro.pdf 99 difference from the neoclassic view here consists in the presence of policies instrumented (developed) for convergence implementing and presumably appropriate (iancu, 2005, p.7). 2.2 classification the α type convergence sees what is meant by structural similarity between economies. this type of convergence is considered able to absorb the asymmetric shocks3, but equally insufficiently clarified as in theory – i.e. what kind of structural similarity is about? – and in methodology – e.g. what about economies of different dimensions? are regional nonsimilarities also able to induce convergence (dinga, 2008, p. 26 and the following)? the β type convergence is pretty different story. it focuses on the link between the ‘classical’ and qualitative view on the convergence dynamic, on the one hand, and ‘catchingup’ type processes – that display different dynamics on shorter terms in favour of less developed and developing countries – on the other. as in its larger sense, the β convergence regards all about economic ‘speeds’, meaning that it even starts from the dynamic of a national economy towards its own equilibrium, as the primary definition of convergence. the same type of convergence reaches its own regression equation and coefficient (salai-martin, 1997, p. 58) and breaks down into: β -absolute -higher growth for developing economies, as compared to the developed ones ; β group -β absolute, plus considering countries’ grouping on criteria of similarity in industrial technologies, institutions and economic policies applied; β -conditioned -the previous, plus additionally considering the vector of determinant factors of growth. criticism for this zone of convergence classifying comes from other several analyses. quah (1993) here accuses the ‘galton type error’ related to self-correlation statistics. boyle & mccarthy (1997) pretend that even the β type convergence, in its literal definition, might see itself wrongly reflected by its found coefficient and friedman (1992) argues that it can be well replaced by the variation coefficient of per capita gdp within the region. boyle & mccarthy (1997, pp. 57-58) suggest that these above three (sub) types of the β convergence would actually base on the need created for such an internal distinction, as directly, and notice, as the basic truth, that the β convergence doesn’t prove able to replace another type, the σ type convergence – that is the similarity regarding per capita gdp and directly related economic indicators, the ‘catching-up’ process equally considered (dinga, 2008, pp. 27-28). as concretely, the σ type convergence calculates through the per capita gdp coefficient of variation4 (friedman, 1992) or standard deviation (dalgaar & vastrup, 2001, pp. 283-287) and includes two series of indicators for value dispersion (from average values): the (a) simple ones -basic dispersion and amplitude – and (b) synthetic ones – linear and squared average dispersions, variation coefficient (pecican, 2006, pp. 1-4). note that such negative assessment that all the σ coefficients basically develop clears the way for assessing ‘catching-up’ as ‘ the higher the dispersion, the higher its speed, the more positive evolving throughout de facto conversion’ (i.e. the β-type conversion, actually the per capita gdp/ iancu, 2005, pp. 14 & 27). the other two types of convergence in debate are ∂ and γ types (dinga, 2008, pp. 27-28). the previous regards the similarity of real convergence factors (frankel, 1999, p. 4). these factors do group into third levels. the basic one sees just the common currency that countries trade in-between (glick & rose, 2001). the second one comprises “common language(s), 3 as one more conceptual relation between convergence and optimum currency area (oca/ i.e. in the other part of this paper). 4 transversal, but also chronological data series are here used (iancu, 2005, pp. 21-22). 100 colonial history, and remaining political links”. the “third category of factors” mean what frankel (2004, p. 4) calls “accidents of history” …”that influences both currency choices and trade links”. finally, the latter γ type convergence regards the business cycles synchronizing. dinga (2008, p. 28) generally agrees the literature’s arguing about its essential role in ‘turning the asymmetric into symmetric shocks’, but slightly doubts its long-life in practical terms. 2.3 the real convergence criteria the description regarding the nominal convergence and its maästricht (1992) criteria won’t be here repeated5. and unlike dinga (2008), i find the eu’s (actually, ecb’s) absence from any debate about real convergence criteria enough consistent with the organization’s general attitude on this topic. just here reminding the nominal convergence criteria and so the basic distinction between these and the real convergence criteria for the reason of mentioning dinga (2008, pp. 36-39)’s contribution to drawing a list of what the author calls interconditioning criteria between the nominal and real groups of them. this is what the author calls ‘nominal-real transmission channels’ and three such general indicators are here enumerated. the real interest rate (dinga, 2008, pp. 36-37) deals with components of both the aggregate demand (consumption, government expenditure) and supply (investments6). secondly, the inflation rate is the way of affecting (reducing, when inflation rises) the money purchasing power, so the aggregate demand, but indirectly the aggregate supply, as well. and thirdly, the exchange rate takes a behaviour similar to the one of wages – as nominal and real, similarly to the exchange rate --, the difference made consisting in the proximity of the exchange rate to the openness degree of the economy (dinga, 2008, p. 37). lastly, table 2 enumerates the real convergence criteria by individual and groups (dinga, 2008, pp. 45-47), then the author organizes them into three ‘classes’ of criteria (dinga, 2008, pp. 48-49), but these classes do not pretty match the previous list of individual criteria. the class of (i) ‘catching-up’ criteria includes items like average domestic supply, openness degree of the economy and average gross wage. the class of (ii) sustaining criteria includes: the net savings rate, labour productivity in commercial sectors, gdp-distribution and the sold of the current account of the external balance of payments. lastly, the (iii) resilience class of criteria contains items like national revenue on activities, domestic absorption, employment rate and government. 2.4 criticism, controversies and other aspects as the above title suggests, this paragraph belongs to debatable aspects, as update. so, there will be below about three directions of studies drawn on the economic convergence concept so far in the same literature. 2.4.1 neoclassics, solow and the ‘anti-convergence’ this aspect might well have had its place as introduction of all the above descriptions, due to its historical order and bibliographical dimension. roughly, studies of convergence did start in the mid 1950s in the neoclassical zone of thinking. solow (1956) has his own (famous) 5 see my opinion about in andrei (2010) that these criteria didn’t arise from any scientific debate that the european monetary institute (emi), its following european central bank (ecb) or other eu forum would ever largely or publicly propose. 6 i see investments on the aggregate supply side as arguable. 101 theory that bases the today convergence description, as both economic equilibrium reached and ‘catching-up’ processes: the same saving-investment rate helps growth and development at different degrees – i.e. it is converse to the capital stock that this rate relates to. in other words, the capital stock agglomeration lowers the returns to investment, as much as less developed economies or those destructed by wars and other external causes, on the opposite, are, conversely, able to acquire higher returns on the same investment made. the solow’s model’s restrictions are those of: (a) equal saving-investment rates for all countries and (b) general decreasing returns on capital stock. plus, a ‘steady state’ to be reached by all economies – when zero growth rate of capital stock related to the unit of labour – is also concluded. table 2 -real convergence criteria group item of which: notation (a) general indicators population p active population pa people employed emp average number of employees empav all of the above, on regions and activities gdpdomestic supply gdps gdpsources gdpk gdp-distribution gdpq exports x imports m government g (b) revenues & expenditures households' revenue hr gross nominal wages wagn net nominal wages wann gross nominal labour costs lcgn households' expenditure he (c) others net savings sn domestic demand dd domestic absorption ad direct fiscal pressure dfp source: dinga (2008, pp. 45-47). mankiw (2003) illustrates the solow’s theory of growth at least by the extreme post-war cases of germany and japan, with their ‘catching-up’ developed economies, but many other authors share a fully different position than that. thirlwall (2001) founds that ‘empirics never confirmed’ this neoclassic theory and others point to the enlarging development gaps, as a contrary world-wide trend, as enough obvious. the poor countries of the third world see themselves forced to internationally specialize in basic product(ion)s, the international factors’ mobility closed stops convergence trends as well and the revenue multiplier plays for reach countries and equally against the poor and developing areas (myrdal, 1957; thirlwall, 2001; kornai, 1974), all of these as a true ‘anti-convergence’ phenomenon of the 102 contemporary era (iancu, 2005, pp. 7-15). new and newly-based models point to the ‘out of use’ for the neoclassic thinking on growth-convergence in diverse ways – e.g. associating to the physical capital or to β-σ parameters like ‘convergence speed’ for the negative value of parameters, or ‘convergence-divergence’ for value dispersion (arrow, 1962; lucas, 1988/pp. 2-42 ; romer, 1986). the current literature in the area sees itself splitting into pros and cons, but not only. on the pros side, the ones reconsider growth motors like savings and growth of population (mankiw; romer; weil 1992 ; islam 1995), the others play the same for capital and labour mobility (barro; sala-i-martin; blanchard; hall 1992). on the opposite side, authors rather see divergence between large groups of countries, versus some existing ‘clubs of convergence’ (baumol, 1986; durlauf, 1996 ; quah, 1996 ). a rather third position belongs to authors like galor (1996) : convergence might be real in practice, but for countries that prove some similarities ‘ab initio’ – or, this is what there has already been called above the conditioned convergence, but also might be called ‘multi-polar’ convergence. 2.4.2 the balassa-samuelson effect this is a controversy face to the convergence issue made by a theory actually shared by a longer series of authors7. the balassa-samuelson effect predicts that countries experiencing productivity increases would meet price increases meanwhile (frankel 1999, p. 14). the purchasing power parity (ppp) proves productivity-based and this effect is double-based: first, the so-called “penn-effect” sees the (same) goods’ price higher in the richer, than in poorer countries; second, the so-called “balassa–samuelson hypothesis” sees all economies producing both tradable and non-tradable goods and the productivity level and rates stay more variable for tradable zone all over. in such an order, immediate causes of this effect do easily multiply: variation of productivity among countries for both tradable and non-tradable sectors; variation of differences in the same productivity between tradable and non-tradable goods within the same country; persistence and weight of the non-tradable sector in the home economy; the direct productivity-incomes correlation; even high transportation costs wherever the good is cheaper. the “penn-effect” finalized sees the ppp deviations as: the higher the income, the higher the price level (david, 1972; officer, 1976). 2.4.3 specific developments in the european union the eu appeared aware of the above described realities from the very beginning – that was why its basic treaties did and do associate convergence with cohesion (myrdal, 1957). the attractiveness of the area has also presumed as associated to the pressure on labour resources, especially the one from less developed areas. the maästricht treaty and moment (1992) took a new and advanced step onto deepening cohesion in a context linked to convergence and growth-sustained development (iancu, 2005, pp. 12-13). despite these facts, iancu (2005, pp. 22-23) concludes some contradictory situation regarding the same issues here above debated. the per capita gdp proves rather divergent (i.e. rising σ coefficient) within eu15 during the 1995-2005 interval. on the contrary, a slight convergence trend was proven by eu25 between 2004 and 2005 around eu10. however, the eu25 and eu15 groups display significantly different variation coefficients from each-other. 7 see the ricardo–viner–harrod–balassa–samuelson–penn–bhagwati effect (kravis & lipsey, 1983; samuelson, 1994, p. 201). 103 finally, all three mentioned groups of the eu member countries play on distinct numbers the way that the highest trend to convergence belongs to the less developed countries8. 3. the optimum currency area (oca) theory in the literature in 2002 the oca theory had its own 40th anniversary, for a period during which four phases were claimed to have succeeded and marked this subject: 1/ ‚pioneering’ phase – with the basic oca theory and properties revealed; 2/ ‚reconciliation’ phase -combining diverse facets of the theory; 3/ ‚reassessment’ phase -that leads to the ‚new oca theory’; 4/ ‚empirical’ phase – in which the theory was subject to due empirical scrutiny (mongelli, 2002, p.4). 3.1 the ”pioneering” phase9. developed between 1960s and early 1970s. actually, debate started and the oca properties were drawn on appropriate issues -mobility of factors of production within the area, price and wage flexibility, economic openess, diversifyed production and consumption, similarity in inflation rates, fiscal and political integration, financial integration. the similarity of shocks and income correlation „were added later” (mongelli, 2002, pp.4 and 8-11). this first phase of the oca theory developing was started by mundell (1961) – who is recognised as the parent of the concept --, then mckinnon (1963), kenen (1969), and ingram (1969) joint the debate not much later on, whilst freedman (1953) and meade (1957) had expressed even earlier than mundell and the others, the previous on a principial price flexibility and the latter about the balance of payments of the region in way to become the later eu. 3.1.1 basic definition of oca once more, mundell drawn the common oca definition: (i) a ‘domain within which the exchange rates are fixed’ (mundell, 1961, p. 657); (ii) the region (not the nation) with a high degree of internal production factors mobility (i.e. capital and labour), versus external immobility (mundell, 1961, p. 661); (iii) finally, mundell sees a world of ‘currency regions’, rather than nations with their own monies. in reality, the first and third components of the mundell’s definition of oca relate to money and currencies, so oca, on the one hand, retorts the older theory of international monetary systems (ims/triffin, 1973) and on the other will come to be completed by mckinnon (1993a) – actually by the lasts’ theory of the nominal anchor. this is the order in which mongelli (2002, p.8) notices the concomitance of this phase with either the ims shaping in the bretton woods agreement (1944)’s way and process, with its specific capital controll, or the beginning (incipience) of the european integration. in other words, the oca theory came up directly into the debate about fixed, versus flexible exchange rates. pelkmans (2003) believes that the (above) oca’s definition might actually be simplyfied or adjusted as: ‚the region in / for which the cost of giving up floating exchange rates– i.e. the alignment of the national currencies’ rates within the region -is overwhelmed by benefits of the unique-common currency in use’.the second component of the oca’s definition prolongs 8 here including romania. despite that the author has a not too optimistic conclusion, i.e. for a presumed 4% a year growth for this country, as against 1.8% a year growth for eu25, a common per capita gdp level will get as high as eur 63,200 in about 57 years from the moment of this study (iancu. 2005, pp. 18-21). 9 mongelli (2002, pp. 4 and 8-11). 104 the above one related to the intra-region currency-exchange rate regime, but then more aspects here attach to these two. 3.1.2 properties of oca (1) mobility of factors. mundell (1961) was ending his analysis by reiterating for oca the picture of the ‘region with perfect (production) factors’ mobility’. as for this component, mobility of factors of production counteracts price variability (see the next sub-paragraph) within the region (mundell, 1961). labour could be less mobile on the short periods, but the aspect might change in the long run (corden, 1972). kenen (1969) notices that the mundell’s ‚region’ is portrayed as neither geographical, nor political, and for the ‚factors’ mobility’, mundell had insisted more on labour, than on capital (ingram, 1969). and this labour mobility needs a prior employment mobility and labour homogeneity in a formula that rather conducts to mono-industrial type regions. grubel (1970) explains that the mundell’s description reclaims ‚perfect internal labour mobility, versus perfect external labour imobility’, whereas in reality it is to debate about a real graduality (different levels) of labour mobility. giersch (1973) here wonders, in context, about whether an irreversible by definition process that migration is would be able to imbalance the external equilibria on the long term. corden (1972) here answers that mobility of labour might prove a rather lower capacity of fighting asymetrical shocks. (2) price flexibility. as continuing the introductory idea of the precedent sub-paragraph, when flexible prices and wages – says the „last neoclassic” that milton friedman was, as together with all his ‚classics’ and neoclassic predecessors -it is less likely for unemployment in one country and inflation in another, plus exchange rate adjustments between (friedman, 1953). (3) financial market integration. and since the incomplete mundell’s discourse about factors’ mobility, ingram (1973) argues that this part of integration cannot substitute the capital’s mobility, but just smoothen it – i.e. fighting its shock aspects. in other words, financial market integration cushions temporary adverse disturbances through capital inflows. later on, mckinnon (2001) reinforces the role of financial integration, in context. (4) degree of economic openess. mckinnon (1963) says that the more open the economy, the easier the transmission mechanism of exchange rate mobility into prices’ and wages’ movements; plus similarity between economic activity structures. (5) diversification in production and consumption. acording to kenen (1969), this oca item also smoothens the exchange rate changes shocks; the same for impacts of individual sectors’ mutations, and for settling ‚jobs portfolios’ within the region. (6) similarities of inflation rates. fleming (1971) observes that inflation might be caused by diverse disequilibria of sectors, their developments, policies promoted etc.10 similarity in inflation rates equally might reduce inter-country shocks and their impacts. eichengreen (1990) indicates the need for narrowing fluctuations between countries and the ‚balassasamuelson’ effect11 could allow the ‚catching-up’ part of integration processes. (7) fiscal integration. this aspect is for the union of countries to be able to redistribute resources among -i.e. to countries that need them, when the case, in order to free the exchange rate from such a task, once more (kenen, 1969). (8) political integration. this is, finally, the will of the countries involved to join commitments, to share costs of processes amongst and to encourage institutional linkages and cooperation on some activities etc. (mintz 1970). synthetically, these above properties would 10 see the ‘mundell-fleming model’. 11 see also the above 2.4.2. 105 make the money exchange rate less adjustable (usable) within the region to adjust (temper) presumable shocks(mongelli, 2002, p.5). 3.1.3 criticism on the ‚pioneering’ phase mongelli (2002, pp.5; 11) indicates what the author calls the ‚pioneering phase’s drawbacks’, meaning there were not yet for oca: (i) a ‚comprehensive framework’ defined, so some properties were yet contredicting one-another; (ii) an empirical content for most of its properties. there also were for robson (1987) difficulties for measuring properties; ambiguity of characteristics and of differences amongst. as for tavlas (1994), „oca points to different directions”, meaning a ‚problem of inconclussiveness’ – e.g. small economies are more likely to be open, but less capable of production diversification, so more likely to accept the unique currency, but with more propensity to flexible (than to stable) exchange rates. mckinnon (1993b) here adds that more differenciated economies have less foreign trade. then, how can the oca above requirements be ranked amongst ? 3.2 the ”reconciliation” phase that was during the 1970s. there were both a deepening of some properties (i.e. ‚metaproperties’) of oca and an adding of more ones (i.e. similarity of shocks/ mongelli, 2002, p. 5). there is to be understood for this phase the above ‚pioneering’ points of view reuniting, but equally what a presumable oca brings for countries joining it. concretely, mckinnon (1963) was viewing that country a might be supposed as interested in a currency union with a price and cost stable country b, in order to ensure its own stability, but some shocks are always expected. or, this is the same with ishyama (1975), for whom oca is limited by the interest of each country to join or stay out of the union, and corden (1972), who imagines joining a currency union by any presumable country as basing on a prior cost-benefit analysis. and actually, the exchange rate flexibility would be in place on both alternatives, together with the one of prices and wages -the exchange rate would be able to insulate a country from asymetric shocks in any way; the question which remains is whether that would be outside or inside the union. and as for the cost-benefit analysis of the monetary integration of individual countries, see the rectangular graph in figure 1. figure 1 -costs & benefits b c c’ c’’ b c’’ c c’ o degree of integration source: artis (2002, p.16) this is illustrated by artis (2002, p.16) for ‚a country facing option of joining with a partner or group of countries in a currency union’ (artis, 2002, p. 2). benefits here mean loss of: (i) transaction costs and (ii) currency risk – the (b) curve is upward sloaping: the higher 106 the economic integration degree, the higher the benefits from the monetary integration. costs, as correspondingly, mean: (i) loss of the country’s (independent) monetary policy; (ii) loss of the shock absorbing of exchange rate movements. – the (c) curve is downward sloaping: both monetary and exchange rate policies decline, as values, in the open and interacted economies of such an area. there are three cost curves (c, c’ and c’’), of which’s meaning gets related to different economists’ view on approaching integration – see also the corresponding intersectional points. the intersectional costs-benefits points express economic states in which a country starts taking advantages of joining a currency area. in such an order, it is the monetarist view (c’’) – for which integration costs are assumed to be low and even a reduced integration degree is enough for attending the crossed costbenefit point of joining integration; versus the keynesian view (c’) – for a significantly higher cost level of assuming integration. cerna (2006) has, in this context, a two collumns list of possible costs-benefits of oca. and apart from these, two ways of efficiency increase in the oca context are outcoming from this view: (1) rising the economic integration (i.e. convergence) degree between countries in the area; (2) reducing rigidity of the integration costs – i.e. flexible production factors’ movement around. despite all these above developments, this new ‚reconciliation’ phase proves the same drawback as its previous ‚pioneering’ one: still no empirical content (mongelli, 2002, p. 5). 3.3 the ”reassessment” phase then, in early 1980s, there came a kind of ‚stagnation’ for the oca theory’s developments or a ‚lost momentum’ in the aftermath of the second phase. despite that, then there were: (a) some advancing on empirical approaches; (b) conceptually reconsidering the monetary (currency) union; (c) reinterpretations of some properties, as previously formulated – and this was the ‚reassessment’ phase: between 1980s and early 1990s (mongelli, 2002, p. 5). not to be equally here ommitted for the late 1980s, parallel preocupations for building the emu on the ‚one market-one money’ principle, that did push approaches through the ‚new oca theory’. or, „the. emu question is, possibly, more complex than the oca question” (mongelli, 2002, p. 14). tavlas (1993) remarks that the ‚new’ oca theory here started emerging vis-à-vis the ‚old’ oca theory after revisions had been made (see also tavlas 1993). then, see empirical studies that did start in context since the 1980s: low wage flexibility behind low price flexibility (calmfors & driffil, 1988); real wages are still low flexibility accross european countries and employment do some adjustment to wage flexibility (oecd, 1994); some significant asymetries of the european labour markets (cadiou, guichard and maurel, 2001); the relationship between centralization of wage bargaining and labour market outcome is not linear – countries with differences in labour market institutions make find it costly to form a monetary union (degrauwe, 2000). besides, it is for this phase that alesina, barro, tenreyro (2002) conclude that countries with large co-movements of outputs and prices have lost costs from abandoning monetary independence vis-à-vis their partners, but calvo & reinhart (2002) appreciate the lost of monetary independence as ‚not a substantial cost’. last, but not least, emerson and al (1992) argue that in the long run, high inflation does not yield any macroeconomic benefit in terms of growtht and unemployment. 3.4 the ”empirical” phase this final phase started in 1987, as complex approaches and analyses (mongelli, 2002, p. 5), of which’s sizes overpassed the previous similar studdies drawn in early 1980s. issues that came one by one under study in this time interval were: price and wage flexibility (mongelli, 107 2002, p. 18), labour market integration (mongelli, 2002, p. 19)12, factors market integration (i.e. foreign direct investments/ mongelli, 2002, p. 20), financial market integration (mongelli, 2002, pp. 20-21), the degree of economic openess (mongelli, 2002, p. 21), diversification in production and consumption (mongelli, 2002, p. 21-22), similarities in inflation rates (mongelli, 2002, p. 22), fiscal integration (mongelli, 2002, p. 22-23) and political integration (mongelli, 2002, p. 23-25). the general critical remark that can be made on this final and intellectually productive phase is that all these studdies look backwards by definition (mongelli, 2002, p. 26), whereas the opposite ‚looking ahead’ stays a more delicate issue – it is supposed to answer some questions raised. the one is the question-paradigm between the old and classic country specialisation in the inter-member countries’ trade contest and endogeneity of oca, that is the real integration (mongelli, 2002, pp. 27-31). as for the previous (country specialisation), the ‚krugman specilisation hypothesis’ (krugman, 1993, with the so called „lesson of messachussets”) relates to a us developmentexperience over the last century: the single currency removes barriers of increasing returns to scale and even in integration fostering conditions the comparative advantage will work as classically and countries will specialize (see also rauch, 1994; eichengreen and bayoumi, 1996; bertola, 1993). but so member countries of a currency area will reduce production diversification and become vulnerable to asymetric shocks. frankel (1999) so opinates that the solution will be enlarging the oca’s area – i.e. the frankel’s paradox. otherwise, the former oca will turn into a small group of countries with proper currencies floating among each other: ‚ the oca’s dissolution’ (mongelli, 2002, p. 28). finally, on the one hand, the european integration is a process of evidence, but on the other specialisation among the eu member countries plays its (other) role: destruct(ur)ing production diversity, as required by oca (mongelli, 2002, p. 32). as for the latter(endogeneity of oca), a preliminary answer comes from frankel (1999) as well: member states will be more attracted by sharing a common currency when the tradeoff and/or corelation between incomes and economic openess towards the(other) member states. the question whether income correlation rises or falls following the monetary integration doesn’t make unanimous answer (mongelli, 2002, pp. 27-28). in which conditions, frankel (2004) also adds that ‚oca varies over time’. the hypothesis of positive correlation between income and inter-member cuntries trade rising consists in that increasing integration would so be assumed to lower transaction costs and eliminate currency risks. mccallum (1995) specifies that the common currency is supposed to be a „serious commitment”; no competitive devaluations, incentive for fdi and future political integration encouraged. but what does the empirical evidence tell us.? eighengreen (1996) and eu commission (1999) conclude on results like: (i) increasing specialisation and (ii) lowering industrial concentration for both europe and us. another important response comes from rose (2000): countries trade on the same currency (with other countries) three times more than with countries with other currencies13. the other relevant question-paradigm of the last and current phase is: „do countries form currency unions because they tread a lot, or start trading more because they form a currency union ?” or, do the two position reconcile ? (mongelli, 2002, pp.6; 31). 12 here to be exemplified about labour market integration in europe eighengreen (1990) concluding that variation of unemployment was twice in europe than in the us. and thomas (1993) for different responses in europe and us of the unemployment rate to unemployment shocks. 13 186 countries were taken in this model. 108 3.5 concluding remarks mongelli (2002, p. 31-32) found as the appropriate question raised for the 40th aniversary of the oca theory that: „was that made simpler ?” and the author answers „yes and no”. for the ‚better position’: studdies are much deeper and oca can be viewed in many more positions and situations. for the opposite ‚harder position’: it is still hard to reconcile all the oca’s properties and to assess the agents’ reactions. 4. concluding for convergence and oca just let us suppose the impossible alternative in which both convergence and oca debates wouldn’t limit to regions, as multi-country-regions defined as above. then, what would our approach become? the answer is simple: (a) the debate on convergence would go back to its primary neoclassical approach of growth-development, with its double aspect, (i) trend towards self-balancing and (ii) ‘catching-up’ developed economies by the less developed ones in the international context; (b) the debate on oca would search for inter-country trade and all the other flows equilibrium able to fight real and even presumable asymmetric shocks. so, actually, such an extremely simplifying hypothesis is enough for re-positioning research onto basic growth-development and general equilibrium. also note that the two concepts keep in common issues like: equilibrium growth, international economics, symmetry-asymmetry of shocks, common currencies – i.e. common value references for the common market --, but equally regionalization, as areas-zones for oca and countries ‘clubs’ for convergence (table 3). despite these, the two defined concepts on the advanced integration are obviously distinct from one-another. last, but not least, recall that the convergence-oca couple of concepts look different issue than the free trade area-customs union corresponding association. the last were just phases of an earlier moment of the integration and the relation between is defined clearly and simply by specific differences. convergence and oca stay different from free trade area and customs union meaning a paradox of more knowledge of the past for what was developing at that time, than it currently is the case of an advanced integration on which theoretical debate sees itself forced to recall primary economic theories and analyses and/or to adapt them to a reality that is just europe. table 3 -key issues related to both convergence and optimum currency area (oca) n. concept convergence optimum currency area (oca) observations 1 asymmetrical shocks convergence is just embarrassed through. they are the opposite of the oca's aiming. x 2 balassasamuelson effect' this is a challenge for all convergence idea: prices (i.e. the inflation rate) go higher in more developed economies. as all challenge for conversion, it is the same for oca and potential shocks. x 3 capital this is a factor of production for economic development, but the financial integration is even more obviously significant for convergence. the financial integration (see 15 below) is equally important for what oca priory sees for capital: its mobility throughout the region. x 4 ‘catching-up’ this is deeply proper to convergence, despite that so growth rates show fully different between developed and developing economies in the this might be a source of some shocks sometimes. solow(1956) and see also the types convergence. 109 region. 5 “common language(s); colonial history; remaining political links”. this is a kind of 'classical' factors for economic convergence nowadays, in the post-colonial era. oca stays always close to convergence and integration factors. glick & rose (2001). 6 cost-benefit analysis rather no mention to make. benefits of (staying in) the oca have to overpass corresponding costs. cerna (2006) 7 country specialization rather non specific for convergence (although never being excluded), but proper to the classical-neoclassical theory of international trade. not specific to oca either. krugman (1993), with the so called „lesson of massachusetts for the eu” 8 criteria they are nominal (see monetary) and real (as referred to the real economy). the previous are pointed by the 'treaty of union' (maästricht 1992), whereas the last seem to be conveyed to the academic approaches. actually, they refer to some macroeconomic indicators, but of which, of course, behaviour displayed is different from oneanother. the convergence criteria belong to convergence, by excellence, whereas oca sees them as belonging to the integration concept itself. convergence itself is one of the oca's requirements. x 9 diversification in production and consumption this is proper to development and building well developed economies. this is for oca, as against potential shocks, but the alternative of country specialization stays under the same debate for a similar support to common currencies. kenen (1969) 10 economic equilibrium this is a convergence trend, as compulsory, in which the 'steadystate' is expected for each economy in part; what happens between different economies then is expected to come. oca is assumed as an equilibrium area (region) of all: prices, including exchange rates and costs, the last including wages, then production factors equally with their prices, but besides with their space mobility etc. x 11 economic openness no convergence without economic openness. the same as for convergence. mckinnon (1963) 12 economic structure this is finally expressed by weight of activity sectors in gdp (or rather gnp, when integration) and stays important for the economic convergence in the sense that markets of different countries so may be not only similar, but also united amongst, as one common (unique) market with the same business cycle timing and similar consequences on employment, welfare and cohesion in the area and, finally, on integration present and perspectives. similarity of economic structures of member states in the region is just one of alternatives for the common unique market viability -the alternative might be a countries' specialization, as in the classic theory of international trade (see also the country specialization). however, the previous similarity of structures seems more appropriate to avoiding asymmetric shocks and so to oca; to welfare and correspondding cohesion, as well. dinga (2008) wonders 'what kind of economic structure?'. krugman (1993) offers the country specialization alternative to the unique market and common currency. 110 13 exchange rates they are assumed as fixed, or at least stable, as much as the floating ones imply insulating individual economies from the others. it is the same as for convergence; moreover, the fixed exchange rates hide the potential or virtual common currency, as operational. see the european monetary system (ems/1979-1999). 14 factors of production their problem is double: (i) supporting growth-development of each nation; (ii) availability to all nations. they imply specific mobility in the region, as either beneficial, or supportive for shocks. x 15 financial market integration this is favourable for the capital involvement in both development and integration. the financial integration is equally important for what oca priory sees for capital: its mobility throughout the region. x 16 fiscal integration this is a good help for convergence, even when disparities of development in the region. as linked to the factors' mobility and disposability throughout the region. x 17 growth & development convergence might be seen as a growth-development theory adapted to new realities. the economic development level is among the strongest stability factors in a multistate region. x 18 inflation rate this is a good reflection of convergence achieved any time. as opposed, there are many factors of the inflation rate's similarity erosion at the same. this is a basic factor for oca achieved, as well. fleming (1971); eichengreen (1990); balassasamuelson effect. 19 integration (degrees) convergence equals integration, as seen from oca. oca is high degree integration, as by definition. artis (2002) 20 labour this directly-indirectly relates to the open economy. a labour market in the region is obviously required. mundell (1061); corden (1972) 21 nominal anchor both convergence and oca relate to a unique basic value for the modern market development. moreover than for convergence, this basic value is a national currency that becomes internationally freely usable currency (i.e. in the oca region), except for the common currency adopted formula. mckinnon (1993a) 22 ‚one market-one money’ principle see above for the nominal anchor. see above for the nominal anchor. x 23 “penn-effect” see the 'balassa-samuelson' effect. the same as above. the higher the income, the higher the price level (david, 1972; officer, 1976). 24 political integration no integration against the people's will. only in theory (i.e. the theory of international trade) and partly in incipient phases of integration (e.g. free trade area & customs union) the indifference about with whom (which other nation) to integrate is considered. mintz (1970) 111 25 productivity the productivity level defines the level of economic development and welfare reached by any economy. the productivity problems presumably 'hide' behind all economic shocks between nations. x 26 quantifying this is needed wherever several economies compete on the same 'qualitative' basis. finally, shocks express in quantitative terms. x 27 structural similarity it expresses like weight of sectors in gdp etc., but there is still controversy in the topic area from different stand-points. oca is more exact in its economic similarity requirement -i.e. when defined as such, asymmetrical shocks would be better avoided, but an alternative of specialized countries and subregions around might equally be valid for supporting common (regional) currencies (see krugman/"lesson of massachusetts"). α type convergence (iancu, 2005; 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(1973): our intrernational monetary system. yesterday, today and tommorrow . yale university press. microsoft word 4 (18-11) kowo.docx 47 effect of participative leadership style on employee’s productivity kowo solomon akpoviroro kwara state university, malete nigeria kadiri ismaila bolarinwa university of ilorin nigeria) sabitu olalekan owotutu ogun state institute of technology igbesa, nigeria received: may 1, 2018 accepted: november 28, 2018 online published: november 15, 2018 abstract this study was conducted based on the effect of participative leadership style on employee’s productivity using midland galvanizing product limited (midgal) abeokuta, ogun state nigeria. the objectives of the study are to examine the significant relationship between participative leadership style and employees motivation and also to investigate the effect of participative leadership style on employees productivity. the study made use of two hypotheses. survey research design was employed for the study. the sample for the study comprised 114 staff of midgal. the instrument titled “participative leadership inventory (pli)” was used for the study. regression analysis was used to measure the effect of the independent variable to the dependent variable of hypothesis one, while in hypothesis two correlation analysis was used to measure the significance of the relationship between the dependent and independent variables. cronbach’s alpha method was employed for measuring questionnaire reliability. spss was also adopted for the research in testing the research hypothesis. the result of the findings shows that there is positive and significant relationship between participating leadership style and employee’s productivity. also, the result shows that participatory leadership style can be used as a motivational tool for workers. based on the results of the study, the study recommended that every organization should adopt participatory leadership style as it boost employee morale and enhance organizational productivity. keywords: participative leadership, motivation, leadership style. organizational performance. 1. introduction with respect to the organization’s perspective to follow their evolution, it is necessary to examine organizational leader’s behaviours precisely in all organizational levels to achieve their goals (mohammed, 2014).leaders should perceive their reciprocal independency and international journal of economic behavior, vol. 8, n. 1, 2018, 47-60 48 influence their employees so that they motivate to participate in reaction and responsibility and hence knew their performance expectations (puni & okoe, 2014). posit that in the organizational environments employee’s behaviour and efficiency influenced by workplaces and this shows leaders behavior’s during their interaction. joashi & row (2011) emphasized that leaders should acquire better cognition from their behaviours that influence their members’ self-confidence as they form effects of work places through employee’s feedback and their employment. the effect of participative leadership style on employee’s productivity is a planned effort knowledge and skills of the behavioral sciences (amstrong,2009). the main thrust in organizational development is on the organizations problem-solving abilities. the employees must integrate their goals with the organizational goals. employee involvement at every level of hierarchy in matters concerning the overall wellbeing of the employees can be achieved through participative leadership (duncan, 2014). participative leadership also known as democratic leadership style is a method of leadership that involves all team members in terms of identifying important goals as well as developing strategies and procedures to achieve the goals. according to house and mitchell (1974), the participative leader possesses consultative behaviors, such as imploring subordinates for ideas prior to making an ultimate decision, although, they retain final decision authority. the participative leader shares duties with subordinates by encompassing them in the preparation, decision-making, and implementation phases (wiesenthal et al, 2015). workers participation in decision making process which affects staffs and their job is one of the psychological motivational activities which could be used to raise employee’s morale and productivity (brown, 2011). 2. literature review 2.1. the concept of participative leadership style participative leadership is defined as the process of making joint decisions or at least sharing influence in decision making by the superior and his or her subordinates (puni & okoe, 2014). it has become increasingly important in african organizations than ever before (ijeoma, 2010). modern business organisations reflects a growing recognition among academics and managers that a high productivity/high wage economy require new labour management relationships, including ways to share gains and organized work that more fully develop and utilize the skills, knowledge, and motivation of the workforce (fincham,2005) . fincham identified this type of style as one that involves the leader including one or more employees in the decision making process (determining what to do and how to do it). however, the leadership maintains the final decision making authority. using this style is not a sign of strength that your employees will respect (sinek, 2014). participative management addresses the relationship between the organisations and the role of employees and stakeholders in all levels of organisational decision making (dhamika, ahmad & sam, 2013). in addition to philosophical issues of governance and the appropriate relationship between workers and their employers, participative management can help managers dealing with the fundamental challenges facing today’s dynamic and competitive environment (house et al,2004). maintaining levels of effectiveness, productivity, innovativeness and worker motivation in an increasingly dynamic, competitive environment should be the concern of all organization (monzani & l.2015). participation is one of the important ingredients in gaining employees commitment on an overall basis (griffin et al,2007). the commitment can lead to less need for the use of formal authority, power, discipline, threats and pressure as a means of obtaining job performance. (ijeoma, 2010). greater goal concern by reducing conflicts, improve 49 cooperation’s and enhance condition without the need for elaborate control or systems for checking and correcting difficult behaviour. (finchan and rhodes 2005). human outcomes of poor leadership include employee stress, disenchantment, lack of creativity, cynicism high employee turnover, and low productivity. poor leadership destroys the human spirit essential to ensure work effectiveness (robbins, 2014). organisations today are moving towards more democratic structures which allow employees to influence the decision made because of concern for quality and the requirement of a high degree of commitment by employees to their work (rost, 2013). the average nigeria employee in recent times appears satisfied with an open door policy of management with adequate avenues for effective communication consultation and delegation of powers which covers some degree of participation (bergen & bressler, 2014). the aim of involving people in decision making process of the organization is to create in such a person a sense of recognition and belonging which could raise the person morale, as they will see themselves as very important in the organization (hartong & koopman, 2011).this will invariably lead such person(s) to a higher output in terms of productivity (goodnight, 2011). the feeling of empowerment or psychological empowerment has been understood as a form of intrinsic motivation to perform the job and is shown in four cognitive dimensions, meaning, impact, competence and self-determination (huang, 2010). robbins (2003) considered the distinction between the sharing of decision with individual subordinates and with the group as a whole. he emphasized that the criteria for choosing the proper style include among others, the importance of acceptance of a decision by subordinates time and cost minimization. managers should therefore be able to analyze the relevant factors and decide on the degree of decision that would be appropriate (dvir et al, 2002). adams (2017), javad (2013) and ejimabo (2015) found the level of trust is high leaders; subordinates may expand more effort to accomplish work tasks. 2.1.1. types and strategy of participation there are basically dual forms of participation namely direct and indirect participation. direct participation in decision –making is the participative processes whereby employees are involved in decision relating to their immediate task or environment (werner, 2007). this form of participation is mainly found in productivity bargaining which is an arrangement between a worker and his employer to the effect that an increase in his productivity will make him earn an additional wage. productivity bargaining arises mainly in circumstances where working practices need changes (chiek, 2001). dull (2010) notes that indirect form of participation is the participation process whereby employees are involved in decision making through their selected representatives or delegates. looking at the strategy applied by managers to involve employees in decision making in organization, participative principles is normally employed to achieve the desired result. managers have many opportunities for involving subordinates in organizational planning and decision making. mission refers to defining a meaningful longterm direction for the organization (brown, 2011). leaders have an important role in managing shared values and mission (yuki, 2002). joashi & roh (2011) identified four participative methods which are: i. delegation: means the transfer of authority from the superiors to the subordinates ii. committee action: committees are a vital mean of continually gaining inputs from a large number of organizational members. most companies have certain standing committees to deal with continuing or receiving problems facing the organization. these could be related to corporate policy goals and operations. depending upon the organizational structure special committees may be established to deal with budgets, 50 employment policies, grievances, disciplinary problems and a variety of other organisational problems and activities. iii. question asking: managers who respect the knowledge, opinions and judgment of their surbodinates may achieve a relatively high level of participation by simply asking questions. here, the participative leader asks for information and insights that will improve the quality of their responsibility of their subordinates in terms of intelligence and problem solving. iv. shared goals: participative leaders are prone to become involved in management by objectives and similar goals – oriented programmes. ideally, an mbo programme is highly participative. 2.1.2. do’s and don’ts participative leaders schein (2010) pointed out some do’s and don’ts of participative leaders. these are: participative leaders do i) communicate the big picture-company priority performance results, work units connection to the large organization. ii) involve employees in developing realistic goals sensible performance measures and appropriate rewards. iii) delegate appropriately and develop employee talent. iv) support employees with clear direction and necessary resources. v) facilitate team work by focusing on process as well as task. participative leaders don’t i) withhold information and act as if the group, is an isolated unit ii) tell employees what to do and hope for good performance. iii) manage in a detailed, hands – on fashion iv) set people up for failure by not providing support v) create competition and focus only on task participative leaders are described as such because their job is to see that employee participate in decisions that affects their work, in short they tap the full potential of their work force. participative leaders orchestrate high performance by providing director information resources and group facilitation. 2.1.3. why the interest in participative management now? unlike the days when a good supervisor was expected to rule an iron first, today’s leaders are asked to be visionaries, coaches and facilitators (careless, 2004). but what do those words mean in terms of the –job behavior faced with new expectation it is not surprising that so many supervisors feel as though they are in alien territory. understanding the changes that have made participative leadership necessary will make the territory more familiar. changes in competition have necessitated changes in business goals which have created a need for new business rules and roles. the playing field has changed. some reasons behind the shift can be seen below: i) competitive pressure: a key factor in the interest in participative management was the realization, which really struck home during the 1980’s that better management practices – superior quality management systems, better employee relations, integrated design and production teams could provide critical competitive advantages to public and private sector organization (siehl, 2009).during this same period, heightened 51 issues about the societal accountability of organization also occupied management positions (martin & s.l, 2013). ii) underlying the entire discussion of participative management and employee‘s involvement is the dominance of the bureaucratic, hierarchical organization model and management approach commonly referred to as taylorism (based on frederick winslow taylor’s (1911) classic, the principles of scientific management) or fordism (based on the principle developed by henry ford). however, the pre-eminence of the bureaucratic, hierarchical organization model and traditional management practices is facing increased challenge (levenwis & green, 2002). in recent time, participative management strategies and employee and stakeholder involvement were approached as modification of or supplements to the traditional bureaucratic, hierarchical model, undertaken to achieve particular goals or address particular problems. recently, however participative management has been discussed as a comprehensive governance system that could and is replacing the traditional bureaucratic hierarchical system for the new, organic networked organizational forms emerging in the 1990s. the traditional logic of organizing is to give simple work to employees at the bottom of the pyramid who then report through a supervisor up a hierarchical chain of command to senior executives who provide direction, coordinal and control. this does not work well for organizations managing knowledge intensive tasks. as the number and visibility of high knowledge based organization increases, the need for a new logic of management has gained currency among both academics and managers (mccleskey, 2014). dull (2010) summarizes some of the principles of this new logic as shown in figure 1. figure 1 – conceptual model of participative leadership style source: dull (2010) principles of new logic of management. 52 2.2. theoretical framework of participative leadership 2.2.1. social learning theory rowe (2001) worked on the foundations of reinforcement theory and suggested that behaviour does stem from its consequences but also includes constant learning and adapting to one's environment and that most learning probably occurs vicariously through observation of others. the theory thus explains behavior as a function of the person and his or her social environment and the interaction between both. another key element of social learning theory is selfregulation which involves controlling one's own behavior or the transfer of behavior from external sources to internal ones. this self-regulation occurs through three steps of selfobservation (looking at one's own behavior and keeping tabs on it), judgment (comparing one's behavior with a standard) and self-response (rewarding or punishing oneself through the comparison with the standard). it is through this self-regulatory mechanism that an individual gets a sense of self-esteem. it is derived from the theory that an individual's self-belief about his or her ability to do a task strongly influences his or her ability to perform (etikan & alkassim, 2016) and the relationship between performance and efficacy has been established empirically. 2.2.2.need based theories the phenomenon of recognition provides for individual political, social and psychological benefits. after food, it is by far the most significant of human needs and as heike (2009) points out, "without recognition humans in general would not lead a life above merely animal existence." (bergen & bressler, 2014). role of recognition in driving human action can be gauged by its placement in the various theories of motivation; need for recognition has been a part of both the traditional and contemporary theories of motivation. maslow (1943) in his seminal work 'a theory of human motivation' gave importance to recognition as a concept can be observed in relation to individual's social needs and needs at the higher end of the hierarchy. (schein, 2010). acknowledgement as a member of a group satisfies an individual's social need, likewise recognition for achievement helps build self-esteem. huang (2010) worked on maslow's need theory and condensed it to three main needs for power, affiliation and achievement. alderfer's erg theory (1972) also points out the role of recognition in context of an individual's need for relatedness. 2.2.3.process theories process theories give relevance to the 'value' associated with those rewards. vroom's expectancy theory (1964) provides the most significant and holistic presentation of work motivation. sarros, brain & santora (2008) assert that after thirty years of inception, there is a decline in the research on expectancy theory, which indicates that the basic concerns regarding the theory have been examined and that the theory has matured) it is said that expectancy theory has been used "as a general framework for assessing, interpreting or evaluating employee behavior" (ambrose and kulik 1999, p.236) 2.2.4.trust-based mechanisms theory this illustrate how participative leadership influences job performance there is growing evidence to suggest that participative leadership influences the job performance of subordinates through engendering higher levels of trust in supervisor, especially for employees in nonmanagerial positions (huang et al. 2010). affective trust refers to that which results from the emotional ties developed between two parties within a relationship as they engage in a process 53 of reciprocal social exchange (amstrong, 2009). by providing opportunities and support to take responsibility and participate in decision-making, participative leaders should elicit affective trust in their subordinates through the development of a close emotional bond between the two parties (huang et al. 2010). 2.3 gap in literature a lot of controversies have been raised in respect of participative management style in recent times. participation which has been defined as allowing workers in decision making on those things that affect them and their work had led to it controversies. commenting on its controversies. joshi & roh (2011) asserted that participation is a device for extending the organization control for worker. the autonomy to confer with an individual in matters reduces his opportunity to deviate from the main organizational purpose. participation can then be a contributing factor in increasing efficiency. robins (2014) also has this to say in respect of participation. “decision is only as good as its implementation and those who participate in making it are usually highly committed to make it fruitful. some managers often view participation as an exclusive cool. it should be understood that participative leadership is not only the tool to attain organizational objectives. managers have a need to verify the variety of tools in achieving objectives and goals. adams (2017) opined that it is easy to manipulate participative management more to the best advantage of the manager rather than for the benefit of the employee and organization. as highlighted in the above, it should be noted that not everyone subscribes to this positive view of participatory democracy or to the benefits of direct participation in the work place. unions for example, argue that participative processes are actually detrimental to the welfare of workers and circumvent the protections provided by collective representation (wiesenthal et al,2015). regardless of the various controversies, the literature review confirms participation and productivity relationship. therefore, this study seeks to add to already existing literature of participative leadership style by examining the conceptual and theoretically concept of participative leadership style and it effect on employees motivation and employees productivity. 3. research methodology primary and secondary data was employed for the study. the population of the study was the staff of midland galvanizing product limited (midgal) abeokuta, ogun state nigeria.the research instrument was a questionnaire titled “participative leadership inventory (pli)”. the questionnaires were structures in form of strongly agree (sa), agree (a) undecided, (u), disagree (d) strongly disagree (sd). the study employed yard's formula. this formula is concerned with applying a normal approximation with a confidence level of 95% and a limit of tolerance level (error level) of 5%. to this extent the sample size is determined by [n = ] where: n = the sample size n = population 𝑒 = the limit of tolerance therefore, n = ( . ) = ( . ) = . 54 = . = 114 respondents a sample of one hundred and fourteen (114) employees out of the one hundred and sixty (160) employee population of midgal plc ogun state nigeria as calculated above. cronbach’s alpha method was also used for measuring questionnaire reliability. spss was also adopted for the research in testing the research hypothesis. table – 1 reliability statistics cronbach's alpha n of items .745 20 source: field survey (2017) table 2 – distribution of respondents and response rate respondents occupation questionnaire administered (sampled) percentage of total response (%) supervisory 45 50-0 managerial 42 46.7 executive 3 3.3 total 90 100.0 gender/category questionnaire administered (sampled) percentage of total response (%) male 57 63.3 female 33 36.7 no of returned 90 78.95 no of not returned 24 21.05 total no of questionnaires 114 100 source: field survey 2017 4. data analysis, hypothesis testing and discussion of findings regression analysis was used to measure the effect of the independent variable to the dependent variable of hypothesis 1, while in hypothesis 2 correlation analysis was used to measure the significance of the relationship between the dependent and independent variables. 4.1. testing of hypothesis i h0: participatory leadership style has no positive and significant effect on employee’s productivity h1: participatory leadership style has positive and significant effect on employee productivity. 55 table 3 – the descriptive statistics of employees productivity, participative leadership style & motivational performance responses total (n) mean participative leadership & employee’s productivity poor leadership includes employee stress, disenchantment, lack of creativity, cynicism high employee turnover, and low productivity. 90 4.56 a high productivity /high wage economy require new labour management 90 3.83 productivity bargaining arises mainly in circumstances where working practices need changes 90 3.95 when workers are involved in decision making it increases their productivity significantly 90 3.88 leadership approaches affect workers level of productivity. 90 3.76 participative leadership style & employees motivation when workers are involves in decision making it increases their productivity significantly 90 3.88 participation can be a contributing factor in increasing efficiency 90 3.79 indirect form of participation is the participation process whereby employees are involved in decision making through their selected representatives or delegates. 90 3.49 the ability to participate in decision making serves as a morale boost for the young employee. 90 3.59 the level of participation in decision making increase productivity through increase in motivation. 90 3.77 when subordinates take part in motivation work, they may discover that the performance of their work is more productive. 90 3.62 source: field survey 2017 table 4 – model summary mode l r r square adjusted r square std. error of the estimate 1 .721(a) .519 .485 .64386 source: field survey 2017 table 5 – anova (b) model sum of squares df mean square f sig. 1 regression 37.192 6 6.199 14.952 .000(a) residual 34.408 83 .415 total 71.600 89 source: field survey 2017 a) predictors: (constant): participatory leadership style b) dependent variable: employee productivity. 56 interpretation of results the results from the tables above revealed that the extent to which the variance in employees productivity can be explained by participative leadership style is 51.9% i.e (r square = 0.519) at 0.0001 significance level. decision the significance level below 0.01 implies a statistical confidence of above 99%. this implies that participative leadership style has a positive and significant effect on employee’s productivity. thus, the decision would be to reject the null hypothesis (h0), and accept the alternative hypothesis (h1). 4.2. testing of hypothesis ii h0: a significant relationship does not exist between participative leadership style and employees motivation. h1: a significant relationship exists between participative leadership style and employees motivation. table 6 – correlations when workers are involved in decision making it increases their productivity significantly when subordinates take part in motivation work, they may discover that the performance of their work is more productive. when workers are involved in decision making it increases their productivity significantly pearson correlation 1 .435(**) sig. (2-tailed) .000 n 90 90 when subordinates take part in motivation work, they may discover that the performance of their work is more productive. pearson correlation .435(**) 1 sig. (2-tailed) .000 n 90 90 source: field survey 2017 coefficient of determination (c.o.d) the coefficient of determination is obtained using formula c.o.d = r2 × 100% where r = pearson correlation thus; c.o.d = (0.435)2 × 100% c.o.d = 0.18705 × 100% c.o.d = 18.705% the pearson correlation of r = 0.435 therefore implies 18.705% shared variance between participative leadership style and employees’ motivation. interpretation of results the relationship between the variables (between participative leadership style and employees’ motivation) was investigated using pearson correlation coefficient. the results from table 6 57 above shows that there is a significant positive correlation of (0.435) between both variables at 0.0001 level of significance. thus, as obtained from the table {r = 0.435, p < 0.01, n = 90}. decision haven found out that a significant relationship exists between participative leadership style and employees motivation. we therefore reject the null hypothesis (h0), and accept the alternative hypothesis (h1). 5. discussion of findings results from the field survey analysis showed that participative leadership style has a positive and significant effect on employee’s productivity. participative leadership style has been proved to be a very effective tool towards boosting employees' level of productivity. this analytical finding is consistent with that of mohammed (2014) pointed out that involving employee’s in decision making in organization increases their productivity significantly. secondly, it was discovered that a significant relationship exists between participative leadership style and employees motivation.analytical results show that an organization that practices participative leadership style will enhance workers motivation. moreover when subordinates take part in motivation work, the performance of their work is more productive. findings of this research are consistent with those of brown (2011) that found that workers participation in decision making process relating to those things, which affect them and their job is one of the psychological motivational activities, which could be used to enhance employee’s motivation, morale and productivity 6. conclusions organizations are increasingly embracing the concept of participatory leadership style in the work place. this research buttress this by showing that most workers in the company studied have actually embraced and practiced the concept towards achieving good working relationships and set goals. the two hypotheses were drawn from the objectives of the study and research questions were tested .the study concluded that participatory leadership style is more in use in the company than other leadership styles. a higher percentage of the population pointed out that participatory leadership is still a matter of individual managers' leadership style and not corporate policy. they however indicated that this should be a matter of company policy and not mere individual’s style of leadership. seventy percent of the workers sampled disagreed with the notion that participatory style results to a lot of problems in the work place; rather, about the same percentage affirmed that participatory is a more effective approach when compared to autocratic and free reign management styles. the research has showed that there is a positive relationship between participatory leadership style and employee productivity while hypothesis two validates the axiom that participative leadership style could be used as a motivational tool to boost workers' morale. furthermore, this study revealed that management behavior and leadership styles adopted by organizations play very important role in influencing workers contribution in the drive towards' growth and survival. it was also evident in the course of this study that participation in decision making by workers relates positively with employees productivity. the morale of workers can also be boosted by the application of participative management styles. a work environment where employees get involved in decision-making in issues that affect their work and performance do help to create a conducive and peaceful industrial setting. 58 6.1. recommendations and practical implications participatory leadership style has been proved to be a very effective tool towards boosting employees' level of productivity. management and organizations should adopt participative leadership style as a matter of corporate policy. participative leadership style should be adopted as a very effective tool for motivating workers and to boost their morale and output. this is because it gives the sense of belonging, acceptance, selfworth, and approval etc., to the employees as identified by maslow being some of the conceptual human needs. management and organizations should take advantage of the peaceful and harmonious industrial environment usually created by this adoption of participatory leadership style so that creative and useful ideas from the workers can be played up and embraced for the advancement and progress of the whole entity. 6.2. limitation of the study the sample size of this study was determined based on the population of the staff of midland galvanizing product limited (midgal) abeokuta; ogun state nigeria further studies should focus on larger and broad population. the sample size for this research was determined using yard's formula. using an alternative method for the sample size determination may offer a different sample size. the study could not have exhausted the definition of participative leadership, motivation, productivity and other relevant concepts in the available stock of participative leadership style. moreover, the questionnaire used in the present study measured participative leadership as perceived by subordinates. thus there was no section where managers could also describe their levels of participative leadership behaviors. 6.3. suggestions for future research the quantitative aspect of this research adopted a survey method of data collection; other studies could consider carrying out a study involving a longitudinal data collection process to provide a reliable confirmation of the relationships identified in this research for this research, the quantitative research design was used. this design is such that numerical data was generated from a number of questionnaires administered to several respondents. further studies could employ in-depth interviews as qualitative data collection process to enrich the data collection process which will describe their level of participative leadership behaviours. future research should also investigate whether participative leadership behavior can influence males and females employees’ performance in organization. references 1. adams r. 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(2002). leadership in organization. 5th edition eagle wood cliffs, n j prentice – hall. microsoft word 3 (18-23) esposito 33 development policies for lagging behind areas: an interpretative note in the name of civil entrepreneurial development *gaetano fausto esposito consorzio universitario di economia industriale e manageriale and assocamerestero, italy received: july 21, 2018 accepted: october 22, 2018 online published: november 16, 2018 abstract this paper is a part of the critical literature of the neoclassical approach to regional development policies and on the role of trust and social norms in defining growth processes. it also adds the role of entrepreneurial capacity in stimulating development processes, by creating a virtuous circle, according to a civil approach to economic dynamics. starting from the limits of the standard economic paradigm in contributing to the reduction of regional development gaps, the article will deal with regional development issues, focusing on the role of trust and the developing entrepreneurship, with an approach that starts from the concept of civil economy, based on the institutional sustainability of innovative forms of development policy. finally, a scheme for civil entrepreneurship development, based on trust, will be presented. keywords: regional development policies; trust; entrepreneurial capacity; civil economy, institutional sustainability 1. regional gaps and different approaches to development policies in recent decades there has been a strong emphasis on regional development policies. empirical evidence tends to confirm that these policies have led to a certain convergence, at least in terms of per-capita income in the main countries, but this has not been accompanied by convergence (in some cases an increase in divergence occurred) among the individual regions within * the author would like to thank fabio musso for reading and commenting on previous versions of this paper, subject to the responsibility for what has been written remains exclusively with the author. international journal of economic behavior, vol. 8, n. 1, 2018, 33-45 34 individual states (european commission 2017; ridao-cano bodewing 2018; austin, glaeser, summers 2018). generally speaking, regional policies should reconcile the principle of competition with social solidarity (equity), in order to have a more balanced development, capable of reducing inequalities. consequently, these policies should lead to a convergence of development indicators in the medium-long term, including disposable income per-capita. recent studies (alcidi et al. 2018; iammarino, rodriguez-pose, storper 2018; rosés, wolf 2018) agree in underlining that until the early 1980s of the last century (at least in europe) there was convergence in the growth rates of gdp per-capita (consistent with the hypothesis of socalled β-convergence1), but since then the distances between regions have increased. it has also been spotted the existence of a u-shape curve in the development of convergence at the regional level, with a reduction in the gaps until the eighties and their regaining since then. this trend reminds closely income distribution, which has also marked an increase in inequalities since the same date2. two aspects – among many – deserve specific consideration: − the distinction between convergence processes at the national and regional level; − the eighties as a watershed in which the processes of convergence are attenuated and even reversed: these were the years in which there was a revival of neo-liberal policies, inspired by a principle of competition, on the presumption that the initial increase in inequalities would have spill over effects and activated forms of mobility of capital and investments from the most developed areas to those lagging behind in development. the correspondence between the increase in development disparities and personal income disparities (piketty, saez 2003) at the regional level leads to the conclusion that there may have been a relationship between these phenomena; the increase in inequalities in interpersonal incomes at the territorial level has led to what some authors (rodriguez-pose 2018) call the "revenge of places that don’t matter", whose population has supported political forms of populism (with self-defensive purpose), as a reaction to the increasing inequality. on the basis of these considerations, new approaches to regional development are emerging, which recognise the inability of traditional policies to achieve lasting processes of rebalancing, and which instead aim to implement strategies of "distributed development" (iammarino, rodriguez-pose, storper 2017; iammarino, rodriguez-pose storper 2018), based also on the consideration of qualitative aspects such as satisfaction and personal creativity. these strategies can be referred to as an economic paradigm very different from the neoliberal one and bring into question the efficiency of a convergence process, based on a rebalancing between different areas, essentially centred on the efficiency of physical capital (stiglitz 2016a). indeed, especially at the regional level, where the interaction between economic trends and social phenomena is greater, emphasis should be put on quality elements and the role of trust capital, that is, the complex of relationships between the various economic and social actors that create a favourable basis for growth and for making people free to create entrepreneurial initiatives. this article is a part of the critical literature of the neoclassical approach to regional development policies (iammarino, rodriguez-pose, storper 2017; iammarino, rodriguez-pose 1 according to this hypothesis linked to the neoclassical model of the growth theory the less developed regions should register a higher growth rate of the gdp per-capita than the more developed ones because the capital ratio per employee is low in these areas, consequently the return on investments is high and therefore they would attract more investments, in this way activating a higher growth. 2 however, several authors opposed to this result, claiming not only defects in the analysis, but also the incompleteness of the data used to reach these conclusions: refer to the essays wood, hughes (2015). 35 storper 2018; haussmann rodrik 2006) and on the role of trust and social norms in defining growth processes (tabellini 2010; bisin, topa, verdier 2004; bjørnskow 2012; zak, knak 2001). in addition, it also adds the role of entrepreneurial capacity in stimulating development processes, by creating a virtuous circle, according to a civil approach to economic dynamics. therefore, starting from the limits of the standard economic paradigm in contributing to the reduction of regional development gaps, some brief considerations will be formulated on a different way of dealing with regional development issues. the role of trust (which can act on the side of improving fairness) and the developing entrepreneurship (which is more closely related to efficiency aspects) will be emphasized, with an approach that starts from the concept of civil economy, based on the institutional sustainability of innovative forms of development policy. after having quickly recalled the antecedents of the civil economy, in the third and fourth chapters a scheme for civil entrepreneurship development, based on trust, will be presented and discussed. trust and trust processes will be explained in the fifth chapter, where different forms of trust capital (including civil and moral capital) are examined and the circuit for sustainable regional development policies is described, also from an institutional point of view. the conclusions summarize the results of the paper. 2. some theoretical evidences... rediscovering the past in recent years, the analysis of the link between culture, trust and development has become increasingly important, also in the literature on regional development (tabellini 2010; bjørnskow 2012), given the possibility of leveraging new ways of growth not only in quantitative terms, but also in qualitative terms. the origins of this approach can be traced back to the mid-1700s in italy, with the formation of a school of thought on civil economy (bruni, sugden 2000), particularly in naples and salerno, where the foundations were laid for a way of understanding the economy in its "political and human" aspects. this approach, which gave answers that today seem to be of extraordinary actuality, came from authors such as antonio genovesi, gaetano filangieri, francesco pagano, giacinto dragonetti and many of their students, all united by a concept of development that started from the dialectical link between economy and civil society: public happiness is linked to freedom and the latter is a basic condition for development. therefore, freedom and public happiness are inseparable issues, to the point that – according to albert hirschman (1982) – the first french economists (like turgot) defined economy as the "science of public happiness". freedom involves the concept of development, not only in terms of quantitative income expansion (central in the definition of the anglo-saxon growth approach3), but more over in a wider socio-economic growth. more recently, the nobel prize for economics amartya sen (2000) has highlighted that development is in people's ability to effectively express their capabilities, and public happiness is a strongly relational concept (connection with others), overcoming an exclusively utilitarian view of the economy, based on egoism and self-interest. in the utilitarian conception, the concept of public happiness is replaced by utility, as the capacity of goods to satisfy needs. the relationship between person and person (inherent in the concept of happiness and freedom) is 3 adam smith's "wealth of nations" stated that the goal of political economy is displayed essentially as such as explaining the causes of income increase, or rather to provide an abundant income for the people and the state, thus leading to enrichment for both the people and the sovereign. 36 replaced by the relationship between person and things. people (or better individuals) make their choices and do so in their own specific and restricted interest. 3. let's change paradigm: towards the civil entrepreneurial development approach the utilitarian view brought a form of hyper-liberal capitalism where speculative actions that feed the tendency towards crises is central. crises ere firstly in terms of economic values, and also (and in some cases mainly) of ethical and moral values. on the basis of this neo-liberal paradigm many of the development policies have been built, inspired by the principle of efficiency, attributing a miraculous role to the market as a general system of territorial rebalancing. as we have seen, such policies have led to blocking the processes of convergence. as a consequence, a growing interest of economists in the subject of "inclusion" emerged. in order to achieve an inclusive economy based on a generative approach (in which the overall value is measured not only with private profit, but also with the social value of choices: magatti, gherardi 2014) it is necessary to overcome a development model exclusively focused on the balancing role of the market, as assumed by the neo-liberal scheme, and focus on an approach of civil entrepreneurial development (esposito, 2013), paying attention to the value of reciprocity and community. in other words, it is necessary to rediscover the figure of the entrepreneur as a social actor, who is a stimulus for efficiency processes, and at the same time contributes to the creation of larger trust networks based on reciprocity. this kind of approach re-evaluates the role of work as a creative action, emphasizing the concept of "human" craftsmanship (sennet 2008). focusing on the entrepreneur’s role, this approach pays attention to the individual ability, the spirit of initiative, the people’s talent, and it is also attentive to contrast inequality, seen as one of the aspects that according to several economists, from joseph stiglitz to thomas piketty, prevents the achievement of better economic performance. civil entrepreneurship (bruni 2009) has been the basis of many experiences in italian industrial districts, where work was accompanied by a real "joy of living" (becattini 2004). such an approach tends to encourage the emergence of civil enterprises, but for what happens it is necessary to favour not only a concept of freedom from (where there must be no external constraints) and also of freedom of (to be precise, to make coherent and efficiencyoriented choices), but also of freedom with (meaning to collaborate with others on the basis of trust) and of freedom to (achieve civil goals). in order to make all these type of freedom effective, there is a need of institutions that work on the side of collaboration between the state, the market and the civil society, to reconstruct a network of trustworthy connections compromised by the neo-liberalist myth as well as by clientele welfare. in this context, the value of entrepreneurship is enhanced, in a circuit that involves creating (market and social value), taking care of (the virtuous processes that have been generated), and donating. the latter aspect is more relevant today than in the past, because of the ability to share with others – even in the absence of specific compensation – because of the need to be recognized and the wish to participate in a greater process of value creation. the three aspects above are the basis of a wikieconomy that has its roots in trust for (and among) people (becchetti 2014) and leads to reassessing an approach to common goods. an economy of participation cannot be built only from top to bottom, and by skipping many connections that characterize the network of social relationships. neither can it be 37 developed forgetting that the task of public intervention is to resolve social conflicts in a logic of development, ensuring that increased equality and improved economic performance are complementary (stiglitz 2016a). 4. an outline of the different forms of development: the role of entrepreneurship and trust considering all that has been said up till now, trust and freedom remind of civil entrepreneurship that helps economic and social development. in this context a form of team rationality is established (sudgen 2009) in which the achievement of common goals favours the growth of trust for the overall social development. civil growth means human growth: a concept that is not new, not even for the traditional economy, to the point that the father of the neoclassical economy alfred marshall considered the enterprise first as a place of character formation of those who worked there, and then as the place of production of goods and services. a civil entrepreneurial development approach is therefore based on the two variables of the growth of trust capital and of what we can define as entrepreneurial capital (audretsch, keilbach 2004). therefore we can have different situations of development (or even its absence), depending on how the two variables of entrepreneurship and trust get combined, which can lead to be the guide to a different approach to regional policies. the following matrix is represented in the figure 1. in the first quadrant (high entrepreneurship/low trust) there is a capacity for self-interested entrepreneurial initiative, without any possibility for the reasons of others: all this converts into a form of selfish development, which involves income growth in the short term, but in the course of time leads to major failures, such as "turbo" american capitalism, cause of the crisis that began in 2008. it is about selfish growth (not a development in the full sense of the term), without much attention to the reasons of others, that falls back on itself and eventually creates distrust and closure towards others, an attitude that richard sennett (2013) described as the feeding of the "non-cooperative self", to identify the loss of collaboration desire. on the other hand, even a generally trustworthy context, in which there is essentially no entrepreneurial capacity, is not able to ensure lasting development. this is the situation in quadrant (3) where high generic trust is not accompanied by entrepreneurial initiative. there are forms of management of common goods that do not receive the push towards an innovative process of which the entrepreneur is the author. a growth based exclusively on a cooperative ethics is destined to die out (mokyr 2016): we secure ourselves to a spiral of subsistence that does not increase the amount of common value, and sooner or later it turns into a real underdevelopment, where impoverishment of common goods ends up resulting in the absence of a relationship of trust and the affirmation of selfish behaviour, with hyper-exploitation (until exhausted) of common goods (quadrant (2)). 38 figure 1 – the development map entrepreneurship low high high communitarianism area (3) civil development area (4) low underdevelopment area (2) area of egoistic growth (1) civil development, on the other hand, affirms itself when there is entrepreneurial initiative accompanied by strong trust processes (quadrant (4)), in which society, sociality and economy are closely linked and feed each other, and where – in brief – there are conditions for a real affirmation of a civil capitalism, oriented towards cooperation with others. different quadrants do not identify stable situations, because there is a continuous development. in the most recent years, in many ways, we have experienced a transition from the fourth to the first quadrant, with the weakening of trust processes, due to the affirmation of consumption models and life oriented to a strong individualism and the proposition of personal success models. this path is degenerating in the underdevelopment area (which is not necessarily identified with a low level of product per-capita, but also with forms of social impoverishment), because the consumption of trust capital, sooner or later, also impoverishes the entrepreneurial tissue and, in any case, the economic democracy that represents the warp of that tissue. a virtuous circuit, on the other hand, should involve the passage from the area of underdevelopment to that of civil development. this can happen according to a course that first enhances the sharing of common goods (and therefore the trust matrix), or individual entrepreneurial initiative, or at least both, but aiming at an increase in both trust capital and entrepreneurial initiatives. 5. towards a development policy marked by civil entrepreneurship 5.1 the need of a new policy trust and civil entrepreneurship are closely connected foundations to set policies for less developed areas that can be linked to a “balanced” approach (iammarino, rodriguez-pose, storper 2018) which may combine efficiency and equity. new (and different) development policies must start from these aspects and from the awareness that financial incentives, while in the short term can increase employment and production, in the medium term have negative effects on productivity. more generally, these policies have resulted in the replacement of investments that would have been made in any case, or in displacement with respect to neighbouring areas without incentives (and therefore in a game of trust 39 zero-sum development, when not negative) often stimulating phenomena of intermediation and a particularistic political demand (and supply). therefore, the link between development, civil society and cultural and environmental characteristics (greenwald, stiglitz 2013; stiglitz, lin, monga 2013) is essential for regional policies, according to a logic that implies enhancing the historical-local aspects, but placing them in a scenario that is inevitably european and global. moreover, even a support policy directed only towards individual companies is doomed to failure if it does not assess the intervention for its effective ability to produce an impact on the growth of the overall local economy. the ability to activate energies (from the bottom) for a shared development project must take into account all the complex implications at the economic and social level. therefore, it is not sufficient to focus on the growth of purely quantitative parameters related to the existing gaps, and it is necessary to work on the system of relations that generate those parameters. companies that are most connected to each other and to the outside world have a better performance, and they are also able to activate innovative processes and active strategies. sharing activities and values helps development processes, making them stronger and more lasting even at the single company level. this is why a policy of civil entrepreneurial development must first be a subject to a sustainability assessment. such sustainability should be measured on the institutional side, meant as the ability to create a “self-supplying circuit in which the institutional framework allows the deployment of individual freedoms/ skills to capture/activate the opportunities offered by the market” (esposito, musso 2016). in order to have effective and lasting regional growth, it is necessary to enhance the entrepreneurial capacity in close relation with the capacity to create a trust capital (synthesis of social, moral and civic norms, and above all of the local cultures of which those norms are the expression, because of the influence they have on the social learning process). in other terms, it is necessary to consolidate and develop the link between trust networks and entrepreneurial action, in order to create a civil entrepreneurship, as in the fourth quadrant of the development map (figure 1) that is influenced by the foundation of trust capital. this can also encourage stronger relationships and a constructive competition in the market. 5.2 the circle of trust and regional development according to the civil entrepreneurship approach what does trust consist of? it has been mentioned so many times till now, but it has not been defined accurately yet. to be used in an operational way, trust must be properly defined and kept within its conceptual boundaries. an appropriate definition of trust is: "shared expectation of cooperation and ability of a community or an organization to give itself a code of conduct based on shared values [...]. in essence, trust can be considered as a social process" (brusco, solinas 1997, pp. 22-24). this process implies some basic aspects: the expectation of cooperation of others (responsibility), the existence of shared values, from which the rules of behaviour arise, the strong social characterization, therefore the need for an extended interaction between groups or between communities and/or organizations. in addition, there are some further elements of trust to be taken into account from the economic point of view (dasgupta 2011, p. 121): the positive expectation of a subject towards the fulfilment of the promise by another subject and the possibility that this relation could be the basis of horizontal networks of cooperation. interpersonal trust and trust in others feed non-opportunistic behaviours, they are the fundamental glue of interaction systems which reduce transaction costs and allow to give a time projection to future choices characterized by uncertainty. moreover, and above all, trust is a 40 stock that is nourished over time (but can also be impoverished), that is why it can be assimilated to capital (which grows, but can also deteriorate and in any case needs to be maintained): a trust capital. edward banfield, in 1958, underlined different dimensions of trust: relationality – or rather its absence with reference to those individuals outside a small family group – and cooperation/reciprocity. therefore there are two aspects: the first one allows a better level of information and identifies social capital in the strict sense, the second aspect identifies the civic capital. civic capital has often been neglected in the analysis of fiduciary links, and yet it is of great importance, because it concerns the set of values and expectations that encourage cooperation/reciprocity and, more specifically, the values and beliefs shared by a community and/or a group, which help its members to overcome problems of free riding in carrying out activities useful to the members of the same group. it contains shared values and beliefs that stimulate a cooperative attitude, pushing towards a mutual benefit4, a sort of incentive to collaboration, as an exchange whose participants benefit from being together (sennett 2013). in other words, this type of trust implies certain behaviour that is meant to be reciprocated, because otherwise it will no longer occur to the original lender. civic capital has a framework of social norms, as the result of a certain culture established over time in communities and groups, which are also transmitted by the effect of family education, norms that imply forms of sanction for those who do not respect them, at least in the form of the absence of reciprocal behaviour. a further dimension of trust capital is the moral dimension. in this case the relationship is rooted in the ground of moral norms, that is, the values that guide human behaviour without resulting in sanctions if fair behaviours are not reciprocated. therefore, there are internal rules that encourage people to conform to virtuous behaviour, in a sort of commitment with the aim of achieving a common goal. in this case, the cultural aspects are absolutely predominant. moral capital, through an act of gratuity, creates a bond with other people without expecting to be reciprocated. it implies forms of altruism, a willingness to make a personal sacrifice to procure benefits for others, responding to a more general principle of justice and equity, which has its roots in personal beliefs, forged by the family, and also by the more general culture, although it may not involve an increase in well-being (and welfare) of people (sen, 2000). this digression introduces a useful scheme to evaluate the development policies implemented in a logic of institutional order, which is linked to the development map presented in chapter 4. in order to produce virtuous effects, a (virtuous) circuit must be established between (civil) development policies, entrepreneurship and market, but there must also be a mutual dependence between the stock of fiduciary/trust capital and the institutional system, according to a process of institutional sustainability that has feedback effects. in the stock of fiduciary capital it is necessary to take into account all three dimensions of social, civic and moral capital (figure 2). 4 if we look closely, the aspect of reciprocity and mutual benefit is at the basis of the same market transactions, and according to some authors, it represents the real telos and provides its justification also from an ethical point of view, representing a sort of moral attitude and in this context the predisposition to trust and give reliability acquire the importance of moral virtue. ref. bruni, sugden (2013), p. 156. 41 figure 2 – the circuit of regional development policies according to the civil entrepreneurship approach figure 2 shows a process-based model, in which development policies interact – in turns – with the institutional system of an economy, aiming at discovering business opportunities through the expansion of the degree of freedom and the entrepreneurial capacity of companies. in addition, there are complex effects of influence between institutional policies and trust capital, which also pass through the cultural background that characterizes different regional realities. in brief, the final goal of policies generated according to this approach is to influence the market by impacting on companies’ competitiveness, since the market plays a central role in encouraging structural change in economies, through the enhancement of endogenous endowments to different production contexts (lin 2012). therefore, the market becomes an element of comparison, which also helps to assess the efficiency of the policies themselves, because it ensures the permanence of the policies’ effects over time, and also their selfsustainment, according to the logic of institutional sustainability. to guarantee the functioning of this circle it is not enough to remove the obstacles to the free functioning of the market (technical approach: freedom "from" and freedom "of"), because on the contrary (as demonstrated in several cases: rodrik, 2009; rodrik, 2004; rodrik, 2006) this could even have counter-productive effects on the productive diversification capacity of an economy. after all, the market itself assumes an important role not so much (and in any case not only) as a competitive arena for comparing costs and prices, but also as a social institution: a place of sharing and reciprocity (civil approach), where business projects meet themselves (and perhaps even confronting each other). a perspective purely based on competition, seen as the elimination of constraints and barriers, without considering the overall links, could risk to jeopardise the long-term performance of a production system, because it undermines not only the reasons for economic-productive convenience, but above all, social convenience, therefore obstructing positive developments for the future. institutional policy civil entrepreneurship market feedback ccacacacava trust capital (information, cooperation, sharing, gratuity) 42 in brief, regional policies for civil development should establish as a priority objective the growth of freedoms/capacities of enterprises5. therefore, their primary objective should be firstly qualitative, and then also quantitative, in terms of change in the production mix and stimulus to a greater regional competitiveness. in this process, the relationship between the institutions and the market is very strong, and we can believe that both are the result of a mutual evolution circle strongly dependent on the situation of local contexts (altobelli, esposito 2014). for this reason, regional development policies must have a strongly contextualized approach and cannot respond to the uncritical repetition of standard principles detached from the specific characteristics of local processes, just because some policies have worked well in other contexts. 6. concluding remarks in this work it has been highlighted that the interruption of the regional convergence processes is questioning the policies followed up till now and motivates the hypothesis of new routes. some elements for a different approach to regional development policies have been outlined. starting from concept of civil economy, regional policies should aim to enhance the role of trust capital and the stimulus to an entrepreneurship oriented to civil values. this kind of approach tends to favour the development of freedom (in extensive sense) and entrepreneurship, and also highlights the role of the market as a place where different business projects meet, responding to a logic of common rationality. this approach has a generative character, because it activates not only economic processes, but also social ones, aiming to reconcile the principle of efficiency that is the basis of businesses (and under many aspects also of markets) with the fair distribution of wealth. the circular process of regional development policies that has been presented in this work starts from the enhancement of the fiduciary/trust capital and the system of informal rules (social and moral) widespread in the society. at the same time, it leverages the important role of the market, to define a policy design that has the character of institutional sustainability, being able to activate a process meant to continue and to self-sustain in the future. a process of this kind must be strongly contextualized to the individual territories, it involves a careful analysis of the socio-economic characteristics of the context (esposito, musso 2016) and requires continuous action by the institutions to grow trust capital, which is one of the elements that contribute to fuelling a form of entrepreneurship that can be defined as "civil". this is how the role of public institutions is relaunched for interventions aimed at fostering regional convergence processes, not only in terms of product, but also of overall well-being and disposable income. therefore, regional policies to promote competitiveness are also linked to the consideration of aspects of income re-distribution that relate to social equity. to the extent that policies of this type reduce also inequalities in disposable income, they also contribute to greater stability in growth (cingano 2014), as well as to the strengthening of 5 in this way, a generative approach to development is affirmed, understood as an increase in value linked to the freedom of people in an intergenerational sustainability logic. also from this point of view, the question of the policies institutional sustainability emerges. such a perspective also implies a rethinking of the role of institutions in the name of greater polyarchy and subsidiarity (magatti, gherardi 2014, p. 145). the latter should be understood not only in terms of horizontal subsidiarity, but as a true circular subsidiarity, such as objectives sharing and "doing together" actions. 43 trust capital, because they sustain the possibility for people to make improvements in their "future". development especially regional development therefore represents a complex process where different economic and social components cannot be kept separate, and also involves a reflection 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(2001), trust and growth, economic journal, vol. 111, n. 470, pp. 295321. 46 14-16 gabor finale formattato retailer for durable goods market in romania. received: august 18, 2013 the durable goods market in romania has many features thanks to simultaneously: acquisition way, structure of households, retailers on this market, banking policies as regards providing consumption loans („loans with identity card only”), mac tacit supporting in relation to banking policies etc. these characteristics are found in the low endowment with durable goods of households in romania, and that generate features of the acquisition process, the decision taking proces consumer relationships. this paper covers the last aspect, being used a representative urban sample of 300 households, the following methods being used for data processing: bivariate, anova, wilcoxon that to provide new results referring to retailer goods market in romania, that confirm or infirm the foreign research results. keywords: durable goods; romanian market statistical methods; retailers; 1. introduction in the author’s previous research have been published results related to the durable goods market in romania (using numerous stati being a completion with new results about this topic. following the previous research, it has resulted that the durable goods market in romania has many simultaneously: • to purchase durable goods, consumers in romania use the following criteria and information sources (gabor smallest influence having the provided • acquisition way used by romanian consumers (p influences etc.) according to • significant differences statistically as regards endowment with durable goods across counties, development regions and nationally ( • information sources used by romanian consumers in purchasing durable goods vary according to their age ( retailer – consumer relationships for durable goods market in romania. a multimethod analysis manuela rozalia gabor petru maior university of tirgu mures, romania accepted: april 14, 2014 online published: abstract the durable goods market in romania has many features thanks to simultaneously: acquisition way, structure of households, retailers on this market, banking policies as regards providing consumption loans („loans with identity card only”), macroeconomic policies of tacit supporting in relation to banking policies etc. these characteristics are found in the low endowment with durable goods of households in romania, and that generate features of the acquisition process, the decision taking process of durable goods and implicitly of retailer consumer relationships. this paper covers the last aspect, being used a representative urban sample of 300 households, the following methods being used for data processing: bivariate, anova, wilcoxon test, cronbach alpha, split – half, the goal of this paper being that to provide new results referring to retailer – consumer relationships for the durable goods market in romania, that confirm or infirm the foreign research results. romanian market; socio-demographic variables consumers. in the author’s previous research have been published results related to the durable goods market in romania (using numerous statistical methods), concerning this market, being a completion with new results about this topic. following the previous research, it has durable goods market in romania has many features ble goods, consumers in romania use the following criteria and gabor et al., 2009): price, promotions, brand of the product smallest influence having the provided after sales service; acquisition way used by romanian consumers (period, location, promotional influences etc.) according to gabor (2011a; 2012a, 2012b, 2013); significant differences statistically as regards endowment with durable goods across development regions and nationally (gabor et al., 2011); on sources used by romanian consumers in purchasing durable goods vary according to their age (gabor et al. , 2011b) ; 67 consumer relationships for durable goods market in a multimethod analysis manuela rozalia gabor petru maior university of tirgu mures, romania online published: may 21, 2014 the durable goods market in romania has many features thanks to simultaneously: acquisition way, structure of households, retailers on this market, banking policies as regards roeconomic policies of tacit supporting in relation to banking policies etc. these characteristics are found in the low endowment with durable goods of households in romania, and that generate features of the s of durable goods and implicitly of retailer – consumer relationships. this paper covers the last aspect, being used a representative urban sample of 300 households, the following methods being used for data processing: χ2 test half, the goal of this paper being consumer relationships for the durable goods market in romania, that confirm or infirm the foreign research results.. demographic variables; households; in the author’s previous research have been published results related to the durable goods concerning this market, this paper being a completion with new results about this topic. following the previous research, it has features thanks to ble goods, consumers in romania use the following criteria and price, promotions, brand of the product, the eriod, location, promotional significant differences statistically as regards endowment with durable goods across on sources used by romanian consumers in purchasing durable goods vary 68 • socio-demographic characteristics that best discriminate this preference for foreign brands being the income and studies of the household head (gabor et. al, 2011) ; • households in romania, from urbane environment, are still endowed with black and white tv (14.3%) and non-automatic washing machines (27%) or very old or second hand goods (25%) (gabor , 2013) ; • romanian consumers are not sensitive to variables related to brand of durable goods, name of shop or design of product but are strongly influenced by their price (gabor , 2012a) ; • structure of households and families that represent these households respectively, and implicitly characteristics of the head of their households (gabor , 2012a); • buying power is very low in romania (our income is enough for a decent living, but we cannot afford buying some more expensive goods) (gabor , 2013); • 42% of urban households have loans or credits (gabor , 2013). to these aspects are added those related to economy and standard of living related to households in romania, respectively; • banking policies in romania as regards providing consumption loans ("loans with identity card only”) in order to rise the accession extent of these types of loans with direct implications on the increase of buying durable goods and therefore, standard of living and quality of life concerning households in romania, ranked at the bottom of the list of eu member countries concerning this indicator; • macroeconomic policies of tacit supporting in relation to the banking policies described above; • compared to the other eu member countries 1 (according to statistical data supplied by eurostat), romania occupies the first place within classification concerning the lack of some durable goods (washing machine, landline and mobile telephone, color tv, personal computer , car) due to the lack of financial resources. starting from the above mentioned, the conceptual frame of this paper is summarized in figure 1. this paper has research as aim, by means of statistical methods, the relation between romanian consumers of durable goods and retailers that operate on this market. the objectives of this paper, embodied in the research hypotheses are summarized in table 1 in the following paragraph. we mention that these results are a completion and are based on the author’s previous research being the first in the specialty literature that provide results – achieved by applying the multimethod analysis – about this market. in order to achieve the objectives of empirical research it has been used a representative sample made of 300 households in tirgu mures municipality, selected through a double sampling scheme to provide the sample representativeness. it has been used a questionnaire managed by a sampling operator, data being gathered in may 2011. for data processing the following statistical methods have been used: χ2 test bivariate, anova, wilcoxon test, cronbach alpha, split – half, multiple feedback data processing. we shall present further a brief description of the main research carried-out in order to characterize the durable goods market, mentioning that international literature has no many research papers in this respect. then we present – separately for each statistical method used – the main results of this research, section followed by future research directions and conclusions. figure 1 – conceptual framework of the paper 2. literature review in the foreign literature the first research with regard to this market is since 1979, when kasulis, lusch & stafford were anticipating that, from a high number of reasons (including a high population – in the ’80s – fastest segment of consumer market in the ’80s. emphasized that: 1. middle population will show various purchase models of durable goods 2. order of purchase the second tv or car in the same household var to the quality of the buyer as being the owner or the tenant of his house. the authors also suggest to study this issue in different geographical areas in the future (as it is one of variables that influences this purchase 2011) and also take into consideration variables such as, was considered in this research, this being reflected by variables such as: obtained in a household and household he household head). modeling of relation between value, usefulness and holding of durable goods was studied and approached by corfman, lehmann sampling on a sample of 735respondents for discretionary goods. characteristics of durable goods market in romania: • high endowment with black and white tv in urban environment (14%) • high endowment with non-automatic washing machines in urban environment (27%) • high endowment with second – hand durable goods (…..%) • structure of households • last position as regards endowment with necessities durable goods, in european union • low buying power • innovativity of romanian consumers however not sustained by buying power • major gaps regarding endowment with durable goods between romania’s development regions • lending policies type „loan with id only”, of romanian banking system in order to artificially increase standard of living in romanian households • conclusions of studies carried-out by gfk romania referitoare la conceptual framework of the paper reign literature the first research with regard to this market is since 1979, when stafford were anticipating that, from a high number of reasons (including a – with age between 18 – 34 years) the durable good fastest segment of consumer market in the ’80s. the conclusions of the three authors middle population will show various purchase models of durable goods order of purchase the second tv or car in the same household var to the quality of the buyer as being the owner or the tenant of his house. the authors also suggest to study this issue in different geographical areas in the future (as it is one of variables that influences this purchase – see the case of romania ) and also take into consideration variables such as, social class of consumers was considered in this research, this being reflected by variables such as: net monthly income obtained in a household and household head, level of education and occupational status of modeling of relation between value, usefulness and holding of durable goods was studied corfman, lehmann & narayanan (1991) by means of a convenience of 735respondents for discretionary goods. they started in building up endowment with durable goods of romanian households, urban environment 1. characteristics of buying durable goods (previous research made by the author) 2. characteristics of decision taking process fordurable goods (previous research made by the author) 3. characteristics of relantionships (these resresearch) multimethod analysis • cronbach alpha • spilt half • wilcoxon test • anova • testing of percentages for multiple choice questions • χ2 bivariate test results of these research • price senzitivity • quality and trade mark are the most important attributes in buying durable goods • the most important information source is recommendations of friends and leaflets • the most important promotional i tvadvertisements • buying place of durable goods: specialty shops and hypermarkets • price senzitivity is different in line with education level of head of household • buying place varies according with the number of household members • buying period varies according with age of household head • buying manner varies according with occupational status of household head 69 reign literature the first research with regard to this market is since 1979, when stafford were anticipating that, from a high number of reasons (including a 34 years) the durable goods will be the the conclusions of the three authors middle population will show various purchase models of durable goods, and order of purchase the second tv or car in the same household varies according to the quality of the buyer as being the owner or the tenant of his house. the authors also suggest to study this issue in different geographical areas in the future f romania: gabor et al. social class of consumers (this aspect net monthly income ad, level of education and occupational status of modeling of relation between value, usefulness and holding of durable goods was studied narayanan (1991) by means of a convenience they started in building up 3. characteristics of retailer – consumer relantionships (these resresearch) multimethod analysis testing of percentages for multiple choice questions results of these research quality and trade mark are the most important attributes in the most important information source is recommendations of friends and leaflets the most important promotional influence comes from buying place of durable goods: specialty shops and price senzitivity is different in line with education level of buying place varies according with the number of period varies according with age of household buying manner varies according with occupational status 70 assumptions for their research from the standard microeconomic theory that suggests that budget allocation of households is carried-out according to: size of consumer budget and usefulness of validity as regards items provided by their price. they concluded that, when choosing durable goods, consumers cannot purchase dissimilar products and cannot compare objective or concrete objectives. their selections are usually the result of comparisons carried-out more at abstract level and involves evaluation of products based on their ability to meet the basic values of consumers. they invalidated the assumption that the order of purchasing durable goods is uniform in population, revealing there are differences according to the social class and the quality to be – or not – owners of endowed house. the consumption patterns carried-out by these authors showed the connection between combination of preferences, price information and budget restrictions for the household buying decision, but these patterns are not consistent for the basic utilities of durable goods, too. the two structural equations that have been tested and used in the pattern are: • endowment with durable goods = f (usefulness, income, age) • usefulness = f (values of consumers, endowment with durable goods) the authors used as stimuli, discretionary durable goods in five categories: house entertainment, sport and exercises, pets, habits and luxury, and as processing methods of data collected by sampling, factor analysis and group analysis. the issue of purchasing durable goods „on credit” was approached in 1993 by that analyzed this „tendency” (called „consumer durable revolution”) in the ’20s. the author considered that this type of credit (with direct illustration for car credits) was „created” not to help the consumer but, on the contrary, for the producers’ success and their marketing strategies. if we carry out an analogy with the romanian market in the surveyed period, what was considered luxury durable goods in the ’20s 2, in romania, as regards category of these goods, necessity goods were „placed” or purchased by credit (considered in the european union as being part in the „basic” endowment of a household), for instance: double glazing, refrigerator, air conditioning etc. the author noticed that, after the second world war (another analogy with romania would be december 1989 when it shifted from the centralized economy in the communist period to the market economy) the consumption behavior of households has changed. the author noticed that one of the important reasons leading to this change is provided by rising of advertising made to durable goods3that has as direct result – and instant – rising of sales as regards durable goods. the final, general conclusion from this study is that the „consumer durable revolution” in the ’20s, brought major changes not only to validity of credit (consumption) but to also advertising and that these changes were not the implicit results of intended endeavor of the market and affected – dramatically – consumption costs of households. in the durable goods industry there is still a global feature namely: country where a product is designed is not the same with the country it produces, aspects related to the impact of country of design and the country of manufacture over perceptions of durable goods consumers was studied in 2006 by hamzaoui & merunka, the two authors suggesting an empiric pattern based on the „of fit” concept of this bi – national quality of the durable goods, dividing the concept of country of origin (coo – country of origin) and tests the influence of country of design (cod – country of design) and country of manufacture (com – country of manufacture) over the evaluation of bi-national durable goods consumer. the paper providing important contributions and new insights to the judges of a consumer concerning the perception of quality for bi-national durable goods. the specialty literature in the durable goods field, enriched in 2010 with another research of authors seitz, razauk purchase of durable goods, singularized on air conditioning systems dedicated – and useful – to producers and dealers of these durable g based on sampling on a random sample of 140 subjects. the surveyed variables were: to which the price to be paid for this durable goods influences the brand about this product is searched and demographic research emphasized that, for this durable, characteristic criterium in selecting the product order of their importance): friends and family, websites of producers, leaflets of producers (but not type „golden pages”), information sources in exchange are influenced by merchants when taking the buying decision as it helps them redefine their selection criteria and therefore choose that air conditioning system that reaches their purpose. the issues of modeling the durable goods market have been approached in various senses, thus in 2010, guiltian approached durables, the results of his research (practically a „stocktaking” of topic in specialty literature) emphasizing as replacement reasons: their usefulness in conjunction with the depreciation rate and the discount rate of durable goods may result in their total or part replacement thus resulting the „desire of something new” or waiting the validity of some new benefits scientifically established presumption that replacement decision is based on the rational choice but – according to behavior research of decision costs and is required by variable situations of replacement and motivations. however, the results of guiltian’s study taken into consideration as a decision maker of the purchase and replacement of a durable good, in our study this decision belongs to household as a decision maker r household head, studies in specialty literature emphasizing this significant aspect, that the purchase decision for a durable good respectively is taken within the household and not individually. maintaining the expanded rate in the last survey, in 2011, liberali, gruca effect of sensitivity(senzitation) to price and habituation over the purchase of durable goods emphasizing that product performances represent the key of consumer motivation to purchase discretionary goods for replacing a durable good, the consumer considering only those goods that provide additional performances compared to that they already have. research conclusion is that, producers should provide products having a much higher performance with every new generation of products launched on the market when price sensitivity goes down every new purchase. the originality of this study consists in the fact that authors cons experienced consumers, the issue for the market in romania is that existence some experienced consumers, considering that, households have adopted quite recently the replacement trend and endowment of household with new durable go purchasing of second-hand durable goods (still valid on the car market as it goes on worldwide). this aspect of additional performances concerning a commodity launched on the market was also approached by zhao, meyer are often attracted by new versions of durable goods that provide additional elements; even if these new elements are never used ( starting from the results published in the professional literature, fo worded the following hypotheses and for whose testing we will use various statistical methods, the testing methods being mentioned for each hypothesis ( research of authors seitz, razauk & wells about the importance of brand equity over the purchase of durable goods, singularized on air conditioning systems to producers and dealers of these durable goods, data being collected based on sampling on a random sample of 140 subjects. the surveyed variables were: to which the price to be paid for this durable goods influences the brand, about this product is searched and demographic characteristics. therefore the results of research emphasized that, for this durable, brand is a proof of product quality in selecting the product and as information sources friends and family, websites of producers, leaflets of producers (but not type „golden pages”), sellers and catalogues type„ golden pages” are not used as information sources in exchange are influenced by merchants when taking the buying helps them redefine their selection criteria and therefore choose that air conditioning system that reaches their purpose. issues of modeling the durable goods market have been approached in various , thus in 2010, guiltian approached the aspects of replacement decision of these , the results of his research (practically a „stocktaking” of topic in specialty literature) replacement reasons: their usefulness in conjunction with the depreciation consumers, deterioration of intrinsic performances concerning durable goods may result in their total or part replacement thus resulting the „desire of something new” or waiting the validity of some new benefits. guiltian starts from the tablished presumption that replacement decision is based on the rational according to behavior research – and on psychological costs, frequent distortions of decision costs and is required by variable situations of replacement and motivations. however, the results of guiltian’s study should be adapted as the final consumer has been taken into consideration as a decision maker of the purchase and replacement of a durable good, in our study this decision belongs to household as a decision maker r household head, studies in specialty literature emphasizing this significant aspect, that the purchase decision for a durable good respectively is taken within the household and not expanded rate in the last years concerning the durable goods market survey, in 2011, liberali, gruca & nique published the results of their research regarding effect of sensitivity(senzitation) to price and habituation over the purchase of durable goods t performances represent the key of consumer motivation to purchase discretionary goods for replacing a durable good, the consumer considering only those goods that provide additional performances compared to that they already have. research conclusion that, producers should provide products having a much higher performance with every new generation of products launched on the market when price sensitivity goes down every new purchase. the originality of this study consists in the fact that authors cons , the issue for the market in romania is that existence some experienced consumers, considering that, households have adopted quite recently the replacement trend and endowment of household with new durable goods, trend that followed hand durable goods (still valid on the car market as it goes on worldwide). this aspect of additional performances concerning a commodity launched on the market was also approached by zhao, meyer & han in 2005 who emphasized that are often attracted by new versions of durable goods that provide additional elements; even if these new elements are never used (have no real usefulness). starting from the results published in the professional literature, for this study we have worded the following hypotheses and for whose testing we will use various statistical methods, the testing methods being mentioned for each hypothesis (table 1). 71 the importance of brand equity over the purchase of durable goods, singularized on air conditioning systems, this study being oods, data being collected based on sampling on a random sample of 140 subjects. the surveyed variables were: degree , where information therefore the results of brand is a proof of product quality but it is not a information sources are used (in friends and family, websites of producers, leaflets of producers pages” are not used as information sources in exchange are influenced by merchants when taking the buying helps them redefine their selection criteria and therefore choose that air issues of modeling the durable goods market have been approached in various replacement decision of these , the results of his research (practically a „stocktaking” of topic in specialty literature) replacement reasons: their usefulness in conjunction with the depreciation consumers, deterioration of intrinsic performances concerning durable goods may result in their total or part replacement thus resulting the „desire of . guiltian starts from the tablished presumption that replacement decision is based on the rational and on psychological costs, frequent distortions of decision costs and is required by variable situations of replacement and motivations. the final consumer has been taken into consideration as a decision maker of the purchase and replacement of a durable good, in our study this decision belongs to household as a decision maker represented by the household head, studies in specialty literature emphasizing this significant aspect, that the purchase decision for a durable good respectively is taken within the household and not years concerning the durable goods market nique published the results of their research regarding the effect of sensitivity(senzitation) to price and habituation over the purchase of durable goods, t performances represent the key of consumer motivation to purchase discretionary goods for replacing a durable good, the consumer considering only those goods that provide additional performances compared to that they already have. research conclusion that, producers should provide products having a much higher performance with every new generation of products launched on the market when price sensitivity goes down every new purchase. the originality of this study consists in the fact that authors considered that , the issue for the market in romania is that existence – or not – of some experienced consumers, considering that, households have adopted quite recently the ods, trend that followed hand durable goods (still valid on the car market as it goes on worldwide). this aspect of additional performances concerning a commodity launched on the who emphasized that consumers are often attracted by new versions of durable goods that provide additional elements; even if r this study we have worded the following hypotheses and for whose testing we will use various statistical 1). 72 table 1 – research hypotheses theoretical and practical frame from previous research (based on literature review) hypotheses of the research statistical method for hypotheses analysis price (8,07), followed by promotions (6.83) and product brand (6.80), post-sales service provided having the slightest influence (gabor et al., 2009) budget allocation of households is carried-out according to: size of consumer budget and usefulness of validity as regards items provided by their price.., when choosing durable goods, consumers cannot purchase dissimilar products and cannot compare objective or concrete objectives (corfman, lehmann, narayanan , 1991). sensitivity(senzitation) to price and habituation over the purchase of durable goods (liberalli, gruca&nique, 2011) h1 –price is the most important criterium in selecting durable goods h2 – quality is the most important criterium in selecting durable goods cronbach alpha wilcoxon test as information sources are used (in order of their importance): friends and family, websites of producers, leaflets of producers(seitz, razzouk, wells, 2010) 57% of romanians express their satisfaction following the use of a product or service in their discussions with the others (gfk, press release, 13 oct. 2011) h3 – the most important information source is provided by recommendations of friends cronbach alpha wilcoxon test brand is a proof of product quality but it is not a characteristic criterium in selecting the product and as information sources are used (in order of their importance): friends and family, websites of producers, leaflets of producers(seitz, razzouk, wells, 2010) the consumption behavior of households has changed… one of the important reasons leading to this change is provided by rising of advertising made to durable goods that has as direct result – and instant – rising of sales as regards durable goods (hira, 1993) 61% of romanian consumers prefer trade mark dedicated sites, while 41% prefer company sites (gfk, press release, sept. 2011) almost 2 thirds of urban consumers are willing to buy a product following a tv advertisement (gfk, press release, sept. 2011) friends’ recommendations (6.58), followed closely by specialty press (6.53) and promotional leaflets (6.41), recommendations of shop assistants being the least used source but not a significant difference compared to the other sources (gabor et al., 2009) (gabor, 2011a) h4 – the most important promotion is provided by tv advertisements h5 – the most important promotional source is provided by leaflets cronbach alpha wilcoxon test consumers are often attracted by new versions of durable goods that provide additional elements; even if these new elements are never used(zhao, meyer, han, 2005) consumer perception of quality for bi-national durable goods (hamzaoui&merunka, 2006) product performance is the „key” of motivation for discretionary buying in order to replace a durable good (liberali et al., 2011) h6 – the most important attribute in purchasing durable goods is product performance and trade mark cronbach alpha split half h7 – the most important place of purchasing durable goods is specialty shop testing percentages for multiple choice questions sensitivity to price and habituation over the purchase of durable goods (liberalli, gruca&nique, 2011) h8 – occupational status and educational level of head of household directly influences price sensitivity in purchasing durable goods anova population with age between 18 – 34 years the durable goods will be the fastest segment of consumer market in the ’80s (kasulis, 1979) middle population will show various purchase models of durable goods (kasulis, 1979) endowment with durable goods = f (usefulness, income, age) (corfman, lehmann, narayanan, 1991) the purchase decision for a durable good respectively is taken within the household and not individually (guiltinan, 2010) h9 – there are significant differences related to the place, period and manner of buying in line with various sociodemographic characteristics of head of household. χ 2 bivariate 3. sampling descriptions in the sample formation, and consequentl national distribution of urban households according to two criteria, namely: the distribution of urban households based on occupation and level of education of the household head, sample used in our research being illustrated in in tirgu mures, by filling in a questionnaire, head of the household, filling in the questionnaire being carried operator. investigated population has been represented by urban households, in municipality, respectively. table 2 – distribution in general population and sample according to training level and occupational status of head of household profession level of education general population t o ta l le v el o f ed u ca ti o n e m p lo y ee s f re el an ce rs primary 21 1 secondary 228 87 11 higher 51 23 total of profession 153 12 total to increase the representativeness of the sample, we considered scheme of combined sampling, respectively the two layers as follows: • first layer consists of the household head occupation including the following categorie employed person with high respectively employers and self • the second layer consisting of primary level: no school, elementary school, secondary school vocational school, high college / university, postgraduate studies in applying the quota sampling be achieved while respecting the distribution of households according to statistics at the national level. for information gathering stage we used a questionnaire administered by tra operators, namely trained students who have practical experience in this field, questionnaire containing a broad range of scales both classical and specific to marketing data and, implicitly, identification of socio indicators of hard core trend • average size of household and equal to 7.6 % thus showing a uniform population and an average representative within the sample; 3. sampling descriptions in the sample formation, and consequently to ensure its representativeness, we started from households according to two criteria, namely: the distribution of urban households based on occupation and level of education of the household head, search being illustrated in table 2.the data was collected in may 2011, mures, by filling in a questionnaire, at respondent’s residence, having the quality of head of the household, filling in the questionnaire being carried-out by a previously qu investigated population has been represented by urban households, in distribution in general population and sample according to training level and occupational status of head of household general population sample f re el an ce rs a g ri cu lt u re w o rk er s u n em p lo y ed p er so n s r et ir ed t o ta l le v el o f ed u ca ti o n e m p lo y ee s f re el an ce rs 1 8 1 40 25 1 1 11 22 10 86 224 109 11 1 0 1 8 51 42 1 12 3 12 120 152 13 300 to increase the representativeness of the sample, we considered appropriate to apply a scheme of combined sampling, respectively the quota sampling and stratified sampling first layer consists of the household head occupation, including: including the following categories: manager, employed person with higher education, employed person with high-school education, unqualified laborer, freelancers employers and self-employed, farmers, unemployed, retired. consisting of the level of training of household head no school, elementary school, secondary school vocational school, high-school, technical/craftsmen school, higher education level: college / university, postgraduate studies. quota sampling there have been distributed to each operator the quotas to be achieved while respecting the distribution of households according to statistics at the for information gathering stage we used a questionnaire administered by tra operators, namely trained students who have practical experience in this field, questionnaire containing a broad range of scales both classical and specific to marketing data and, implicitly, identification of socio-demographic variables of the household head characteristics indicators of hard core trend are provided by: average size of household in the sample is 3 people, variation coefficient thus showing a uniform population and an average representative 73 y to ensure its representativeness, we started from households according to two criteria, namely: the distribution of urban households based on occupation and level of education of the household head, he 2.the data was collected in may 2011, at respondent’s residence, having the quality of out by a previously qualified investigated population has been represented by urban households, in tirgu mures distribution in general population and sample according to training level and sample a g ri cu lt u re w o rk er s u n em p lo y ed p er so n s r et ir ed 1 0 22 2 12 90 0 0 8 3 12 120 300 appropriate to apply a stratified sampling, using , including: employed persons, manager, employed person with higher education, school education, unqualified laborer, freelancers, , farmers, unemployed, retired. f household head, as follows: no school, elementary school, secondary school, secondary level: , higher education level: there have been distributed to each operator the quotas to be achieved while respecting the distribution of households according to statistics at the for information gathering stage we used a questionnaire administered by trained operators, namely trained students who have practical experience in this field, questionnaire containing a broad range of scales both classical and specific to marketing data and, old head characteristics variation coefficient calculated thus showing a uniform population and an average representative 74 • of households with children below 18 years, the average number of children per household is 1 child per household. • average age of household head is 49.37 years, this value is the result of a high percentage of households of pensioners in the sample, 40 % respectively, the average being representative for 70 % of population (variation coefficient is 29.7 %). for this study the following durable goods have been investigated (havign as starting point the official statistics of the national institute of statistics in romania and eurostat, to which have been added goods subject to foreign research), respectively: car, land telephone, mobile telephone, refrigerator, paraboloidal antenna / cable, internet access, color tv, freezer/refrigerating box, aautomatic washing machine, dish washing machine, computer, laptop, lcd monitor, camera, digital camera, video camera, hi – fi audio system, dvd player, printer / multifunction, sewing machine, microwave, hood, cooker, radio cassette player, audio tower, bicycle, motorbike / moped, vacuum cleaner, cosmetic care appliances, body care appliances, double glazing, kitchen machine, air conditioning, home cinema system. 4. main findings of the research 4.1. presentation of results –analysis of item validity by means of cronbach alpha and split half method as the stapel scale has been used in the questionnaire to measure criteria used in choosing durable goods (price -alegpret, brand alegmarc, promotions/offers alegprom, post-sale service alegserv), and also, to measure sources of information that influence them in their selection (promotional leaflets-infplian, special press – infpresa, recommendations of friends infpret, recommendations of sellers infvanza)we have shown as response versions variables whose grouping we considered it was necessary to be tested, we used, by means of the spss software, analysis of validity in relation to items in the questionnaire by means of two methods that evaluate internal consistency of items: split – half method and cronbach alpha coefficient as indicator of scale precision (internal consistency index) therefore, for variables measured on the stapel scale and the likert scale, results for calculation of the cronbach alpha coefficient are (table 3): table 3 – results for reliability analysis – scale. cronbach alpha item codes item total statistics scale mean if item deleted scale variance of item deleted corrected item – total correlation alpha if item deleted results for stapel scale–buying criteria alegpret alegmarc alegprom alegserv 19.3933 20.6767 20.6633 21.6767 28.5003 27.6376 23.6421 21.9988 .2841 .2422 .4225 .4571 .5419 .5780 .4306 .3951 reliability coefficients alpha = .5657 n of cases= 300 n of items= 4 results for stapel scale – information sources used infplian infpresa infpret infvanza 17.0367 16.9200 15.8733 17.4500 31.4401 31.7060 36.9538 35.1112 .5626 .6118 .5015 .5245 .6888 .6585 .7203 .7081 reliability coefficients alpha = .7526 n of cases = 300 n of items= 4 note for items codes: 1) price -alegpret, brand alegmarc, promotions/offers alegprom, post-sale service – alegserv. 2) promotional leafletsinfplian, special press – infpresa, recommendations of friends infpret, recommendations of sellers – infvanza. for criteria used in acquiring goods value of 0.57 proving that scale has an average precision level first item (price), the alpha coefficient concerning validity of the three remaining items (brand, promotions, post-sale service change, it is better to keep the first item, mures are price sensitive in the buying process of durable goods. this aspect is explainable considering that, a very high percentage (40%) of households in the study, are made of pensioners, whose income is low compared to the other types of households. for information sources used in acquiring goods validity of the 4 item-scale has a value of level, removing the first item (promotional leaflets) leading to declining alpha 0.69, a significant decline indicating that these sources are important in buying goods for variables measuring measuring attributes taken into account in purchasing durable goods included variables measure in fact these promotional influences, results being shown in 4. for attributes taken into accounting acquiring goods methods of item validity, results being shown in of the alpha coefficient was 0.72 we conclude that variables are measured on a scale with a good precision level, issue also sustained by results of the second method, split the spearman – brown validity coeffici precision. 4.2. presentation of results – most variables are measured on nominal or ordinal scales useful to test ranks of ordinal variables been used for linked scores (ranks) within the research we requested respondents to rank the “ stapel scale (providing scores/ranks) with values between 1 and10 compared to other three variables (promotions, brand, post again as attribute evaluated on a scale from1 to 5 alongside other 11 attributes, aiming to notice if ,evaluated by several attributes, in the first case, it achieved the highest score, in the second case it has been gone beyond by another attribute, namely “ differences between the two mean provided by the same respondents. results achieved with the spss software as a result of applying the wilcoxon test are summarized in it is therefore noticed that the number of 10 and 14 non-existent differences 14.303) it means that, the difference between the two ranks is significant and hence, together with several attributes than those taken into account price is not so important in buying goods but their quality. retailers, emphasizing that, though price sensitive, consumers (households respectively) in romania gives priority to quality of durab buying these goods. used in acquiring goods, the alpha coefficient of 4 itemscale has an average precision level. moreover if we remove the ha coefficient concerning validity of the three remaining items sale service) decreases to 0.54 and as long as this is a very small change, it is better to keep the first item, price. this issue reveals that, households in tirgu res are price sensitive in the buying process of durable goods. this aspect is explainable considering that, a very high percentage (40%) of households in the study, are made of pensioners, whose income is low compared to the other types of households. information sources used in acquiring goods, the alpha coefficient concerning scale has a value of 0.75 proving that the scale has a good precision removing the first item (promotional leaflets) leading to declining alpha 0.69, a significant decline indicating that these sources are important in buying goods for variables measuring promotional influences in buying a commodity attributes taken into account in purchasing durable goods5we wante included variables measure in fact these promotional influences, results being shown in attributes taken into accounting acquiring goods, we have used both analysis methods of item validity, results being shown in table 4. as through the first method, a value of the alpha coefficient was 0.72 we conclude that variables are measured on a scale with a good precision level, issue also sustained by results of the second method, split brown validity coefficient has the value of 0.66 showing a mild to good wilcoxon test ost variables are measured on nominal or ordinal scales, and therefore of ordinal variables within sampling. therefore the wilcoxon (ranks). within the research we requested respondents to rank the “price” variable one on the (providing scores/ranks) with values between 1 and10 compared to other three omotions, brand, post-sale service) considered as a criterium in selecting goods again as attribute evaluated on a scale from1 to 5 alongside other 11 attributes, aiming to notice if ,evaluated by several attributes, price variable still has the same rank in the first case, it achieved the highest score, in the second case it has been gone beyond by another attribute, namely “quality”. therefore, we considered useful between the two mean ranks, considered to have a relational natu provided by the same respondents. results achieved with the spss software as a result of are summarized in table 5. it is therefore noticed that the number of negative differences is 275 and those existent differences, for a significance level α < 0.05, z rank has the value ( 14.303) it means that, the difference between the two ranks is significant and hence, together with several attributes than those taken into account when the stapel scale has been used, the price is not so important in buying goods but their quality. this result is an important one for retailers, emphasizing that, though price sensitive, consumers (households respectively) in romania gives priority to quality of durable goods, aspect due to mainly the frequency of 75 -scale validity has a . moreover if we remove the ha coefficient concerning validity of the three remaining items to 0.54 and as long as this is a very small . this issue reveals that, households in tirgu res are price sensitive in the buying process of durable goods. this aspect is explainable considering that, a very high percentage (40%) of households in the study, are made of pensioners, whose income is low compared to the other types of households. , the alpha coefficient concerning has a good precision removing the first item (promotional leaflets) leading to declining alpha coefficient to 0.69, a significant decline indicating that these sources are important in buying goods. promotional influences in buying a commodity4and those we wanted to test if included variables measure in fact these promotional influences, results being shown in table , we have used both analysis ugh the first method, a value of the alpha coefficient was 0.72 we conclude that variables are measured on a scale with a good precision level, issue also sustained by results of the second method, split – half, where 0.66 showing a mild to good , and therefore we consider it is the wilcoxon test has ” variable one on the (providing scores/ranks) with values between 1 and10 compared to other three ) considered as a criterium in selecting goods again as attribute evaluated on a scale from1 to 5 alongside other 11 attributes, aiming to variable still has the same rank . in the first case, it achieved the highest score, in the second case it has been gone . therefore, we considered useful to test the , considered to have a relational nature as they were provided by the same respondents. results achieved with the spss software as a result of is 275 and those positive are < 0.05, z rank has the value (14.303) it means that, the difference between the two ranks is significant and hence, together scale has been used, the this result is an important one for retailers, emphasizing that, though price sensitive, consumers (households respectively) in le goods, aspect due to mainly the frequency of 76 table 4 – results for reliability analysis – scale. cronbach alpha for information sources and attributes that are taken into consideration when buying durable goods items codes item total statistics scale mean if item deleted scale variance of item deleted corrected item – total correlation alpha if item deleted results for information sources infl_tv inf_rad inf_pres inf_str inf_pmag inf_prie inf_gara inf_pmar inf_afis inf_net inf_amar inf_nici 9714 .9714 .9714 .9714 .9714 .9429 .9429 .9714 .9714 .9714 .9714 .0571 .0874 .0874 .0874 .0874 .0874 .0555 .0555 .0874 .0874 .0874 .0874 .1143 .0000 .0000 .0000 .0000 .0000 .0422 .0422 .0000 .0000 .0000 .0000 -.5601 -.6346 -.6346 -.6346 -.6346 -.6346 -1.0667 -1.0667 -.6346 -.6346 -.6346 -.6346 .5500 reliability coefficients alpha = .6294 n of cases= 300 n of items= 12 results for attributes achmarca achgaran achpret achservi achnumm achdscou achcompe achcalpr achcalit achperft achdesig achconse 40.9064 40.6789 40.3445 41.6589 42.5284 41.0100 41.9264 40.4013 40.1271 40.5819 41.5485 40.8227 33.4140 33.3865 35.2131 31.3061 33.3775 33.2046 31.5382 34.2142 35.2791 33.0025 31.0069 33.7168 .2872 .4049 .2260 .4225 .3100 .3230 .3829 .3836 .3594 .4268 .4469 .2647 .7058 .6900 .7114 .6850 .7020 .7001 .6917 .6941 .6992 .6868 .6809 .7090 reliability coefficients alpha = .7147 n of cases= 300 n of items= 12 split – half method n of cases= 300; n of items= 12; correlation between forms = .4937; equal-length spearman-brown = .6611 guttman split – half = .6611; unequal-length spearman-brown = .6611; 6 items in part 1.6 items in part 2. alpha for part 1 = .5484. alpha for part 2 = .6144 note for items codes: 1) tvcommercials – infl_tv, radio commercials -inf_rad, press commercials -inf_pres, street boards inf_str, promotional leaflets of shop -inf_pmag, advice of friends or acquaintances-inf_prie, provided warranty -inf_gara, promotional leaflets of brands inf_pmar, posters in and on public means of transport -inf_afis, internet commercials -inf_net, the same brand that has already been used inf_amar, no influence -inf_nici. 2) brand -achmarca, provided warranty -achgaran, price achpret, post-sales service -achservi, shop name -achnumm, provided discounts -achdscou, personnel competence -achcompe, quality-price ratio -achcalpr, product quality -achcalit, product technical performances -achperft, product design -achdesig, energy consumption class –achconse. table 5 – results for wilcoxon signed ranks test variables tested ranks n mean rank sum of ranks price_stapel scale variable price_11 attributes variable negative ranks 275 145.89 40118.50 positive ranks 10 63.65 636.50 ties 14 total 299 recommendations/advice of friends_ stapel scala variable recommendations/advice of friends variable_10 variables negative ranks 299 150.00 44850.00 positive ranks 0 0.00 0.00 ties 1 total 300 we have also applied the wilcoxon test for the variable that, measured on the three variables (special press, measured alongside other 10 variables has achieved “tv commercials”, the results achieved with spss being shown in noticed that the negative differences difference, for a significance level the difference between the two ranks is significant and hence, alongside several attributes than those taken into account when the staple scale has been used important in buying goods but buying goods. this result emphasizes that, romanian consumers are influenced and trust information shown in tv advertisements, thus proving their efficiency for these goods. 4.3. presentation of results – processing of multiple choice questions as the question in questionnaire with regards to the place where households within sample buy durable goods, contains multiple choice answers test the significance of percentages obtained to this question, their distribution of the answers being found in table 6. table 6 – distribution of commodity acquisition places response version hypermarket number of answers relative frequencies testing of proportion conformity in case of a multiple choice question formula and was the base for testing significance of percentages achieved by and specialty shops, as buying place of durable goods. ( ) ( ) n pppp pp tc 2211 21 11 +−+− − = we consider the value of p than its theoretical value for a probability of 95 %, 1.96 respectively, and it results that, the difference is significant for a proportion of 95% of households, and thus special shop represent the main place of buying the durable goods for households in tirgu municipality. 4.5. presentation of results – anova considered often as an extension of the t test of testing two means, anova allows the testing of means in case when the the marketing research concerning the durable goods market in tirgu mures, respondents have been required to evaluate by influence) – 10 (it influences very much) four criteria used in buying durable goods, brand, promotions/offers and post variable ranking this variable to the first place. distribu variable – dependent variable we have also applied the wilcoxon test for the ”recommendations/a variable that, measured on the stapel scale has achieved the best rank compared to other , promotional leaflets, and recommendations of sellers measured alongside other 10 variables has achieved the second rank, being gone beyond by ”, the results achieved with spss being shown in table negative differences are 299 and the positive ones are 0 and a significance level α < 0.05, the z rank has a value of (-15.028) meaning that the difference between the two ranks is significant and hence, alongside several attributes than when the staple scale has been used “advice of friends t in buying goods but tv commercials have a higher influence . this result emphasizes that, romanian consumers are influenced and trust information shown in tv advertisements, thus proving their efficiency for these goods. processing of multiple choice questions as the question in questionnaire with regards to the place where households within sample durable goods, contains multiple choice answers (table 6), we consider it is necessary to test the significance of percentages obtained to this question, their distribution of the answers distribution of commodity acquisition places hypermarket supermarket special shops internet 89 20 128 9 29.7 6.7 42.7 3.0 testing of proportion conformity in case of a multiple choice question formula and was the base for testing significance of percentages achieved by , as buying place of durable goods. ( )ppp 1221 *2 −+ where p1 = percentage achieved from specialty shops p2 = percentage achieved by hypermarket p12 = common percentage of the two response versions of p12equal to 0, hence it results tc = 2.677 that has a higher value than its theoretical value for a probability of 95 %, 1.96 respectively, and it results that, the significant for a proportion of 95% of households, and thus special shop represent the main place of buying the durable goods for households in tirgu anova an extension of the t test of testing two means, anova allows the testing of means in case when the independent variable shows more than three ways. within the marketing research concerning the durable goods market in tirgu mures, respondents have been required to evaluate by means of the stapel scale, built on range 1 (does not uences very much) four criteria used in buying durable goods, brand, promotions/offers and post-sale service, respectively, mean rank related to the price variable ranking this variable to the first place. distribution of ranks provided to dependent variable – of those 300 households in the sample, differentiated 77 recommendations/advice of friends” has achieved the best rank compared to other recommendations of sellers) and that, the second rank, being gone beyond by table 5.it is therefore are 0 and a non-existent 15.028) meaning that the difference between the two ranks is significant and hence, alongside several attributes than advice of friends” are not so have a higher influence on the decision of . this result emphasizes that, romanian consumers are influenced and trust information shown in tv advertisements, thus proving their efficiency for these goods. as the question in questionnaire with regards to the place where households within sample 6), we consider it is necessary to test the significance of percentages obtained to this question, their distribution of the answers internet anywhere 74 3.0 25.0 testing of proportion conformity in case of a multiple choice question–has the following formula and was the base for testing significance of percentages achieved byhypermarkets = percentage achieved from = percentage achieved by hypermarket = common percentage of the two = 2.677 that has a higher value than its theoretical value for a probability of 95 %, 1.96 respectively, and it results that, the significant for a proportion of 95% of households, and thus special shops represent the main place of buying the durable goods for households in tirgu mures an extension of the t test of testing two means, anova allows the independent variable shows more than three ways. within the marketing research concerning the durable goods market in tirgu mures, respondents means of the stapel scale, built on range 1 (does not uences very much) four criteria used in buying durable goods, price, , respectively, mean rank related to the price tion of ranks provided to the price of those 300 households in the sample, differentiated 78 according to the education level of household head independent variable –is shown in table 7. table 7 – distribution of scores according to education level of household head and descriptive statistics of anova education level scores n mean st. deviation 1 2 3 4 5 6 7 8 9 10 elementary school (4 classes) 1 1 3 1 6 8.33 1.51 secondary school (8 classes) 2 1 3 1 2 10 19 7.79 3.14 vocational school 1 1 2 2 5 7 12 13 40 83 8.60 1.89 high school/careertraining school/ technical/foremen 1 1 1 5 6 12 13 36 28 37 141 8.01 1.97 college / university 1 1 5 7 1 4 6 6 10 41 7.17 2.52 postgraduate education 1 2 4 3 10 8.80 1.23 total 5 2 3 12 15 23 26 56 56 101 300 8.08 2.13 starting from these data, we shall apply anova with a single factor to evaluate statistically the impact of education level on providing ranks for the „price” criterium in acquiring durable goods; we use the spss software for data processing, the null hypothesis h0 being equality of means of the six categories of education levels. from data illustrated in table 7are noticed the main descriptive statistics, the number of cases, means achieved by the price criterium typical to each education level and standard deviation on each education level and on total sample, respectively. therefore it is noticed that, between the means of the six education levels are differences and, if these education levels would be regrouped in 3 levels, primary, secondary and higher, respectively so as elementary and gymnasium education corresponds to the primary level, we notice that between the two levels are differences between means (8.33 and 7.79). for the secondary level we group vocational school and high school/career-training school/ technical school/ foremen, the means of the two are different (8.01 and 7.17).the same thing being valid for the last regroup, the higher level comprises college / university and postgraduate studies, the two means being 7.17 and 8.80. the results of anova are illustrated in table8, the f ratio being significant at 0.013 as being lower than 0.05 and is achieved by dividing the sum of deviation squares from the mean between groups to the sum of squares from the means within groups that provides us an f ratio equal with 2.928. that means that there is a significant difference between the six groups and therefore the null hypothesis is rejected. table 8 – anova results sum of squares df mean square f sig. between groups 64.468 5 12.894 2.928 .013 within groups 1294.769 294 4.404 total 1359.237 299 in conclusion, the education level has a significant influence the price as important attribute that is taken into consideration in buying as a result of applying anova with a single factor to sampling data related to the attribute as the governing attribute of buying durable goods, the conclusion is that is significant group factor and therefore the group of th education level is also influenced by other attributes that have relatively high ranks that are close to the price attribute. t household heads take into conside price, promotions, brand and post goods. hence between the six education levels of household head there are perceptible differences of price as attribute they have taken into consideration when buying durable goods, issue that is explainable as people with an education over average, have functions or jobs that are paid better and hence acquisition price is not a critical factor in buying a 4.6. presentation of results – χ in order to test if there are significant differences statistically in line with the socio demographic characteristics of household head ( gender) and household (number of people in household, households with children under 18 years or without children) with regards to period of durable goods, we have used the in table 9, being only retained the results with a statistical significance level lower than 0.05. table 9 – results for χ2 bivariate test tested null hypothesis h 1. there are no significant differences 1.1. number of people in household 1.2. gender of household head 1.3. education level of household head 2. there are no significant differences 2.1. education level of household head 2.2. occupational status of household head 2.3. age of household head 2.4. households with children and those without children 3. there are no significant differences 3.1. number of people in household 3.2. age of household head 3.3. occupational status of household head 3.4. education level of household head the final conclusion obtained as a result of applying the differences related to acquisition place, acquisition period and acquisition way concerning durable goods in line with various socio sample and of household head, emphasized • there are differences related to acquisition place special shops and from internet, respectively household, gender and education level of household head; the education level has a significant influence (f = 2.928, p = 0.013) on the price as important attribute that is taken into consideration in buying durable goods. as a result of applying anova with a single factor to sampling data related to the attribute as the governing attribute of buying durable goods, the conclusion is that is and therefore the group of the 300 households according to the education level is also influenced by other attributes that have relatively high ranks that are . the final conclusion being that, regardless the education level, household heads take into consideration the influence gathered by these attributes namely price, promotions, brand and post-sale service in the decision process of buying durable goods. hence between the six education levels of household head there are perceptible attribute they have taken into consideration when buying durable goods, issue that is explainable as people with an education over average, have functions or jobs that are paid better and hence acquisition price is not a critical factor in buying a χ2 bivariate test in order to test if there are significant differences statistically in line with the socio demographic characteristics of household head (age, education level, occupational status, mber of people in household, households with children under 18 ) with regards to acquisition way, acquisition place and acquisition , we have used the χ2 bivariate test, its results being shown structured 9, being only retained the results with a statistical significance level lower than 0.05. bivariate test h0 χ 2 calculated df asymp. sig. (2-sided) χ 2 theoretical icant differences, statistically, as regards acquisition place, according to: number of people in household education level of household head 11.357 11.490 13.827 6 1 5 .078 .001 .017 10.64 10.83 12.83 there are no significant differences, statistically, as regards acquisition way, according to: education level of household head occupational status of household head ildren and those 14.615 53.778 17.185 15.986 10 16 8 8 .047 .000 .028 .043 18.31 39.25 17.53 15.51 there are no significant differences, statistically, as regards acquisition period, according to: number of people in household occupational status of household head education level of household head 28.655 19.624 49.726 19.617 18 12 24 15 .053 .075 .002 .087 28.87 18.55 51.18 22.31 the final conclusion obtained as a result of applying theχ2 bivariate test for testing differences related to acquisition place, acquisition period and acquisition way concerning ds in line with various socio-demographic characteristics of households in the sample and of household head, emphasized that: there are differences related to acquisition place (supermarket, hypermarket, special shops and from internet, respectively) according to the number of people in household, gender and education level of household head; 79 (f = 2.928, p = 0.013) on durable goods. as a result of applying anova with a single factor to sampling data related to the price attribute as the governing attribute of buying durable goods, the conclusion is that is not a 300 households according to the education level is also influenced by other attributes that have relatively high ranks that are he final conclusion being that, regardless the education level, ration the influence gathered by these attributes namely sale service in the decision process of buying durable goods. hence between the six education levels of household head there are perceptible attribute they have taken into consideration when buying durable goods, issue that is explainable as people with an education over average, have functions or jobs that are paid better and hence acquisition price is not a critical factor in buying a good. in order to test if there are significant differences statistically in line with the socioage, education level, occupational status, mber of people in household, households with children under 18 acquisition way, acquisition place and acquisition bivariate test, its results being shown structured 9, being only retained the results with a statistical significance level lower than 0.05. theoretical conclusions , according to: 10.64 10.83 12.83 h0is rejected h0 is rejected h0 is rejected according to: 18.31 39.25 17.53 15.51 h0 is accepted h0 is rejected h0 is accepted h0 is rejected , according to: 28.87 18.55 51.18 .31 h0 is accepted h0 is rejected h0 is accepted h0 is accepted bivariate test for testing differences related to acquisition place, acquisition period and acquisition way concerning demographic characteristics of households in the (supermarket, hypermarket, rding to the number of people in 80 • there are differences related to acquisition way(full when buying or by installments, respectively) according to the occupational status of household head and by having or not children under 18 years who are under family sustenance; • there are significant differences related to acquisition period (festive season, promotional periods, any other period of the year, respectively) according with the age of household head. 5. conclusions and future research directions we have therefore emphasized through this research, by means of various statistical methods, that, in the relation between romanian consumer retailer, exogenous factors provided by social factors such as: income of household, social status (quantified in this research by means of education level and occupational status) have a major influence, both as regards acquisition of durable goods inwardly, as well as perception of this relation, quantified in research through variables such as: post-sale service and advice or recommendations of sellers. however, on the other hand, in the relation consumer – retailer, promotion policy is an exogenous factor that is as important as in influencing the buying decision of these goods. thus, we have emphasized a paradox, in fact another feature of romanian consumer behavior and especially immaturity of romanian market on one hand distrust of consumers in sales personnel, and on the other hand, the confidence in commercials used on various carriers. moreover about this feature, the previous research of author outlined and emphasized the innovative character of romanian durable goods consumer but….unsupported by its buying power. also, according to eurostat data related to countries retail volume annual growth rate 2000 – 2010, if within eu – 27 countries, the growth rates have registered values between (1.7) in 2009 and (+3.3) in 2000, in romania these growth rates have registered values that are tenfold than average in eu – 27, (9.9) in 2009 and values between (+8.3) in 2003 and (+21.1) in 2007, respectively. thus we conclude that the retail market in romania has not maturated yet as well as the markets from the other eu member countries, extending, the same is with the durable goods market. financial implications of the loans made by romanian households in order to buy durable goods have consequences on the financial-banking system in romania that are visible in the economic recession period. for the marketing researcher it is important to sample the consumers’ opinions in order to discover what kind of problems and needs have consumers, how they occurred and especially how they will lead them to the goal of buying a consumer durable. by gathering such information, stimuli that are interesting for a certain product can be identified and marketing programs focused on these stimuli can be carried-out. this research has some limits. one of them would be the period of research, year 2011 respectively, when the economic crisis effects felt in romania due to the international eastern-western gap. another limit is that research had as location a city in the centre development area in romania, area that is more developed economically and hence perceptions are significantly different compared to less developed areas in romania. as a result, research should be started again and extended (or applied simultaneously) in another development area in romania. references ardily, p. 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(2006). the effect of secondhand markets on the firm’s dynamic pricing and new product introduction strategies. international journal of reasearch in marketing, 23, 295–307. http://www.capital.ro/detalii-articole/stiri/site-ul-emag-a-picat-157056.html http://www.wall-street.ro/articol/it-c-tehnologie/113066/campania-black-friday-emag-avandut-de-8-mil-euro-intr-o-singura-zi.html http://www.wall-street.ro/articol/it-c-tehnologie/113063/black-friday-in-romaniareduceri-fara-stocuri-sau-disponibilitate.html http://www.gfkro.com/imperia/md/content/gfkromania/consumer_tracking.pdf http://www.gfk-ro.com/public_relations/press/multiple_pg/008791/index.ro.html http://www.gfk-ro.com/public_relations/press/multiple_pg/008728/index.ro.html http://www.gfk-ro.com/public_relations/press/multiple_pg/008695/index.ro.html www.emag.ro 1 according to eurostat quoted by the national institute of statistics in living conditions of population in romania – year 2009, p. 220. 2as a matter of fact the author considers that the ’20s also had a major influence in economy, that apart the significant rise of household expenses for durable goods also led to an „instauration” of family income reallotment for durable and non-durable goods. 3t. hira mentions as a sustaining source of this issue the study carried-out by the “ladies home journal” in 1901 – 1941. in that time, the publication concerned increased both the number of pages dedicated to durable goods advertising and the size of advertising space related to durable goods. 4tv commercials, radio commercials, press commercials, street boards, promotional leaflets of shops, advice of friends or acquaintances, provided warranty, promotional leaflets of brands, posters in and on public means of transport, internet commercials, the same brand that has already been used, no influence. 5brand, provided warranty, price, post-sales service, shop name, provided discounts, personnel competence,quality-price ratio, product quality, product technical performances, product design, energy consumption class . 14-03 asongu new financial development indicators: with a critical contribution to inequality empirics received: september 7, 2013 the employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. financial depth in the perspective of money supply is not equal to l liabilities in every development context. this paper introduces complementary indicators to the existing financial development and structure database (fdsd). dynamic panel system gmm estimations are applied. different specifications, non variables are used to check the consistency of estimated coefficients. our results suggest that from an absolute standpoint (gdp base measures), all financial sectors are pro however, three interesting findings are drawn from m expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income effect. (2) growth of informal and semi expense of the formal financial se income redistributive effect of semi than the corresponding impact of informal finance. it unites two streams of research by contributing at the same time to the macroeconomic literature on measuring financial development and responding to the growing field of economic development by means of informal financial sector promotion and microfinance. the paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing countries. the phenomenon of mobile banking is such an example. jel classification: e00; g20; i30; o17; o55 keywords: financial development; shadow economy; poverty; inequality; africa. 1. introduction poverty and inequality remain daunting challenges in developing countr three decades of financial reforms. in spite of this substantial policy relevant concern, inequality related studies have not been critically engaged in these countries due to lack and/or scarcity of relevant data (kai & hamori, 2009). countries embarked on a chain of structural adjustment policies in the financial sector as part new financial development indicators: with a critical contribution to inequality empirics simplice a. asongu african governance and development institute yaoundé, cameroon accepted: may 22, 2014 online published: abstract the employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. financial depth in the perspective of money supply is not equal to l liabilities in every development context. this paper introduces complementary indicators to the existing financial development and structure database (fdsd). dynamic panel system gmm estimations are applied. different specifications, non-overlapping intervals and control variables are used to check the consistency of estimated coefficients. our results suggest that from an absolute standpoint (gdp base measures), all financial sectors are pro however, three interesting findings are drawn from measures of sector importance. (1) the expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income effect. (2) growth of informal and semi-formal financial sectors at the expense of the formal financial sector has an income equalizing effect. (3) the positive income redistributive effect of semi-formal finance in financial sector competition is higher than the corresponding impact of informal finance. it unites two streams of research by same time to the macroeconomic literature on measuring financial development and responding to the growing field of economic development by means of informal financial sector promotion and microfinance. the paper suggests a practicable way the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing countries. the menon of mobile banking is such an example. g20; i30; o17; o55 : financial development; shadow economy; poverty; inequality; africa. poverty and inequality remain daunting challenges in developing countries despite close to three decades of financial reforms. in spite of this substantial policy relevant concern, inequality related studies have not been critically engaged in these countries due to lack and/or scarcity of relevant data (kai & hamori, 2009). accordingly, many developing countries embarked on a chain of structural adjustment policies in the financial sector as part 33 new financial development indicators: with a critical contribution to inequality empirics simplice a. asongu african governance and development institute yaoundé, cameroon online published: june 5, 2014 the employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. financial depth in the perspective of money supply is not equal to liquid liabilities in every development context. this paper introduces complementary indicators to the existing financial development and structure database (fdsd). dynamic panel system intervals and control variables are used to check the consistency of estimated coefficients. our results suggest that from an absolute standpoint (gdp base measures), all financial sectors are pro-poor. easures of sector importance. (1) the expansion of the formal financial sector to the detriment of other financial sectors has a formal financial sectors at the ctor has an income equalizing effect. (3) the positive formal finance in financial sector competition is higher than the corresponding impact of informal finance. it unites two streams of research by same time to the macroeconomic literature on measuring financial development and responding to the growing field of economic development by means of informal financial sector promotion and microfinance. the paper suggests a practicable way the effects of the various financial sectors on economic development. the equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing countries. the : financial development; shadow economy; poverty; inequality; africa. ies despite close to three decades of financial reforms. in spite of this substantial policy relevant concern, inequality related studies have not been critically engaged in these countries due to lack accordingly, many developing countries embarked on a chain of structural adjustment policies in the financial sector as part 34 of reforms in the economic sector with the ambitious goals of mitigating inequality, enhancing economic prosperity and improving financial efficiency (janine & elbadawi, 1991). these reforms led to the adoption of some financial indicators that do not exhaustively calibrate the policy needs of poverty and/or inequality mitigation (asongu, 2013a). the employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. usage of some indicators for instance is based on the presumption that they are generally valid (gries, kraft & meierrieks, 2009)1, notwithstanding recent empirical evidence that not all indicators may matter in financial development (asongu, 2013b). furthermore, the absence of a consensus on the superiority of financial development indicators, especially the widely used proxy for financial depth (gries, kraft & meierrieks, 2009) is deserving of research attention. as far as we have reviewed related literature, we suppose the absence of studies that focus on the quality of financial development indicators (with respect to contextual development concerns) is enough inspiration to search for the missing link. it is the objective of this paper to verify the validity of the financial depth indicator as applied to developing countries and hence, decompose it into new measures that substantially tackle financial development challenges in developing countries. the underlying impetus of the study is the misleading assumption that, money supply (financial depth) is a proxy for liquid liabilities in developing countries. this paper will therefore suggest a practicable way to disentangle the effects of the various financial sectors on economic development. we shall develop testable hypotheses and propositions for more refined financial development indicators and empirically verify their validity in the finance-inequality nexus. gdp and money-supply oriented ratios are developed for each sector of the financial system. our conception of the financial system goes beyond the realm of that expressed in the international financial statistics’ definition: it integrates the informal sector, hitherto a missing component in the existing measurement of monetary supply (m2). the contribution of this paper to the finance-inequality literature is threefold. (1) it provides a macroeconomic assessment of the income-redistributive incidence of the informal financial sector. (2) the existing measurement of financial depth is disentangled to include a previously missing component and, the income-equalizing effect of each component is examined independently. (3) financial sector importance measures are introduced to complement gdp-based indicators in order to investigate the dynamics of financial sector competition in the finance-inequality nexus. the outcome of this study could be interesting to policy makers and researchers because, it unites two streams of research. it contributes at the same time to the macroeconomic literature on measuring financial development and, responds to the growing field of economic development by means of informal financial sector promotion and microfinance (asongu, 2013cd, 2014a). the absence of sound fundamentals in a financial indicator might lead to inappropriate inferences and unhealthy policy recommendations. the rest of the paper is structured in the following manner. section 2 examines the problem statement and the proposed solutions from the literature. data and methodology are presented and outlined respectively in section 3. presentation of results, discussion and policy recommendations are covered in section 4. we conclude with section 5. 1 gries, kraft & meierrieks (2009) state: “in the related literature, several proxies for financial deepening have been suggested, for example, monetary aggregates such as m2 on gdp. to date there is no consensus on the superiority of any indicator” (p. 1851). 2. problem statement and solutions a shortcoming in the definition of the financial system by the international monetary fund (imf) is core to this problem statement because it is more adapted to developed countries. according to the international financial statistics (ifs), the financial s formal and semi-formal sectors; that is, deposit money banks and other financial institutions (see lines 24, 25 and 45 of the ifs, 2008). while this definition could be quasi developed countries, it fails to take account of t countries. this begs the concern of knowing the role of the informal sector (in economic development). 2.1 the international financial statistics’ (2008) conception of the financial system as detailed in table 1 below inspired by steel (2006), formal finance refers to services that are regulated by the central bank and other supervisory authorities. semi enables a distinction between formal and informal finance. this is the segment of finance tha is in a formal financial environment but not formally recognized. a good example is microfinance. informal finance is one that is not arranged via formal agreements and not enforced through the legal system. from the fourth column, the last two types of lending’ are very common in developing countries, particularly among the financially excluded or those on low incomes. unfortunately, the ifs definition completely marginalizes the last types. we postulate that, based on the weight of availabl should no longer be undermined in the definition of the financial system. table 1 – segments of the financial system by degree of formality in paper’s context paper’s context formal financial system imf definition of financial system from international financial statistics (ifs) formal financial sector (deposit banks) semiformal and informal financial systems semi-formal financial sector (other financial institutions) missing component in ifs definition informal financial sector source author 2. problem statement and solutions a shortcoming in the definition of the financial system by the international monetary fund (imf) is core to this problem statement because it is more adapted to developed countries. according to the international financial statistics (ifs), the financial system consists of the formal sectors; that is, deposit money banks and other financial institutions (see lines 24, 25 and 45 of the ifs, 2008). while this definition could be quasi developed countries, it fails to take account of the informal financial sector in undeveloped countries. this begs the concern of knowing the role of the informal sector (in economic 2.1 the international financial statistics’ (2008) conception of the financial system 1 below inspired by steel (2006), formal finance refers to services that are regulated by the central bank and other supervisory authorities. semi enables a distinction between formal and informal finance. this is the segment of finance tha is in a formal financial environment but not formally recognized. a good example is microfinance. informal finance is one that is not arranged via formal agreements and not enforced through the legal system. from the fourth column, the last two types of lending’ are very common in developing countries, particularly among the financially excluded or those on low incomes. unfortunately, the ifs definition completely marginalizes the last types. we postulate that, based on the weight of available evidence, informal finance should no longer be undermined in the definition of the financial system. segments of the financial system by degree of formality in paper’s context tiers definitions institutions formal financial (deposit formal banks licensed by central bank commercial and development banks formal financial (other financial institutions) specialize d non-bank financial institutions rural banks, post banks, saving and loan companies, deposit taking micro finance banks other nonbank financial institutions legally registered but not licensed as financial institution by central bank and government credit unions, micro finance ngos informal financial informal banks not legally registered at national level (though may be linked to a registered association) savings collectors, savings and credit associations, money lenders 35 a shortcoming in the definition of the financial system by the international monetary fund (imf) is core to this problem statement because it is more adapted to developed countries. ystem consists of the formal sectors; that is, deposit money banks and other financial institutions (see lines 24, 25 and 45 of the ifs, 2008). while this definition could be quasi-true for he informal financial sector in undeveloped countries. this begs the concern of knowing the role of the informal sector (in economic 2.1 the international financial statistics’ (2008) conception of the financial system 1 below inspired by steel (2006), formal finance refers to services that are regulated by the central bank and other supervisory authorities. semi-formal finance enables a distinction between formal and informal finance. this is the segment of finance that is in a formal financial environment but not formally recognized. a good example is microfinance. informal finance is one that is not arranged via formal agreements and not enforced through the legal system. from the fourth column, the last two types of ‘saving and lending’ are very common in developing countries, particularly among the financially excluded or those on low incomes. unfortunately, the ifs definition completely marginalizes e evidence, informal finance segments of the financial system by degree of formality in paper’s context institutions principal clients commercial development large businesses, government rural banks, companies, deposit taking micro finance large rural enterprises, salaried workers, small and medium enterprises unions, micro microenterprises , entrepreneurial poor savings and associations, self-employed poor 36 2.2 rethinking financial development indicators as far as we have reviewed, but for beck, demirgüç-kunt & levine (1999), the absence of studies that underline the quality of financial development indicators with regard to contextual development is a significant missing component in the financial development literature. some studies have identified the issue, but fallen short of addressing it. hence, it has been well documented that the financial depth indicator as applied to developing countries is very misleading as it does not integrate the realities and challenges of financial intermediary development (demetriades & hussein, 1996; khumbhakar & mavrotas, 2005; ang & mckibbin, 2007; abu-bader & abu-qarn, 2008). therefore, a motivation of this work hinges on an existing debate over the contextual quality of financial development indicators. accordingly, as we shall cover the first generation solutions before proposing second generation solutions. 2.2.1 first generation solutions as far as we have reviewed, first generation solutions consist of a class of studies that has identified the issue with the ifs definition of the financial system and tried to address it superficially without given due consideration to the informal financial sector. the kernel of this categorization is that, while trying to address the issue, informal finance is still marginalized. money supply (m2) which represents the money stock has been widely employed as a standard measurement of liquid liabilities in many studies for decades (world bank, 1989; king & levine, 1993). while, this indicator is quasi-true in the developed world, its application to developing countries has faced substantial criticisms. critics have stressed that in developing countries; an improvement in m2 may reflect an extensive use of currency rather than an increase in bank deposits (liquid liabilities). in attempts to address this problem in empirical literature, a number of solutions have been suggested. firstly, in a bid to curtail this shortcoming, demetriades & hussein (1996) have proposed the subtraction of currency outside banks from m2 when measuring liquid liabilities in developing countries. abu-bader & abu-qarn (2008) amongst others have recently followed suit in adjusting m2. however, these adjustments have not emphasized financial sector importance, because the informal financial sector has still been ruled-out as marginal in the adjustment. secondly, some authors have sought to address the concern by determining a variable that broadly takes account of financial depth. they have used the first principal component of money supply and a combination of other financial measures (khumbhakar & mavrotas, 2005; ang & mckibbin, 2007; gries, kraft & meierrieks, 2009). in so doing, they have decreased the dimensionality of the set of variables without losing much information from the initial dataset on the one hand; and on the other hand, decreased problems related to the quality of m2 as a proxy for liquid liabilities. however, the main drawback of this approach is that for the most part, m2 is mixed with concepts of financial activity (private domestic credit), financial size (deposit bank assets/central bank assets plus deposit bank assets), financial allocation efficiency (bank credit/bank deposits)…etc. 2.2.2. second generation solutions we propose second generation solutions in table 2 below which is a practical way of disentangling the effects of formal, semi-formal and informal financial development sectors contained in m2. propositions in table 2 are based on a rethinking of the ifs definition of the financial system. hence, the new definition integrates a previously missing informal financial sector component into the definition of the financial system. it disentangles the existing measurement into formal and semiformal financial sectors. moreover, it proposes measures of financial sector importance that appreciate evidence of financial sector competition. these second generation solutions are cons sector competition (asongu, 2014bcd). table 2 – summary of propositions panel a: gdp propositions name(s) proposition 1 formal financial development proposition 2 semi-formal financial development proposition 3 informal financial development proposition 4 informal and semiformal financial development panel b: measures of financial sector importance proposition 5 financial intermediary formalization proposition 6 financial intermediary ‘semiformalization’ proposition 7 financial intermediary ‘informalization’ proposition 8 financial intermediary ‘semiformalization and informalization’ n.b: propositions 5, 6, 7 add up to unity (one); arithmetically spelling hence, when their time series properties are considered in empirical analysis, the evolution of one sector is to the detriment of other sectors and vice-versa. 2.3 scope and positioning of the paper poverty and inequality undoubtedly remain serious challenges to economic and human developments. financial repression and its pervasiveness of mitigating economic growth has been elaborately covered by a substantial bulk of the literature (mckinnon, 1973; 1973). in the 1980s and 1990s, most african countries engaged in a series of structural and policy adjustments in the financial sector as part of economic reforms with the goal of given 2 lines 24 and 25 of the ifs (october 3 lines 24, 25 and 45 of the ifs (2008 4 in undeveloped countries m2 is not equal t whereas, in undeveloped countries bd/m2<1, in developed countri measures the rate at which money in circulation is absorbed by the banking is defined as the propensity of the formal banking 5 this indicator measures the level at and informal sectors. 6 this proposition shows the rate at which the informal financial sector is developing at the cost of formal and semi-formal sectors. 7 the proposition appreciates the deterioration of the formal banking sector to the benefit of other sectors (informal and semi-formal). from common sense, proposition meaning the former (formal financial development at the expense of ot deterioration) should display a perfectly negative coefficient of correlation a high positive correlation with proposition 8 and therefore, only the former will be used in the e financial sector importance that appreciate evidence of financial sector competition. these second generation solutions are consistent with a growing stream of literature on financial sector competition (asongu, 2014bcd). summary of propositions panel a: gdp-based financial development indicators formula elucidation bank deposits/gdp bank deposits2 here refer to demand, time and saving deposits in deposit money banks. financial development (financial deposits – bank deposits)/ gdp financial deposits3 are demand, time and saving deposits in deposit money banks and other financial institutions. (money supply – financial deposits)/gdp (money supply – bank deposits)/gdp panel b: measures of financial sector importance bank deposits/ money supply (m2) from ‘informal and semi financial development (formalization) (financial deposits bank deposits)/ money supply from ‘informal and formal’ to financial development (semi (money supply – financial deposits)/ money supply from ‘formal and semifinancial development (informalisation) (money supply – bank deposits)/money supply formal to ‘informal and semi development: (semi-formalization and informalization) 7 n.b: propositions 5, 6, 7 add up to unity (one); arithmetically spelling-out the underlying assumption of sector importance. eries properties are considered in empirical analysis, the evolution of one sector is to the detriment 2.3 scope and positioning of the paper poverty and inequality undoubtedly remain serious challenges to economic and human developments. financial repression and its pervasiveness of mitigating economic growth has been elaborately covered by a substantial bulk of the literature (mckinnon, 1973; 1973). in the 1980s and 1990s, most african countries engaged in a series of structural and policy adjustments in the financial sector as part of economic reforms with the goal of given october 2008). 2008). in undeveloped countries m2 is not equal to liquid liabilities (liquid liabilities equal bank deposits: bd). in undeveloped countries bd/m2<1, in developed countries bd/m2 is almost equal to 1. measures the rate at which money in circulation is absorbed by the banking system. financial formalization here formal banking system to absorb money in circulation. this indicator measures the level at which the semi-formal financial sector evolves to the detriment of formal this proposition shows the rate at which the informal financial sector is developing at the cost of formal and iates the deterioration of the formal banking sector to the benefit of other sectors from common sense, propositions 5 and 8 should be perfectly antagonistic, meaning the former (formal financial development at the expense of other sectors) and the later (formal sector deterioration) should display a perfectly negative coefficient of correlation (see appendix 2). proposition 7 has a high positive correlation with proposition 8 and therefore, only the former will be used in the e 37 financial sector importance that appreciate evidence of financial sector competition. these istent with a growing stream of literature on financial elucidation here refer to demand, time and saving deposits in deposit money banks. are demand, time and saving deposits in deposit money banks and other from ‘informal and semi-formal’ to formal financial development (formalization)4 . from ‘informal and formal’ to semi-formal financial development (semi-formalization)5. -formal’ to informal financial development (informalisation)6. informal and semi-formal’ financial formalization and out the underlying assumption of sector importance. eries properties are considered in empirical analysis, the evolution of one sector is to the detriment poverty and inequality undoubtedly remain serious challenges to economic and human developments. financial repression and its pervasiveness of mitigating economic growth has been elaborately covered by a substantial bulk of the literature (mckinnon, 1973; shaw, 1973). in the 1980s and 1990s, most african countries engaged in a series of structural and policy adjustments in the financial sector as part of economic reforms with the goal of given o liquid liabilities (liquid liabilities equal bank deposits: bd). es bd/m2 is almost equal to 1. this indicator financial formalization here financial sector evolves to the detriment of formal this proposition shows the rate at which the informal financial sector is developing at the cost of formal and iates the deterioration of the formal banking sector to the benefit of other sectors 5 and 8 should be perfectly antagonistic, her sectors) and the later (formal sector (see appendix 2). proposition 7 has a high positive correlation with proposition 8 and therefore, only the former will be used in the empirical section. 38 impetus to economic growth, as well as improving overall economic and financial efficiency (janine & elbadawi, 1992). hitherto, owing to data issues on income-inequality for africa, only two studies to the best of our knowledge have addressed the finance-inequality nexus in the continent (kai & hamori, 2009; batuo, guidi & mlambo, 2010). a common drawback of these two works is the very limited application of the concept of financial development, which we have broadened with the propositions in the previous section. restricting the concept of finance to only its dynamics of depth (kai & hamori, 2009; batuo, guidi & mlambo, 2010) and activity (batuo, guidi & mlambo, 2010) does not paint a full picture of the african inequality-finance nexus for the following reasons. firstly, as we have earlier discussed, a distinction between money supply and liquid liabilities in the conception of financial depth is very important in separating the income redistributive-effect of ‘bank mobilized funds’ from that of overall money supply8. secondly, it is our conviction that the african finance-inequality nexus cannot be effectively assessed without taking into consideration the semi-formal and informal sectors which are more close to the poor segments of the population than the formal financial sector. thirdly, contrary to the motivation of batuo, guidi & mlambo, (2010), the effect on inequality of first and second generation financial reforms in africa cannot be limited to formal finance. in light of the above points, drawing from the experience of a continent that has been implementing development financial reforms, motivated by the propositions highlighted above and shortcomings of existing empirical literature on the african inequality nexus, the empirical section of this paper will provide additional dimensions to the debate. hence, the following hypotheses will be tested in the empirical section. hypothesis 1: the informal financial sector (a previously missing component in the definition of money supply) is good for the poor. hypothesis 2: disentangling different components of the existing measurement (financial system) into formal (banking sector) and semi-formal (other financial institutions) financial sector indicators contribute significantly to the finance-inequality nexus debate. hypothesis 3: introducing measures of sector importance provides interesting dynamics of financial sector competition in the finance-inequality nexus. 3. data and methodology 3.1 data we assess a sample of 28 african countries with annual data from african development indicators (adi) of the world bank (wb) for the period 1996 to 2010. the limitation to a 15 year span is based on constraints in data availability. summary statistics (and presentation of countries), correlation analysis and variable definitions are presented in appendix 1, appendix 2 and appendix 3 respectively. the summary statistics of the variables used in the panel regressions show that, there is quite a degree of variation in the data utilized so that one should be confident that reasonable estimated relationships should emerge. both the standard deviations and minimum/maximum values validate this assertion and further lend credit to the 8 this is because, a great chunk of the monetary base in the african continent circulates outside the banking sector, therefore an increase in money supply may reflect the increase in the use of currency rather than a strengthening of financial system deposits. inappropriateness of a parametric model that assumes a particular functional distribution. the purpose of the correlation matrix is to mitigate multicollinearity. based on the correlation coefficients, there do not appear to be any serious problems with respect of the relationships to be estimated. the indicator for inequality is the gini coefficient values of the frequency income a coefficient of one expresses maximal inequality. the gini coefficient which is commonly used as a measure of inequality in inco disciplines studying inequality: sociology, economics, health science, agriculture…etc guidi & mlambo, 2010). control variables include: inflation, government expenditure, economic prosperity (gdp growth), population growth, foreign foreign direct investment: fdi). we expect: high inflation to fuel inequality (albanesi, 2007) while, low inflation should reduce it (bulir, 1998; lopez, 2004); government tainted by corrupt malpractices) to mitigate inequality and; gdp growth to reduce inequality conditional on even-distribution of the fruits of economic prosperity. the impact of foreign aid on inequality is contingent on the quality of ins growth on inequality should to be positive (afdb, 2012, p.3). we expect globalization both from trade and capital openness perspectives to have a negative income consistent with recent african from intuition, trade can either increase or decrease inequality depending on the proportion of the poor relying on agricultural exports. on the other hand, cheap imports could increase savings and hence, indirectly improve the income too much imports of ‘substitution goods’ produced by domestic industries could fuel income inequality if majority of the population in the lower the affected industries for subsistence income. the impact of human development on inequality depends on the proportion of the poor in the following three dimensions (with respect to national average): gdp per capita, life expectancy and, literac 3.2 methodology estimation with dynamic panel data has some important advantages and one disadvantage relative to cross-country analysis (demirgüç first positive note: (1) it makes use both of time data; (2) in cross-country regressions, the unobserved country error term, so that correlation between the er biased estimated coefficients. more so, in cross variable is included among the explanatory variables, the country correlated with the regressors. a means of controlling for the presence of unobserved country specific effects is to first-difference the regression equation to eliminate the country effect, and then employ instrumental variables to take account of endogeneity. the endogeneity issue is the second edge of the dynamic panel estimation technique. uncontrolled endogeneity can significantly bias estimates and lead to misleading inferences. dynamic panel data analysis accounts for this endogeneity issue by using lagged exogenous variables as instruments 9 on a more general note, an indicator is endogenous when it is correlated with the error term. endogeneity can result from simultaneity or omitted variables, autoregression with autocorrelated errors and measurement error. in addition, a loop of causality between the independent variable and the dependent parameter results in endogeneity. inappropriateness of a parametric model that assumes a particular functional distribution. the purpose of the correlation matrix is to mitigate issues resulting from overparametization and multicollinearity. based on the correlation coefficients, there do not appear to be any serious problems with respect of the relationships to be estimated. the indicator for inequality is the gini coefficient which measures disparity among values of the frequency income-distribution. a value of zero represents perfect equality while a coefficient of one expresses maximal inequality. the gini coefficient which is commonly used as a measure of inequality in income or wealth has found application in diverse disciplines studying inequality: sociology, economics, health science, agriculture…etc control variables include: inflation, government expenditure, economic prosperity (gdp th), population growth, foreign-aid, human development and globalization (trade and foreign direct investment: fdi). we expect: high inflation to fuel inequality (albanesi, 2007) while, low inflation should reduce it (bulir, 1998; lopez, 2004); government tainted by corrupt malpractices) to mitigate inequality and; gdp growth to reduce inequality distribution of the fruits of economic prosperity. the impact of foreign aid on inequality is contingent on the quality of institutions. the incidence of population growth on inequality should to be positive (afdb, 2012, p.3). we expect globalization both from trade and capital openness perspectives to have a negative incomeredistributive effect: consistent with recent african inequality literature (kai & hamori, 2009, p.15). however from intuition, trade can either increase or decrease inequality depending on the proportion of the poor relying on agricultural exports. on the other hand, cheap imports could increase hence, indirectly improve the income-distribution of the poor. in the same vein, too much imports of ‘substitution goods’ produced by domestic industries could fuel income inequality if majority of the population in the lower-income brackets depend substan the affected industries for subsistence income. the impact of human development on inequality depends on the proportion of the poor in the following three dimensions (with respect to national average): gdp per capita, life expectancy and, literacy rate. estimation with dynamic panel data has some important advantages and one disadvantage country analysis (demirgüç-kunt & levine, 2008; asongu first positive note: (1) it makes use both of time-series and the cross sectional variation in the country regressions, the unobserved country-specific effect is part of the error term, so that correlation between the error term and the independent variables results in biased estimated coefficients. more so, in cross-country regressions, if the lagged endogenous variable is included among the explanatory variables, the country-specific effect is certainly the regressors. a means of controlling for the presence of unobserved country difference the regression equation to eliminate the country effect, and then employ instrumental variables to take account of endogeneity. the endogeneity issue is the second edge of the dynamic panel estimation technique. uncontrolled endogeneity can significantly bias estimates and lead to misleading inferences. dynamic panel data analysis accounts for this endogeneity issue by using lagged exogenous variables as instruments9. on a more general note, an indicator is endogenous when it is correlated with the error term. endogeneity can result from simultaneity or omitted variables, autoregression with autocorrelated errors and measurement error. ition, a loop of causality between the independent variable and the dependent parameter results in 39 inappropriateness of a parametric model that assumes a particular functional distribution. the issues resulting from overparametization and multicollinearity. based on the correlation coefficients, there do not appear to be any serious which measures disparity among distribution. a value of zero represents perfect equality while a coefficient of one expresses maximal inequality. the gini coefficient which is commonly me or wealth has found application in diverse disciplines studying inequality: sociology, economics, health science, agriculture…etc (batuo, control variables include: inflation, government expenditure, economic prosperity (gdp aid, human development and globalization (trade and foreign direct investment: fdi). we expect: high inflation to fuel inequality (albanesi, 2007) while, low inflation should reduce it (bulir, 1998; lopez, 2004); government expenditure (not tainted by corrupt malpractices) to mitigate inequality and; gdp growth to reduce inequality distribution of the fruits of economic prosperity. the impact of foreigntitutions. the incidence of population growth on inequality should to be positive (afdb, 2012, p.3). we expect globalization both redistributive effect: inequality literature (kai & hamori, 2009, p.15). however from intuition, trade can either increase or decrease inequality depending on the proportion of the poor relying on agricultural exports. on the other hand, cheap imports could increase distribution of the poor. in the same vein, too much imports of ‘substitution goods’ produced by domestic industries could fuel incomeincome brackets depend substantially on the affected industries for subsistence income. the impact of human development on inequality depends on the proportion of the poor in the following three dimensions (with y rate. estimation with dynamic panel data has some important advantages and one disadvantage kunt & levine, 2008; asongu, 2013e). on the series and the cross sectional variation in the specific effect is part of the ror term and the independent variables results in country regressions, if the lagged endogenous specific effect is certainly the regressors. a means of controlling for the presence of unobserved countrydifference the regression equation to eliminate the country-specific effect, and then employ instrumental variables to take account of endogeneity. the endogeneity issue is the second edge of the dynamic panel estimation technique. uncontrolled endogeneity can significantly bias estimates and lead to misleading inferences. dynamic panel data analysis accounts for this endogeneity issue by using lagged values of on a more general note, an indicator is endogenous when it is correlated with the error term. endogeneity can result from simultaneity or omitted variables, autoregression with autocorrelated errors and measurement error. ition, a loop of causality between the independent variable and the dependent parameter results in 40 the principal concern associated with dynamic panel data analysis is the usage of dataaverage over shorter time spans. by implication, the estimated results reveal short-run impacts and not long-term effects, which should be kept in mind when interpreting and discussing results. in the context our paper, we shall overcome this issue by using both ‘full data’ and ‘data averages’ in terms of non-overlapping intervals. for robustness purposes, we shall use two-year10, three-year11 and five-year12 non-overlapping intervals. the dynamic panel regression model is expressed as follows: tititiytixtiti wpiqiq ,,,1,10, εξησσσσ ++++++= − (1) where ‘t’ stands for the period and ‘i’ represents a country. iq is the inequality rate; p , the vector of propositions with 91 << x . tiw , is a vector of control variables with 179 << y , iη is a country-specific effect, tξ is a time-specific constant and ti ,ε an error term. estimates will be unbiased if and only if, the independent variables above demonstrate strict exogeneity. unfortunately, this is not the case in the real world because: (1) while the propositions could have substantial incidences on inequality, the reverse effect cannot be ruled-out because, the redistributive quality of income in an economy also has some bearing on financial sector development13; (2) the propositions could be correlated with the error term ( ti ,ε ); (3) countryand time-specific effects could also be correlated with other variables in the model, which is often the case with lagged dependent variables included in the equations. hence, arises an issue of endogeneity owing to endogenous propositions. a way of dealing with the problem of the correlation between the individual specific-effect and the lagged inequality variables involves eliminating the individual effects by first differencing. therefore, eq. (1) becomes: )()( 1,,2,1,11,, −−−− −+−=− titixtitititi ppiqiqiqiq σσ )()()( 1,,11,, −−− −+−+−+ tititttitiy ww εεξξσ (2) however eq. (2) presents another issue; estimation by ordinary least square (ols) is still biased because there remains a correlation between the lagged inequality independent variable and the disturbance term. to tackle this issue, we estimate the regression in differences jointly with the regression in levels using the generalized method of moments (gmm) estimation. the procedure uses lagged levels of the regressors as instruments in the difference equation, and lagged differences of the regressors as instruments in the levels equation, thus exploiting all the orthogonality conditions between the lagged inequality variables and the error term. between the difference gmm estimator (arellano & bond, 1991) and system gmm estimator (arellano & bover, 1995; blundell & bond, 1998), we choose the latter in accordance with bond, hoeffler & tample (2001, 3-4). the system gmm has been confirmed to be better in recent poverty (arestis & caner, 2010) and african finance (batuo & kupulike, 2010) literature. 10 we have eight two-year non-overlapping intervals: 1996; 1997-1998; 1999-2000; 2001-2002; 2003-2004; 2005-2006; 2007-2008; 2009-2010. 11 there are five three-year non-overlapping intervals: 1996-1998; 1999-2001; 2002-2004; 2005-2007; 20082010. 12 the corresponding five-year non-overlapping intervals are three: 1996-2000; 2001-2005; 2006-2010. 13 from intuition and common sense, increasing inequality is likely to have a more favorable impact on formal financial development; since bank accounts are mostly held by the rich. in specifying the dynamic panel system estimation, because it corrects the residuals for heteroscedasticity. in the assumed to be homoscedastic. the assumption of no auto crucial as past lagged propositions also, the estimation depends on the assumption that the lagged values of the inequality variable and other propositions of the level equation are not auto residuals should be significant whereas their second be. the validity of the instruments is examined with the sargan over test (oir). in summary, the main arguments for using the does not eliminate cross-country variation, it mitigates potential biases of the difference estimator in small samples, and it can control for the potential endogeneity of all beside the control for endogeneity and unobserved heterogeneity, further robustness of our models is ensured by the following. (1) usage of both ‘full data’ and ‘average data’ with non-overlapping intervals to capture the long coefficients respectively. hence, in addition to the full dataset, we have three categories of non-overlapping intervals sub of two system gmm specifications with differ 4. empirical analysis 4.1 presentation of results from the estimates presented in table 3, with respect to panel a based’ and financial-sectorcommon. (1) we notice that initial values of inequality have positive significant signs. coefficients corresponding to these initial values of inequality are less than one, suggesting that inequality in converging in africa; an indication of potential broa policy measures. discussing the speed of convergence and time required to achieve full conditional convergence will be out of scope. however, it is worthwhile highlighting that, conditional convergence is contingent on th based on the propositions, it could be inferred that countries with low inequality rates are catching-up their counterparts with higher rates (conditional on the (2) but for the two-year and fi examine the null hypothesis of no serial correlation of residual in first the estimations do not suffer from serial correlation issues. while evidence for serial correlation is thin for the two feasible for the five-year noi owing to constraints in degrees of freedom. hence, results of the five-year noi will be purely informative and not object of any inferences f of doubt. (3) the sargan oir test for the validity of the instruments compares the sample moment conditions with their population analog. the null hypothesis of this test is the position that, the lagged differences of the errors in the level equations. in other words, the instruments explain inequality through no other mechanisms beside the proposed channels, conditional on other covariates (control 14 we had wished to use a poverty headcount indicator as the alternative measure of inequality but the available data from world development indicators is so scanty and/or substantially short of degrees of freedom. in specifying the dynamic panel system estimation, we choose the because it corrects the residuals for heteroscedasticity. in the first-step, the residuals are assumed to be homoscedastic. the assumption of no auto-correlation in the residuals is propositions are to be used as instruments for the dependent variables. also, the estimation depends on the assumption that the lagged values of the inequality propositions are valid instruments in the regression. when the error terms of the level equation are not auto-correlated, the first-order auto-correlation of the differenced residuals should be significant whereas their second-order auto-correlation: be. the validity of the instruments is examined with the sargan over-identifying restrictions ummary, the main arguments for using the system gmm estimation are that it country variation, it mitigates potential biases of the difference estimator in small samples, and it can control for the potential endogeneity of all beside the control for endogeneity and unobserved heterogeneity, further robustness of our models is ensured by the following. (1) usage of both ‘full data’ and ‘average data’ with overlapping intervals to capture the long-term and short-run tendencies of estimated coefficients respectively. hence, in addition to the full dataset, we have three categories of overlapping intervals sub-datasets already discussed in the data section. (2) employment of two system gmm specifications with different control variables14. from the estimates presented in table 3, with respect to panel a and panel b for ‘gdp -importance measures respectively, four interpretations are (1) we notice that initial values of inequality have positive significant signs. coefficients corresponding to these initial values of inequality are less than one, suggesting that inequality in converging in africa; an indication of potential broad and blanket inequality reduction policy measures. discussing the speed of convergence and time required to achieve full conditional convergence will be out of scope. however, it is worthwhile highlighting that, conditional convergence is contingent on the variables we model or empirical test. hence, , it could be inferred that countries with low inequality rates are up their counterparts with higher rates (conditional on the propositions year and five-year noi, the report of the serial correlation test used to examine the null hypothesis of no serial correlation of residual in first-difference, confirms the estimations do not suffer from serial correlation issues. while evidence for serial n is thin for the two-year noi (at a 10% significance level), the ar(2) test is not year noi owing to constraints in degrees of freedom. hence, results of year noi will be purely informative and not object of any inferences f (3) the sargan oir test for the validity of the instruments compares the sample moment conditions with their population analog. the null hypothesis of this test is the position that, the lagged differences of the propositions and control variables are uncorrelated with the errors in the level equations. in other words, the instruments explain inequality through no other mechanisms beside the proposed channels, conditional on other covariates (control we had wished to use a poverty headcount indicator as the alternative measure of inequality but the available ld development indicators is so scanty and/or substantially short of degrees of freedom. 41 we choose the second-step gmm , the residuals are correlation in the residuals is r the dependent variables. also, the estimation depends on the assumption that the lagged values of the inequality are valid instruments in the regression. when the error terms correlation of the differenced correlation: ar(2) should not identifying restrictions gmm estimation are that it country variation, it mitigates potential biases of the difference estimator in small samples, and it can control for the potential endogeneity of all propositions. beside the control for endogeneity and unobserved heterogeneity, further robustness of our models is ensured by the following. (1) usage of both ‘full data’ and ‘average data’ with tendencies of estimated coefficients respectively. hence, in addition to the full dataset, we have three categories of datasets already discussed in the data section. (2) employment and panel b for ‘gdpimportance measures respectively, four interpretations are (1) we notice that initial values of inequality have positive significant signs. coefficients corresponding to these initial values of inequality are less than one, suggesting that inequality d and blanket inequality reduction policy measures. discussing the speed of convergence and time required to achieve full conditional convergence will be out of scope. however, it is worthwhile highlighting that, e variables we model or empirical test. hence, , it could be inferred that countries with low inequality rates are propositions). year noi, the report of the serial correlation test used to difference, confirms the estimations do not suffer from serial correlation issues. while evidence for serial year noi (at a 10% significance level), the ar(2) test is not year noi owing to constraints in degrees of freedom. hence, results of year noi will be purely informative and not object of any inferences for the benefit (3) the sargan oir test for the validity of the instruments compares the sample moment conditions with their population analog. the null hypothesis of this test is the position that, control variables are uncorrelated with the errors in the level equations. in other words, the instruments explain inequality through no other mechanisms beside the proposed channels, conditional on other covariates (control we had wished to use a poverty headcount indicator as the alternative measure of inequality but the available ld development indicators is so scanty and/or substantially short of degrees of freedom. 42 variables). the overwhelming rejection of the null hypothesis of the oir test (across specifications and panels) points to the validity of the instruments. (4) the wald test for the joint significance of estimated coefficients also provides appealing results at the 1% significance level. 4.2 discussion of results based on panel a of table 3, the following conclusions could be drawn. (1) the formal, semi-formal, and informal financial sectors all have negative incidences on inequality. this implies, all financial sectors have a positive income redistributive effect. ultimately, improvement in financial sector shares relative to economic prosperity (gdp growth) is good for the poor. the intuition behind this interpretation is twofold. on the one hand, holding gdp growth and other things constant, financial development which is a constituent of gdp growth will mitigate poverty by its equalizing effect on incomedistribution. on the other hand, if the share of financial sector development in gdp growth is greater in comparison to other macroeconomic components of gdp growth, the direct effect on income distribution will be an equalizing one. ultimately, the equalizing income-effect of financial sector measures (that are relative to gdp) is consistent with recent african financeinequality literature (batuo, guidi & mlambo, 2010). from a broad perspective, the findings are also in line with empirical (beck, demirgüç-kunt & levine, 2004; beck, demirgüç-kunt & levine, 2007; kai & hamori, 2009) and theoretical (galor & zeira, 1993; banerjee & newman, 1993) literature which postulate a negative and linear relationship between financial development and income-inequality. (2) as for the control variables, human development increases inequality while population growth mitigates it. the negative impact of human development on inequality implies a diminishing proportion of the following three dimensions (with respect to national average) to the poor: gdp per capita, life expectancy and literacy rate. the finding on population growth diminishing inequality which is not in line with afdb (2012) confirms the expected relationship from the correlation matrix. from panel b of table 3, the following could be established. (1) growth of formal finance at the expense of informal and semi-formal finance has an income-disequalizing effect. this is logical from common sense because, the increase in bank deposits (liquid liabilities) in the formal banking sector can only result from the fruits of the population faction in possession of bank accounts. in developing countries, this segment of the population with bank accounts constitute the upper-income and middle-income brackets. by implication, when growth in money supply (m2) or an extensive use of currency in an economy transits through the banking sector to the detriment of the informal and semi-formal financial sectors, the natural consequence is rising inequality. this conclusion could be substantiated with present-day statistics of most formal institutions concentrated in the urban areas of less developed countries. with a great proportion of the poor domiciled in rural areas without access to bank accounts, the competitive advantage of formal banking in shares of m2 is not good for the poor. (2) when the share of the semi-formal financial sector in money supply improves to the detriment of the formal and informal sectors, the effect on the poor is positive. (3) growth of the informal financial sector to the detriment of the formal and semi-formal sectors is also good for the poor. 4. 3 robustness checks findings of table 3 have one particular short-coming. discussions relevant to propositions 3, 4 (panel a), 5 and 7 (panel b) are purely of informative character because they are based on findings from the five-year noi dataset. we earlier stated that, because the five specification was short of a second the findings for the benefit of doubt and justice to the system gmm approach. consequently, we use different control variables and replicate the regressions in table 3. the findings in table 4 show propositions 3 and 4 of panel a and, propositions 5 and 7 of panel b a significant outside the five propositions 5, 6 and 7 in the same equation because propositions 5 and 7 have a correlation of -0.974 (see appendix 2). overwhelming failure to reject the null hypotheses sargan oir tests points to the absence of autocorrelation and validity of the instruments respectively. beside these positive specification points, overwhelming rejection of the null hypotheses of the wald tests for joint significance of esti quality of overall model specification and hence, the substance of inferences based on estimated propositions. the discussion of results in table 3 is relevant for table 4. however, one additional point is worth mentioning f semi-formal financial sector is higher in comparison to the informal sector. the explanation to this is a simple one: the semi-formal sector engages in more poverty reduction initiatives than the informal sector (see table 1). 4.4 policy recommendations the following policy recommendations derived from the findings are relevant to governments of sampled countries in particular and developing countries in general. (1) encourage the establishment of formal institutions in rural communities. why? we have found that formal banking development mitigates inequality (proposition 1). however, formal banking development at the expense of other financial sectors increases inequality (proposition 5). it follows that the establishment of formal institutions in rural areas dominated by the ‘low income brackets’ population could have an equalizing income redistributive effect. (2) favor the establishment of (specialized) non especially in rural and poorproposition 3, 4, 6 and 7 have income equalizing effects. (3) semi poor friendly than informal finance, implying specialized bank and non institutions are more pro-poor than informal banks (made and credit associations and, money lenders). as an overall policy recommendation, the poor should be encouraged to open up bank accounts. the significance of the results demonstrates that financial development is essential in reducing income inequality in african countries. widening access to non intermediary markets, especially by targeting those at the lower income strata and the rural population would help reduce the persistent income gap between the rural and urban population. one possible way of improving financial access to the poor is to oriented policy towards the reduction of information asymmetries that increase the operating cost institutions. access to finance by the poor will enable productive investments (e.g in education and small manufacturing) which in time could improve equality. particularly micro finance (part of the semi-formal sector) should be encouraged b stage, can thrive without relying heavily on government regulation or strong legal institutions that require the poor to borrow contingent on their assets. 15 specialized non-bank financial institutions include: rural banks, post banks, saving and loan companies and, deposit-taking micro finance banks. non ngos. informal banks (savings collectors, savings and credit associations, money lenders). year noi dataset. we earlier stated that, because the five specification was short of a second-order autocorrelation test, inference could not be based on for the benefit of doubt and justice to the system gmm approach. consequently, we use different control variables and replicate the regressions in table 3. the findings in table 4 show propositions 3 and 4 of panel a and, propositions 5 and 7 of panel b a significant outside the five-year noi specification columns. we are unable to use propositions 5, 6 and 7 in the same equation because propositions 5 and 7 have a correlation 0.974 (see appendix 2). overwhelming failure to reject the null hypotheses sargan oir tests points to the absence of autocorrelation and validity of the instruments respectively. beside these positive specification points, overwhelming rejection of the null hypotheses of the wald tests for joint significance of estimated coefficients confirms the quality of overall model specification and hence, the substance of inferences based on estimated propositions. the discussion of results in table 3 is relevant for table 4. however, one additional point is worth mentioning from panel b: the inequality mitigation effect of the formal financial sector is higher in comparison to the informal sector. the explanation to formal sector engages in more poverty reduction initiatives than l sector (see table 1). the following policy recommendations derived from the findings are relevant to governments of sampled countries in particular and developing countries in general. (1) encourage the l institutions in rural communities. why? we have found that formal banking development mitigates inequality (proposition 1). however, formal banking development at the expense of other financial sectors increases inequality (proposition 5). it t the establishment of formal institutions in rural areas dominated by the ‘low income brackets’ population could have an equalizing income redistributive effect. (2) favor the establishment of (specialized) non-bank financial institutions and informal ban -dominated urban areas15. why? our results have shown that proposition 3, 4, 6 and 7 have income equalizing effects. (3) semi-formal finance is more poor friendly than informal finance, implying specialized bank and non poor than informal banks (made-up of: savings collectors, savings and credit associations and, money lenders). as an overall policy recommendation, the poor should be encouraged to open up bank e of the results demonstrates that financial development is essential in reducing income inequality in african countries. widening access to non intermediary markets, especially by targeting those at the lower income strata and the rural opulation would help reduce the persistent income gap between the rural and urban population. one possible way of improving financial access to the poor is to oriented policy towards the reduction of information asymmetries that increase the operating cost institutions. access to finance by the poor will enable productive investments (e.g in education and small manufacturing) which in time could improve equality. particularly micro formal sector) should be encouraged because, at least in its initial stage, can thrive without relying heavily on government regulation or strong legal institutions that require the poor to borrow contingent on their assets. bank financial institutions include: rural banks, post banks, saving and loan companies and, taking micro finance banks. non-bank financial institutions are: credit unions and micro finance ngos. informal banks (savings collectors, savings and credit associations, money lenders). 43 year noi dataset. we earlier stated that, because the five-year noi order autocorrelation test, inference could not be based on for the benefit of doubt and justice to the system gmm approach. consequently, we use different control variables and replicate the regressions in table 3. the findings in table 4 show propositions 3 and 4 of panel a and, propositions 5 and 7 of panel b are year noi specification columns. we are unable to use propositions 5, 6 and 7 in the same equation because propositions 5 and 7 have a correlation 0.974 (see appendix 2). overwhelming failure to reject the null hypotheses of ar(2) and sargan oir tests points to the absence of autocorrelation and validity of the instruments respectively. beside these positive specification points, overwhelming rejection of the null mated coefficients confirms the quality of overall model specification and hence, the substance of inferences based on estimated propositions. the discussion of results in table 3 is relevant for table 4. however, rom panel b: the inequality mitigation effect of the formal financial sector is higher in comparison to the informal sector. the explanation to formal sector engages in more poverty reduction initiatives than the following policy recommendations derived from the findings are relevant to governments of sampled countries in particular and developing countries in general. (1) encourage the l institutions in rural communities. why? we have found that formal banking development mitigates inequality (proposition 1). however, formal banking development at the expense of other financial sectors increases inequality (proposition 5). it t the establishment of formal institutions in rural areas dominated by the ‘lowincome brackets’ population could have an equalizing income redistributive effect. (2) favor bank financial institutions and informal banks, . why? our results have shown that formal finance is more poor friendly than informal finance, implying specialized bank and non-bank financial up of: savings collectors, savings as an overall policy recommendation, the poor should be encouraged to open up bank e of the results demonstrates that financial development is essential in reducing income inequality in african countries. widening access to non-formal financial intermediary markets, especially by targeting those at the lower income strata and the rural opulation would help reduce the persistent income gap between the rural and urban population. one possible way of improving financial access to the poor is to oriented policy towards the reduction of information asymmetries that increase the operating cost of financial institutions. access to finance by the poor will enable productive investments (e.g in education and small manufacturing) which in time could improve equality. particularly microecause, at least in its initial stage, can thrive without relying heavily on government regulation or strong legal institutions bank financial institutions include: rural banks, post banks, saving and loan companies and, nstitutions are: credit unions and micro finance ngos. informal banks (savings collectors, savings and credit associations, money lenders). 44 table 3 – two-step system gmm estimates (dependent variable: inequality) panel a: impact of gdp based measures full data 2 year noi 3 year noi 5 year noi constant 10.548*** 10.556*** 8.248 8.280 9.640 9.640 25.688** 25.688** (4.025) (4.025) (1.115) (1.152) (0.917) (0.917) (2.057) (2.057) gini_1 0.787*** 0.787*** 0.840*** 0.840*** 0.848*** 0.848*** 0.446** 0.446** (14.91) (14.88) (5.982) (6.142) (3.939) (3.939) (2.567) (2.567) proposition 1 -2.556* -2.553* -1.319 -1.332 -0.692 -0.692 -6.861 -6.861 (-1.695) (-1.695) (-0.425) (-0.443) (-0.383) (-0.383) (-0.829) (-0.829) proposition 2 -4.071 -3.218 -29.459 -26.562 -101.53** -87.61** -10.268 50.533 (-0.137) (-0.100) (-0.731) (-0.610) (-2.279) (-2.046) (-0.064) (0.323) proposition 3 -0.881 ---3.803 ---13.91 ---60.801** -- (-0.235) (-0.267) (-0.714) (-2.006) proposition 4 ---0.859 ---3.641 ---13.919 ---60.801** (-0.2302) (-0.256) (-0.714) (-2.006) economic prosperity 0.016 0.016 0.072 0.071 0.172 0.172 -0.042 -0.042 (0.419) (0.419) (0.710) (0.683) (1.083) (1.083) (-0.165 (-0.165) population growth -0.362 -0.361 -0.334 -0.339 -1.192* -1.192* -2.555** -2.555** (-0.964) (-0.964) (-0.513) (-0.536) (-1.871) (-1.871) (-2.183) (-2.183) foreign aid -0.035 -0.035 -0.056 -0.055 -0.034 -0.034 -- (-1.182) (-1.181) (-1.411) (-1.409) (-0.562) (-0.562) human development 0.077* 0.077* 0.019 0.018 ----21.422* 21.422* (1.773) (1.778) (0.422) (0.425) (1.661) (1.661) test for ar(2) errors -1.007 -1.007 -1.783* -1.798* 0.002 0.002 n.a n.a [0.313] [0.313] [0.074] [0.072] [0.998] [0.998] sargan oir test 15.972 15.978 16.729 16.758 11.566 11.566 0.011 0.011 [1.000] [1.000] [0.917] [0.916] [0.171] [0.171] [0.916] [0.916] wald (joint) test 317. 1*** 316.93*** 177.19*** 209.99*** 543.63*** 543.63*** 191.37*** 191.37*** [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] instruments 60 60 35 35 16 16 9 9 countries 24 24 24 24 26 26 15 15 observations 234 234 123 123 79 79 30 30 panel b: impact of measures of financial sector importance full data 2 year noi 3 year noi 5 year noi constant 5.793* 7.876*** 8.586** 7.180 11.220 5.970 13.397 35.782* (1.730) (3.432) (1.985) (1.492) (1.543) (0.646) (0.732) (1.677) gini_1 0.838*** 0.838*** 0.828*** 0.827*** 0.857*** 0.857*** 0.458** 0.458** (16.43) (16.37) (7.802) (7.480) (4.108) (4.108) (2.056) (2.056) proposition 5 2.075 ---1.465 ---5.250 --22.384** -- (0.946) (-0.453) (-0.927) (2.237) proposition 6 -8.072* -10.096* -15.752 -14.010 -26.651** -21.400** -77.713 -100.09 (-1.871) (-1.948) (-1.498) (-1.262) (-2.348) (-2.389) (-0.913) (-1.172) proposition 7 ---2.059 --1.433 --5.250 ---22.384** (-0.941) (0.445) (0.927) (-2.237) economic prosperity ----0.047 0.049 0.117 0.117 -0.404 -0.404 (0.385) (0.377) (0.462) (0.462) (-1.224) (-1.224) population growth -0.137 -0.149 -0.121 -0.129 -1.042 -1.042 0.422 0.422 (-0.539) (-0.533) (-0.246) (-0.265) (-1.031) (-1.031) (0.217) (0.217) foreign aid -----0.039 -0.039 0.007 0.007 -0.206** -0.206** (-1.439) (-1.436) (0.125) (0.125) (-2.377) (-2.377) human development ----0.046 0.050 0.105* 0.105* -11.483 -11.483 (1.190) (1.315) (1.746) (1.746) (-0.567) (-0.567) test for ar(2) errors -0.941 -0.944 -1.770* -1.770* -1.023 -1.023 n.a n.a [0.346] [0.344] [0.076] [0.076] [0.306] [0.306] sargan oir test 20.673 20.705 17.588 17.615 11.125 11.125 0.006 0.006 [1.000] [1.000] [0.890] [0.889] [0.194] [0.194] [0.936] [0.936] wald(joint) test 327*** 326.08*** 231.6*** 263.59*** 4160.2*** 4160.2*** 87.193*** 87.193*** [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] [0.000] instruments 59 59 34 34 16 16 9 9 countries 27 27 24 24 22 22 15 15 observations 270 270 123 123 67 67 30 30 *;**;***: significance levels of 10%, 5% and 1% respectively. z-statistics in parentheses. [ ]:p-values. noi: non overlapping intervals. oir: overidentifying restrictions. gini_1: lagged gini index. n.a: the second-order autocorrelation test is not applicable owing to constraints in degrees of freedom with the five-year noi dataset. table 4 – two-step system gmm estimates (dependent variable: inequality) full data constant 7.994 7.993 (1.379) (1.376) gini_1 0.802*** 0.802*** (7.406) (7.394) proposition 1 -0.622 -0.624 (-0.260) (-0.260) proposition 2 13.178 21.060 (0.306) (0.490) proposition 3 -8.168 -- (-0.494) proposition 4 ---8.189 (-0.494) inflation -0.002 -0.002 (-0.089) (-0.088) government expenditure 0.031 0.031 (0.855) (0.855) foreign direct investment -0.019 -0.019 (-0.329) (-0.335) trade 0.013 0.013 (1.409) (1.406) test for ar(2) errors -0.922 -0.922 [0.356] [0.356] sargan oir test 12.09 12.099 [1.000] [1.000] wald(joint) test 360.6*** 358.5*** [0.000 ] [0.000 ] instruments 58 58 countries 20 20 observations 183 183 full data constant 6.549 7.323*** (1.584) (3.608) gini_1 0.822*** 0.825*** (14.58) (14.85) proposition 5 0.866 -- (0.262) proposition 6 -24.638* -25.327* (-1.727) (-1.711) proposition 7 ---0.966 (-0.290) inflation 0.036 0.036 (1.258) (1.227) government expendit 0.039 0.039 (1.476) (1.486) foreign direct invest. ---- trade ---- test for ar(2) errors -0.224 -0.223 [0.822] [0.822] sargan oir test 16.440 16.720 [1.000] [1.000 ] wald(joint) test 457.13*** 466.76*** [0.000 ] [0.000 ] instruments 55 55 countries 22 22 observations 207 207 *;**;***: significance levels of 10%, 5% and 1% respectively. oir: overidentifying restrictions. gini_1: lagged gini index. n.a: the second constraints in degrees of freedom with the five step system gmm estimates (dependent variable: inequality) panel a: impact of gdp based measures 2 year noi 3 year noi 7.993 14.193** 14.203** 16.057** 16.057** (1.376) (1.999) (1.998) (1.972) (1.972) 0.802*** 0.695*** 0.695*** 0.646*** 0.646*** (7.394) (4.648) (4.642) (3.681) (3.681) 0.624 2.442 2.440 3.024 3.024 0.260) (1.248) (1.247) (1.401) (1.401) 21.060 -40.564 -14.819 -83.319 -49.388 (0.490) (-1.104) (-0.404) (-1.135) (-0.630) -25.674** ---33.930** -- (-2.044) (-2.021) 8.189 ---25.677** ---33.930** 0.494) (-2.043) (-2.021) 0.002 -------- 0.088) 0.031 -------- (0.855) 0.019 -0.014 -0.013 -0.0006 -0.0006 0.335) (-0.157) (-0.155) (-0.007) (-0.007) 0.013 -------- (1.406) 0.922 -1.452 -1.452 0.532 0.532 [0.356] [0.146 ] [0.146] [0.594] [0.594] 12.099 18.006 18.013 12.135 12.135 [1.000] [0.875 ] [0.875] [0.145] [0.145] 358.5*** 333.79*** 332.93*** 565.64*** 565.64*** [0.000 ] [0.000 ] [0.000] [0.000] [0.000] 32 32 14 14 25 25 23 23 125 125 71 71 panel b: impact of measures of financial sector importance 2 year noi 3 year noi 7.323*** 4.267 9.036 2.377 12.632** (3.608) (1.166) (1.593) (1.378) (2.551) 0.825*** 0.789*** 0.825*** 0.745*** 0.745*** (14.85) (6.359) (6.597) (7.610) (7.610) 6.447* --10.254*** -- (1.907) (2.634) 25.327* -17.401** -23.631*** -18.858*** -29.113*** 1.711) (-2.177) (-3.858) (-3.062) (-7.358) 0.966 ---5.616** ---10.25*** 0.290) (-2.269) (-2.634) 0.036 -0.0004 -0.019 ---- (1.227) (-0.016) (-0.387) 0.039 -------- (1.486) -0.070 -0.060 -0.024 -0.024 (-0.381) (-0.492) (-0.340) (-0.340) ----0.002 0.002 (0.150) (0.150) 0.223 -1.173 -1.155 -0.029 -0.029 [0.822] [0.240] [0.247] [0.976] [0.976] 16.720 15.300 14.196 7.557 7.557 [1.000 ] [0.951] [0.970] [0.477] [0.477] 466.76*** 460.81*** 505.84*** 2386.3*** 2386.3*** [0.000 ] [0.000] [0.000] [0.000] [0.000] 32 32 14 14 25 25 22 22 120 120 67 67 *;**;***: significance levels of 10%, 5% and 1% respectively. z-statistics in parentheses. [ ]:p-values. noi: non overlapping intervals. oir: overidentifying restrictions. gini_1: lagged gini index. n.a: the second-order autocorrelation test is not applicable owing to constraints in degrees of freedom with the five-year noi dataset. 45 step system gmm estimates (dependent variable: inequality) panel a: impact of gdp based measures 5 year noi 16.057** 36.463** 36.463** (2.528) (2.528) 0.646*** 0.195 0.195 (0.678) (0.678) 6.735 6.735 (1.170) (1.170) -14.798 71.453 0.630) (-0.062) (0.285) -86.251*** -- (-3.287) 33.930** ---86.251*** 2.021) (-3.287) -0.092 -0.092 (-0.916) (-0.916) ---- 0.488** 0.488** 0.007) (2.015) (2.015) ---- n.a n.a 0.0350 0.035 [0.851] [0.851] 565.64*** 394.48*** 394.48*** [0.000] [0.000] 8 8 16 16 32 32 panel b: impact of measures of financial sector importance 5 year noi 12.632** 1.374 27.520*** (0.287) (3.545) 0.745*** 0.392** 0.392** (2.005) (2.005) 26.145*** -- (4.037) 29.113*** -22.313 -48.459 7.358) (-0.297) (-0.653) 10.25*** ---26.145*** 2.634) (-4.037) ---- ---- 0.260 0.260 0.340) (1.332) (1.332) 0.038 0.038 (1.189) (1.189) n.a n.a 0.018 0.018 [0.891] [0.891] 2386.3*** 141.79*** 141.79*** [0.000] [0.000] 7 7 16 16 32 32 values. noi: non overlapping intervals. order autocorrelation test is not applicable owing to 46 5. conclusion financial development indicators are often applied to countries/regions without taking into account specific financial development realities. financial depth in the perspective of money supply is not equal to liquid liabilities in every development context. this paper has introduced complementary indicators to the existing financial development and structure database (fdsd). the work unites two streams of research. it contributes at the same time to the macroeconomic literature on measuring financial development and responds to the growing field of economic development by means of informal financial sector promotion and microfinance. the paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. our results suggest that, from an absolute standpoint (gdp base measures), all financial sectors are pro-poor. however, three interesting findings are drawn from measures of sector importance. (1) the expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income-effect. (2) the expansion of informal and semi-formal financial sectors at the expense of the formal financial sector has an income equalizing effect. (3) the positive income redistributive effect of semi-formal finance in financial sector competition is higher than the corresponding impact of informal finance. appendices appendix 1 – summary statistics and presentation of countries panel a: summary statistics mean s.d min max obser. inequality gini coefficient 43.104 6.828 29.760 67.400 356 gdp-based financial development indicators proposition 1 0.255 0.204 0.036 0.935 363 proposition 2 0.003 0.010 -0.007 0.097 419 proposition 3 0.050 0.055 -0.292 0.198 419 proposition 4 0.053 0.057 -0.290 0.244 419 measures of financial sector proposition 5 0.749 0.161 0.175 1.456 360 proposition 6 0.011 0.036 -0.024 0.224 360 proposition 7 0.238 0.161 -0.457 0.824 360 proposition 8 0.238 0.161 -0.457 0.824 360 control variables inflation 7.239 9.496 -100.00 46.561 395 government expenditure 4.304 10.670 -34.882 61.364 298 human development 1.913 8.0128 0.204 47.486 341 economic prosperity 4.273 3.710 -16.740 27.462 420 foreign aid 9.447 8.946 -0.251 54.785 392 population growth 2.275 0.741 0.042 4.146 420 trade 68.687 29.967 21.574 187.68 401 foreign direct investment (fdi) 2.777 4.252 -8.629 36.114 346 panel b: presentation of countries botswana, cameroon, ivory coast, egypt, ethiopia, gabon, ghana, kenya, lesotho, madagascar, malawi, mauritania, mauritius, morocco, nigeria, senegal, sierra leone, south africa, tanzania, tunisia, uganda, zambia, niger, mali, guinea, burkina faso, burundi, central african republic. s.d: standard deviation. min: minimum. max: maximum. obser: observations. appendix 2– correlation analysis prop: proposition. infl: inflation. ge: government expenditure. ihdi: inequality adjusted human development index. gdpg: gdp growth rate. noda: net official development assistance. popg: population growth rate. gini: inequality coefficient. correlation analysis : inflation. ge: government expenditure. ihdi: inequality adjusted human development index. gdpg: gdp growth rate. noda: net official development assistance. popg: population growth rate. gini: inequality 47 : inflation. ge: government expenditure. ihdi: inequality adjusted human development index. gdpg: gdp growth rate. noda: net official development assistance. popg: population growth rate. gini: inequality 48 appendix 3 – variable definitions variables signs variable definitions sources inequality dependent variable inequality gini gini coefficient wdi (world bank) control variables inflation inflation consumer price index (annual %) wdi (world bank) government expenditure ge government final expenditure (% of gdp) wdi (world bank) human development ihdi inequality adjusted human development index wdi (world bank) economic prosperity gdpg gdp growth rate (annual %) wdi (world bank) foreign-aid noda net official development assistance (% of gdp) wdi (world bank) population growth popg population growth rate (annual %) wdi (world bank) trade liberalization trade imports + exports of commodities (% of gdp) wdi (world bank) financial liberalization fdi foregin direct investment (% of gdp) wdi (world bank) wdi: world bank development indicators. gdp: gross domestic product. acknowledgements the author is highly indebted to the reviewers and editor for useful comments. references abu-bader, s., & abu-qarn, a. s. 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(2006). extending financial systems to the poor: what strategies for ghana”,paper presented at the 7th isser-merchant bank annual economic lectures, university of ghana, legon. world bank, (1989). world bank development report 1989, new york, oxford university press. microsoft word 1 (18-07) silvestrelli 3 managing changes into international markets. flexible structures and knowledge sharing for firm competitiveness patrizia silvestrelli university of macerata (italy) received: december 16, 2017 accepted: march 5, 2018 online published: march 14, 2018 abstract this paper focuses on the analysis of organizational flexibility as one of the most important prerequisites to implement business strategies, particularly at international level. turbulent and endless changes into international environments, high competition, innovation technology development, and consumer shifting towards new needs and behaviors lead companies in finding appropriate strategies to remain competitive. this implies to look continuously for better solutions to structure organizations, manage people, and improve knowledge. flexible structures allow not only to faster adapt to ever-changing business needs, but also to facilitate information exchange and – when required – modify working procedures and people behaviors. however, any process of organizational change is onerous and finds obstacles to be implemented. change requires top managers and subordinates involvement, in terms of their comprehension and acceptance of business choices; in this way, they can concretely support innovation. the role of infra-firm communication is here crucial since it represents the vehicle through which change can occur and people can acquire, create and diffuse knowledge. this is the base for developing new strategies and making the firm grows. however, the effort for modifying organizational assets is an endless process. market forces as well as economic, political and social variations obligate companies to change and readjust their internal resources in order to remain competitive or even to survive. keywords: international environment; organizational flexibility; change management; infraorganization communication; knowledge improvement. 1. introduction this article focuses on the analysis of organizational structures supporting international strategies by giving companies the ability to respond faster and effectively to environmental challenges. unpredictable and ceaseless changes into international environments, higher competition infra and inter-sectors, innovation technology development, and consumer shifting towards new international journal of economic behavior, vol. 8, n. 1, 2018, 3-18 4 needs and behaviors force companies in finding appropriate strategies to maintaining their competitiveness. this implies to look constantly for better solutions to define appropriate structures, in order to manage people, exploit efficiently and effectively tangible and intangible resources and improve business knowledge (hagel, 2010; hill, 2011). in this context, traditional configurations (like divisional and matrix structures) seem no longer suitable to respond adequately to today challenges. therefore, companies search for flexible structures, which are more similar to networks than to hierarchical configurations halal, 1994). these forms are more appropriate to manage uncertainty, instability and variability of the environment in which firms operate (lawrence & lorsch, 1967). moreover, organizational flexibility is required not only to adapt faster to ever-changing business needs, but also to facilitate information exchange and – when required – modify working procedures and people behaviors. therefore, organizational flexibility and communication are interdependent: on one hand, flexibility sustains communication process because interactions can occur without the limitations arising from hierarchy and bureaucracy; on the other hand, communication represents an important prerequisite to increase organizational flexibility and make business changes successful. several scholars agree that flexible structures can help organizations in a significant way to gain and maintain their competitive advantage especially at international level, since they improve interactions among people within headquarter and subsidiaries (halal, 1994; ashkenas et al., 1995). moreover, flexibility does not support only infra-firm relationships but also interfirm relationships. particularly, we referred to those ones arising from agreements and alliances that a firm develops with other organizations, belonging to both the same supply chain and to other industries and sectors (hamel, 1991; grant, 1996). however, the basic dilemma of organizational design remains unchanged. companies are constantly oriented to finding the appropriate way to group people, processes, and units in relations to their strategic goals and specific competitive environments. it is not easy to planning and implementing change though and, even if firms “need” to do it, they have to deal with several resistances to change (ulrich & lake, 1990). in this regard, one important factor influencing change success is the involvement of all employees (both top managers and subordinates), in terms of their comprehension and compliance about the need to change. it is clear that infra-firm communication plays a strategic role. it becomes the tool through which people can acquire and diffuse knowledge, and, in this way, be able to activate and support change (nonaka & takeuchi, 1995). it is known that knowledge is the fundamental base for improving organizational culture, developing new strategies and making the firm grows (cohen & levinthal, 1990; senge, 1990; paniccia & valeri, 2010). this paper comes from the idea to provide the reader with an in-deep analysis of the issues introduced above in order to explain some important implications related to strategy-structure relationships. these ones affect the way and degree in which companies carry out change, without disregarding the fact that any modification entails costs from an economic, organizational and administrative point of view. this work does not demand to be exhaustive, since there are other important factors to analyze in-depth. moreover, it would be meaningful to verify empirically how organizational flexibility and knowledge sharing can truly support business strategies. thus, this paper is a preliminary analysis, aimed at debating some important management issues, trying to give an explanation on their interdependences and show the difficulties faced by companies in dealing with the today international business environment. 5 2. the challenge to face international business environment in today competitive environment, going international represents a necessary condition for most companies to grow and, sometimes, even to survive. foreign environments provide firms of tangible and intangible resources useful to catch business opportunities and develop new strategic paths; at the same time, internationalization can be the vehicle through which a firm acquires new knowledge, for example, by cooperating with other companies worldwide. however, it is not easy to operate at global level, especially if we consider the remarkable changes that have characterized international environments in the last decades, which force firms to implement strategic adjustments in order to adapt quickly to new competitive conditions (hill, 2011; brondoni, 2014), as illustrated below. firstly, international trade has significantly improved due to the less restrictions developed by local governments, thus allowing firms to move products and services more efficiently across borders and providing customers with an easier access to a variety of goods and services at competitive prices. secondly, countries continuously develop new infrastructures, norms, and economic and financial policies to create favorable conditions for foreign investments, which represent one of the most important prerequisite for economic and social development in today world. thirdly, the rapid progress in communication and innovation technology, which have enabled not only people to interact faster and easier, but also firms to produce, place and promote their products and services worldwide more efficiently in terms of time and space. this is consistent with another factor related to delocalization and outsourcing implemented by firms. these strategies have dramatically modified structure and form of operations within industries, since resources are searched at global level in order to achieve cost reductions and new market opportunities; this has increased the degree of competition worldwide not only in final markets but also in upstream activities of supply chains. finally, the remarkable changes in consumer behavior, where customers are more aware about their needs and continuously search for new products and services to satisfy them, thus pushing firms to introduce innovations aimed at catch as many customers as possible and, as a result, increase their market share. all the factors listed above are consistent with the definition of globalization given govindarajan (2000, p. 275) according to which globalization is a “growing economic interdependence among countries as reflected in increasing cross-border flows of three types of commodities: goods and services, capital, and knowhow”. globalization is mainly a closer integration of the countries and peoples all around the world, which involves both the reduction of costs of transportation and communication and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders. we cannot disregard that globalization multiplies both opportunities and threats for companies. in fact, firms have to face, on one hand, the homogenization of consumer behaviors and needs as well as the convergence of technology and products, and, on the other hand, the increasing markets’ differentiation, which requires specific marketing strategies to respond effectively to local customers, which may be different from an economic, social and cultural point of view (gupta, 2011). this is consistent to the glocal approach that takes in consideration both the need to globalize activities as well as products/services and the need to differentiate them to adapt to local environments (bartlett & ghoshal, 1988). therefore, it is quite difficult to approach international markets in an undifferentiated way. rather, a global approach to markets can eventually be appropriate in case of different cross-country segments, which present homogeneous characteristics among them in terms of customer needs and, thus, marketing strategies (ghemawat, 2003). thus, companies have to manage the trade-off between worldwide and nation/region-wide perspective, in relation to both their strategic needs and changes in competitive environment. 6 this implies that successful interactions with international markets depend also on the degree of “sensitivity” and interest expressed by a firm while approaching to different countries. what stated above concerns mainly big companies, which have already reached a high degree of internationalization and are familiar to foreign countries. the situation can be significantly different for small enterprises, which most of the times do not own those resources required to approach to international markets. however, we cannot disregard that several small firms have developed successful strategies to sell their products worldwide, thanks not only to the ability of entrepreneurs and managers, but also to the type of products they sell (cafferata, 2009). this is the case, for example, of italian small firms operating in the agri-food sector and fashion industry. most of these enterprises are able to commercialize their goods worldwide through a wide network of buyers and retailers that make those products available to customers in different countries. in this regard, the fact that they are made in italy products often facilitate promotion and distribution since customers know and appreciate their quality, design and image (bertoli & resciniti, 2012). really, the level of internationalization can affect the way a firm approach to international markets. in this regard, literature states that there are three main orientations in international management: 1) domestic market orientation; 2) multi-domestic market orientation, and 3) global market orientation. these orientations follow an increasing path in terms of growth and degree of involvement in international activities – from casual exporting to global marketing – and they are related to the eprg framework (ethnocentric, polycentric, regiocentric and geocentric orientation), which varies according to degree of internationalization and willing to achieve international strategies (perlmutter, 1969). moreover, regardless of the type of entry strategy adopted by a company and its degree of internationalization, it is relevant to take in consideration the fact that operating at international level requires a high ability to manage relationships worldwide. this regards not only relationships between the firm and its foreign stakeholders (like local governments, competitors, trade unions, and customers) but also relationships with other companies through partnerships and various forms of cooperation (brondoni, 2014; grant & baden-fuller, 2004). at the same time, we cannot ignore the relations generating among managers within the company, which can come as well from different countries and cultures (schuler & jackson, 2014). generally, interactions at international level are useful to increase the firm organizational learning, especially in the case of alliances and networks able to generate growth and innovation. this can be achieved when each enterprise – participating to one or more international partnerships – can improve its skills by benefiting from the synergies generated by the whole pool of knowledge (kraatz, 1998). in fact, internationalization strategy can take place through different forms of cooperation with other enterprises worldwide, therefore acquiring resources and skills, which a firm can hardly develop autonomously (hamel, 1991). thus, international alliances become the way through which a firm can grow, without enlarging its structure or investing directly in foreign countries. in these terms, it is misleading to see the company as a single economic entity, which carries on its strategies with a more or less global orientation; rather, a company has to be analyzed as a part of international clusters and its internationalization can sometimes take place just because it belongs to those boundaryless networks (nadler & tushman, 1999). thus, we can assume that the ability and degree of internationalization depend also on the type and intensity of relationships that a company is able to implement and manage at international level. when we talk about international relationships, it is not possible to ignore that globalization lead companies to deal also with ethical issues. in the present complex environment where changes are unpredictable and quickly, it is necessary to establish not only more control in 7 business activities and procedures but also more attention to behaviors and ethical conducts in terms of social responsibility and sustainability (caselli, 2003; brondoni, 2010). for this reason, there is an increasing interest by scholars as well as by policy makers in business ethics: companies should follow responsible behaviors not only toward the external environments (i.e. all stakeholders) but also to their internal milieu (i.e. people working in the organization), in order to respond to current and ever-changing business needs (zucchella, 2007; schuler & jackson 2014). in fact, the economic paths occurred in the last decades influenced social behaviors and people attitude to needs and life-styles, generating economic and social anomalies that undermined ethical principles and develop a more heightened individualism. for this reason, the global community (governments, international organization, policy makers, scholars and individuals) focus the attention to defining guidelines inspiring business conducts towards responsible actions suitable to generate sustainable development. this is consistent to the definition of sustainability that was formalized by the world commission on environment and development (brundtland commission) in 1987. the report defines sustainable development as «development which meets the needs of current generations without compromising the ability of future generations to meet their own needs». at this point, the role of companies is crucial, since their actions influence not only the economic and competitive dynamics, but also the social and natural contexts where they operate. therefore, achieving sustainability implies to be able to combining economic growth with social development and environmental resources safeguard. in this regard, we mention the three pillars of sustainable development that should inspire entrepreneurial and managerial actions; at the same time, they can be also guidelines for every human behavior and the entire global society. − economic effectiveness: it is related to an organization “well-acting”, which implies to pursue company mission, obtain adequate economic returns, and generate wealth for local communities. in other words, to remain effective and efficient in the long term. − social effectiveness: it concerns the ability of maintaining fair relationships not only with employees but also with all other stakeholders, primarily the local actors sited where the company is rooted, respecting their culture, needs and expectations. − environmental effectiveness: it is associated to the respect of natural heritage, which implies to employ resources rationally and avoid damages in order to maintain the environmental natural equilibrium. by following the three pillars listed above, any firm should create a specific “corporate code of ethics” during its growth, so defining guidelines for any business activity in relation to the type of goals to achieve. however, interaction with different contexts and relationships with other organizations lead companies to face continuously new ethical issues, so that it is sometimes difficult to reconcile their own “ethical standards” with those of other organizations and, even more, located in other countries. in fact, we cannot neglect that business ethics is influenced by cultural variables, like values, religion, customs, etc., which can vary significantly among countries (zucchella, 2007). the major difficulty regards the fact that it is not possible to define a “global business ethics” acknowledged and shared worldwide, since ethical principles not only vary from one society to another, but also within the same context from both time and space point of view. for this reason, today the global community is strongly committed to defining new standards for implementing sustainability through profound sharing of ethical principles and common codes of conducts. in conclusion, there is no doubt that competing at international level demands a huge effort to firms, because of the environmental complexity due to unpredictable and significant changes in economic and social assets. certainly, flexibility in organizing business resources and 8 developing a “culture of change” can help companies in facing competitive challenges worldwide. 3. flexible structures for improving knowledge in each historical era, market forces demand new organizational forms as managers seek new ways of arranging assets and resources to produce the goods and services that customers want and expect (meyer, tsui & hinings, 1993). according to literature, hierarchical functional structures dominated the industrial age because they were suitable to its relatively stable and predictable external business environment, but the explosion of environmental turbulence has dramatically altered the situation. divisional structures, on the contrary, has been designed for disturbed and predictable markets, and seemed to be better suited to support diversification and improve internal coordination needs than to rapid advance into new markets and fast adjustments in relation to the environmental changes. finally, the matrix structure has been the response to highly unpredictable markets, and allowed to focus on both stable and emerging markets segments and clients. companies find that those traditional, institutionalized organizational designs no longer enable them to remain competitive since they are too slow in responding to the heterogeneous, fast-changing business environment, defined as “hyper turbulent environment” (mohrman, galbraith & lawler, 1998). in fact, today environment is challenging due to its “degree of volatility”, which depends at least on three important factors: a) uncertainty provoked by unpredictable changes in customers’ behavior, new technologies in production systems, retailers’ competitiveness, and financial capitals shifts worldwide; b) heterogeneity related not only to products and services, but also to distribution channels, ways to compete and resources to exploit; c) volatility concerning prices, innovation technology, regulatory restrictions, and shortage of raw materials. another significant feature characterizing today environment is the velocity through which changes take place. this pushes companies to modify their strategies and quickly adapt to new competitive conditions, and, at the same time, find the organizational architectures suitable to support strategic choices. therefore, traditional hierarchical structures have evolved to forms more fluid, which are appropriate to follow strategic imperatives (nohria & ghoshal, 1991). this requires the ability to design organizational configurations that are flexible enough to allow the firm to managing effectively uncertainty in a broader context of discontinuous change. nadler & tushman (1999, p. 49) emphasize this concept and state that while “historically, the purpose of organizational structures was to institutionalize stability; in the organization of the future, the goal of design will be to institutionalize change.” it is clear that strategy and structure are strictly interconnected. particularly, strategy drives organizational design that means that the need to reorganize is triggered by a strategic shift driven by new technologies or market changes (chandler, 1977). at the same time, we cannot disregard that organizational design affects strategy since structure defines hierarchy and gives those formal rules to organize, coordinate, and manage people and the other resources within the company. since flexible configurations are able to respond to business needs more effectively than traditional structures, most companies organize their activities through departments, divisions and functions, which behave as if they are autonomous “enterprises” (halal, 1994; ashkenas et al., 1995). of course, this kind of organization needs to be supported by new entrepreneurial forms of management, where empowerment, initiative and control make infra-firm 9 relationships more fluid and faster. in these terms, firm’s configuration is no longer a hierarchical structure operating through vertical top-down communication. rather, it is a network of units interconnected and interacting through systems of “lateral communication”. an example of organizational design with these characteristics is the cellular form (miles et al., 1997), where each cell has to reorganize processes and strategies in order to make its expected contribution to the overall company. the flexibility related to governance abilities as well as to technical and managerial skills contribute to strip away that part of bureaucracy that might limit flexibility. in these terms, “the organization is no longer a pyramid of power but a web of changing business relationships held together by clusters of internal enterprises” (halal, 1994, p. 75). in other words, organizations become a process rather than a structure; they tend to behave as “organic systems”, operating more through circular interactions and interconnections (both at infra and inter-firm level) among parts then through linear chains of cause-effect. these organizational changes are consistent to flexibility and specialization in operation systems, related the current post-fordism era, which characterizes the modern production systems: together with standardization and mass-production typical of fordism systems, flexibility is required today to deal with products and customers differentiation. these organizational features can improve the company’s learning process by facilitating information diffusion and innovation. in fact, developing learning process is related to the organization’s ability to look at continuous improvements to guarantee flexibility and efficiency of the entire organizational system. companies able to give up traditional approaches are more capable to deal with the impact of environmental changes and adapt to new conditions. in this regard, we agree with the statement according to which “a culture with a positive orientation to knowledge is one that highly values learning on and off job and one in which experience, expertise, and rapid innovation supersede hierarchy” (davenport, long & beers, 1998, p. 52). therefore, the attitude of firms to innovate is strictly related to their ability to unlearn. in this way, companies can create and improve new organizational behaviors, suitable to cope with the evolution of environmental contexts where they operate. inter-organizational relationships can improve this ability, since firms experiment new ways to cooperate not only with upstream and downstream partners but also with enterprises operating in different sectors (hamel, 1991; kraatz, 1998). in particular, relationships among firms backward and forward along the supply chain (from raw materials, to parts and components production, to manufacture and assembly, to distribution and final sale) can generate networks through different forms of outsourcing and “insourcing”. in this way, relationships within the supply chain can become so tight that it becomes sometimes difficult to determine where one organization ends and the other begins. in this regard, meyer, tsui & hinings (1993, p. 1178) highlight that “the parts of a social entity take their meaning from the whole and cannot be understood in isolation. order emerges from the interaction of those parts as a whole.” what stated above becomes more relevant if inter-firm relationships develop worldwide, involving companies – coming from different countries and sometimes operating in different sectors – that share resources and competences. in this way, the interaction creates a concrete opportunity to acquire new knowledge and improve transnational learning, arising from the mix of different resources and competences combined within the network (hamel, 1991; ghemawat, 2003). generally, this situation occurs in multinational companies, where the everexpanding transnational linkages consist of different companies, subsidiaries, suppliers, and individuals and they result in relational networks (brondoni, 2014). however, also small and medium firms find advantageous to participate in international networks. in fact, becoming part of a network can represent an important source of competitiveness for small enterprises, which 10 can exploit knowledge and experience from the partners belonging to the same international network. 4. the challenge of implementing organizational change although companies shift today towards structures more flexible, any advantage of such change can be gained only by tolerating an increase in disorder. in fact, organizational changes may determine modifications not only in the structure (departments, offices, hierarchical levels, etc.) but also in managers and employees’ behavior, in relation to their roles, positions and degree of freedom in decision-making process (morrison & milliken, 2000). even if change demands that managers and employees unlearn old habits and assumptions, which reinforce hierarchy and inhibit empowerment, it is challenging to realize radical changes. generally, companies adjust their organization through process of gradual modifications over the traditional structure, aimed at managing more effectively the trade-off between control and freedom. in fact, organizational freedom may carry out creative energy, but this energy can turn destructive if not guided into useful paths. conversely, hierarchies may avoid this disorder, but they inhibit creative freedom. flexible structures are aimed at overcoming this dilemma: they do not represent laissez-faire systems, but “guided” systems, where people involvement, empowerment and roles are regulated in base of formal rules, which in any case are not compromised by a rigid authoritarian hierarchy (halal, 1994). in any case, managing change for implementing new organizational assets encounters several obstacles inside the firm. firstly, there are structural inertia referred to the heaviness of “administrative machine” that may slow down the entire process (kotter, 1996). secondly, as stated by simon (1991), the bounded rationality of people can compromise change because it is almost impossible to evaluate completely advantages and disadvantages of strategic choices and, particularly, all their related consequences in the business system. finally, personal resistances that regard the propensity of people to conserve roles, positions and power (morrison & milliken, 2000); such tendency prevents companies from organizational change since any modification is often negatively affected by past procedures, obsolete attitudes and limited perceptions. in this regard, business corporate culture plays an ambivalent role: on one hand, it can be an important source of innovation and development; on the other hand, it can provoke conservatory behaviors, since it is source of company identity and social cohesion. for all those reasons, successful companies use to recruit people (particularly top managers) which welcome and are able to manage change. they are supposed to own the ability to create an inspiring vision, which all members of the organization can comprehend and trust, as well as leadership skills in managing and institutionalizing change (kotter, 1996; begley & boyd, 2003). these personal features are more crucial when the company operates in economic sectors characterized by unexpected changes due, for example, to innovation technology. in this case, difficulties in predicting variations, high degree of instability and turbulent environment require high flexibility to respond to environmental changes and – when possible – even to forestall market modifications in order to reduce the lead-time of competitive responses. from this point of view, the prudent executive will have to combine different degrees of hierarchical control and organizational freedom to find that solution, which best suits the firm strategic needs. it is clear that any organizational change is a challenging process and requires a specific managerial mindset, which regards ability to envision, motivate people in improving their entrepreneurial and self-organizing attitude, and communicate the need to carry on changes in order to make organization more performing (begley & boyd, 2003). in other words, leaders learn when it is best to encourage autonomy and differentiation, and how to create value through 11 the selective use of linking structures and integrative processes. this means that organizations seek “congruence” at the enterprise level and manage differences at the same time, in perceiving internal architectural divergence as a powerful source of evolutionary strength. together with the factors listed above, there are circumstances outside the firm, related to environmental conditions, which can influence organizational change in a significant way. we can mention the following ones: − need to develop products and services suitable to satisfy global customers, who are more aware and careful than in the past about preferences selection, quality evaluation and business image; − political and social contexts, which influence mode and degree of firm involvement with governments, local administrations and associations as well as with competitors, distributors and customers; − international trade modifications in terms of norms, laws and barriers, which can vary significantly from one country to another, making promotion and selling of products more difficult to be achieved; − difficulties in managing changes within the own sector, where competition increases continuously due also to the “contaminations” of other firms belonging to different industries; this happens for example between consumer electronics and telecommunication industry, between pharmaceutical and chemical sector); − need to develop international partnerships and alliances that certainly give companies the opportunity to grow but that requires specific competences and flexibility to manage the system of relationships worldwide. all what stated above shows that firms need to change continuously, pushed both by internal and external factors. this process is never-ending because it depends on the interdependence between firm and its environment: any modification, taking place within the environment, affects strategic choices of firms as well as any innovation introduced even by a single firm can modify heavily the degree of competitiveness of other companies, modifying the way market forces interact among them. this means that firm and its environment co-evolve through a process of mutual exchange, where changes take place not only in terms of time (evolution) but also in terms of space (co-evolution). this implies that what changes is not only the degree but also the content of competition as well as the way firms organize their resources to face the ever-changing and turbulent environment. 4.1. organizational changes and human resources involvement today’s companies need to face continuously changes in strategy-structure adjustment since organizational assets are required not only to better arrange business resources but also to optimize them in order to achieve competitive advantage. in fact, the value of a resource is related not only to its procurement cost but also to the way it is used. a resource has not value in itself: its value emerges when it combines with other resources and participates to the effectiveness of the whole operation system. one of the most important resources for a company is certainly human resources, seen as source for competitiveness; as highlighted by schuler & jackson (2014, p. 49) “having projected human resources issues more forcefully into their overall strategic outlook, companies turn made investments in people as prime source of competitive advantage”. their role is particularly relevant in innovative processes where creativity, competences and flexibility are required to deal with change. due to uncertainty and ambiguity of organizational change, it is important to involving people, which require to be engaged in continuous learning in order to keep up with organizational changes and ensure their continued contribution to the 12 organization (schulz, 2001). however, it is not easy to improve people involvement, at least for three reasons. the first one regards the kind of commitment between firm and its employees. the relationship should comprehend loyalty and profound values sharing: on one hand, firm enhances the value of specific human capital that contributes to competitive advantage creation and, on the other hand, employees have the possibility to preserve and increase their competences (kofman & senge, 1993). if employees do not feel enhanced, involved and committed, they may resist to change, provoking delays and inefficiencies. the second reason is that human resources management is affected by firm size and business culture. for example, in cases of small firms, entrepreneurial factors influence personnel policies (including recruitment, selection, training, and compensation) and decisions are sometimes taken in base of personal bias and attitude of the entrepreneur and are affected by “family power” dynamics. this is sometimes counter-productive since personnel choices do not follow those formalized procedures, allowing to better match individual competences with job objective and description. the third aspect that can limit employees’ involvement in organizational changes is the organizational structure. if the firm is a rigid hierarchical system, it is possible that information process slows down and people cannot interact and communicate properly (laursen & mahnke, 2001), therefore influencing negatively speed and effectiveness of organizational changes. from this point of view, we can say that organizational change is related to people mental patterns. regardless to the type of change, organizational modifications involve the way people think, acquire knowledge, accept and act for implementing change (kofman & senge, 1993). in this regard, an interesting example is reengineering and restructuring strategies adopted by several companies in the past decades in order to reduce costs and increase efficiency (henkoff, 1994). in some cases, firms have ignored the complexity of these organizational changes and attacked their hierarchical dysfunctions unsuccessfully through simplistic or unidimensional means, believing that downsizing their hierarchies would automatically change their organizational dynamics. this view is misleading since hierarchy is necessary to allocate resources and set directions. in other words, we cannot take for granted that by “removing layers” vertical boundaries are loosened and that information, competence, decision-making, and rewards are anyway spread through lower levels of the organization. in this regard, it is useful to mention the classification illustrated by some scholars, according to which there are firms that downsize mainly for cost-containment and profitability (cost-control), and those ones that did so to improve productivity, deal with competitors more effectively, or implement a new business strategy. firms that cut back for the sake of cost control experience more post-downsizing problems than those that downsize for purpose of increased productivity (henkoff, 1994). moreover, downsizing can imply work force reduction without necessarily improving organizational operations, because some competences and skills are lost in the process. the consequence of downsizing differ in relation to the company’s ability to innovate their approach to human resource management. firms that are typically slowest to make this kind of innovation are far more likely to incur higher-than-expected severance costs, to increase their use of costly overtime and consultants, and to lose more of the “wrong kind of people” than are those companies considered leaders in human resources innovation. these slow-to-innovate firms find themselves in a downward spiral, continuing to lay off people without the critical mass of skills and motivation to right the business (kofman & senge, 1993). for what stated above, it is clear that employees’ involvement represents a crucial factor influencing change outcome and the firm’s ability to recombine competencies, knowhow and skills (kogut & zander, 1992; pfeffer, 1994). a weak attention to human resources during the 13 change process can provoke organizational dysfunctions, since people represent one of the most crucial barrier to perform organizational adjustments. regardless to firm size, workforce composition or industry, the key differentiator in change performing is most of the times the relative emphasis that a firm gives to human resources enhancement. 5. infra-organizational communication for supporting business change in order to face competitive environment, we argued that companies might achieve organizational flexibility not only through implementing structures more adaptable but also by training people within firm in dealing with change. therefore, if people’s mindset can represent a relevant factor for making change successful, how is it possible to develop that attitude needed to accepting and dealing with organizational changes? scholars and enlightened managers consider internal communication as one of the most important prerequisites to pursue organizational changes and improve business performance (argyris & schon, 1978; phillips & brown, 1993; begley & boyd, 2003). in order to be effective, communication should be a “circle-shape process” rather than a traditional downward spiral of information. this means that communication needs to take place through both horizontal ways (among managers as well as among employees) and vertical/hierarchical ways (between supervisors and subordinates). this virtuous cycle can facilitate information dissemination and support human resource policies according to firm goals and knowledge development. in these terms, communication is aimed at cementing the bond between firm and employees, providing tools, modalities and contents, which are the base not only to do a good job but also to strengthen organizational culture (schulz, 2001). for example, communication is determinant in training stage for people recently hired; in this case, socialization is achieved by maintaining open lines of communication, carrying out decision making in a consultative way, and by encouraging both formal and informal opportunities to make employees socialize. in order to make communication effective, there are two important factors to consider, “social prerequisites” and “informative prerequisites”. social prerequisites are the base of relationships among people within organizations and are usually generated and guided by the following aspects. − mechanisms of control guaranteed by hierarchical positions. organizations need to be regulated by a central authority, which defines spaces and limits of people autonomy and guarantees that all tasks are carried out properly. − habits and rules. they represent a system of internal norms and implicit regulations, which manage job relationships, included those ones not officially formalized. they include also ethical behavioral codes, which people recognize and accept in their learning process within the firm. − trust developed by repetitive relationships among individuals. reciprocal trust derives from different forms of interactions, regulated by a set of rules (both formal and informal), duties and feelings, which the members of a company repeat and acknowledge. the other factor contributing to make communication more effective is informative prerequisites. they are related to the importance of giving people the appropriate information needed to do a job. people without information cannot be empowered to act with responsibility. sharing information is determinant since respond to a natural desire in people to want to do a good job and participate in performance improvement (phillips & brown, 1993). having people acquaintance with information regards not only job-related issues but also corporate culture 14 rules (both formal and informal), which regulate behaviors, roles and tasks (schuler & jackson, 2014). in case of new employees, for example, they learn transcendent company values and organizational folklore, including the importance of product quality and stories about the dedication and commitment of employees long since retired. this results in increased commitment to the company, willingness to work long hours, and decreased absenteeism and turnover. both social and informative prerequisites are more important for internationalized companies, where physical distance among subsidiaries can compromise information and knowledge dissemination and slow down the entire decision making process. moreover, we cannot disregard that cultural differences can influence the way people learn and the extent to which they are familiar to routines and ethical behaviors (grant, 1996). for this reason, information has to be codified in order to make it “visible” and usable to everyone. in this way, learning process can be improved generating new knowledge, which becomes the base for organizational routines development (phillips & brown, 1993). the firm’s knowledge as well as all activities aimed at improving knowledge represent the foundation of a company’s distinctive competencies. however, to make these competencies truly useful, knowledge has to convert in “actions”. this means that knowledge should be incorporated into specific tangible assets (instruments, plants, etc.), managerial assets (routine, procedures, etc.) related to individuals’ skills, and cultural aspects that reside in the organization’s norms and values (senge, 1990). moreover, we cannot disregard that knowledge codification becomes more crucial in case of tacit knowledge, which – differently from explicit knowledge (“know about”) – comprehends people know how that cannot always identified and codified. however, “tacitness” is the factor on which innovation takes place. successful companies own the ability not only to have access to information and knowledge, but also to use those resources efficiently and effectively, by improving competencies suitable to generate innovation (cohen & levinthal, 1990; kogut & zander, 1992; nonaka & takeuchi, 1995). this is an ability, a tacit knowledge that cannot by expressed formally but it resides within people and organizational culture. for this reason, tacit knowledge may represent a distinctive competence because it is less imitable and, therefore, needs to be protected because it belongs to the business culture with its history, behaviors, policies and procedures. in other words, business culture is a social product, which company’s members constitute and maintain through their ongoing communicative interaction. in these terms, culture is a product of communication (kofman & senge, 1993). effective communication processes ensure that consistent, credible, and continuous information is shared so that employees can share a mindset about the business’s goals and means. in these terms, communication may help overcome resistance to change in which one common barrier is often a lack of information about the positive outcomes of change (ulrich & lake, 1990). at the same time, communication is the base to knowledge improvement because it allows to recombine new information with the existing knowledge so generating innovation (wang et al., 1998). however, developing communication is not easy to achieve due to several factors which obstacle informative flows. first of all, many companies are still fearful of sharing information with employees, especially, when some “best practices” are specific and too complicated to be transmitted from one person to another. in particular, more knowledge resides in individual capabilities, more people tend to be in competition among each other and not inclined to share their own distinctive competencies and skills (kofman & senge, 1993). a second factor concerns the fact that communication is often inappropriate and ineffective because few individuals control information and the degree of codification and standardization is limited (schulz, 2001). generally, power centralization and lack of empowerment do not 15 allow people to acquiring the needed knowledge to do their job effectively and participate to business operations. another factor regards the business organizational dynamics. many companies remain hierarchically structured and retain bureaucratic procedures, which can obstacles information and knowledge improvement. for example, organizations often focus inappropriately on managing the life cycle of the hardware and software systems that produce the information instead of on the information itself. this implies that they fail to capture the additional knowledge necessary to achieve meaningful information quality (argyris & schon, 1978; laursen & mahnke, 2001). we cannot disregard that technology and digital communication play an important role. in the past two decades, innovations have changed dramatically the way people communicate, facilitating their interactions in terms of time reduction as well as quantity and quality of information exchanged. we can say that with current information technology capabilities, there is no reason why anyone throughout an organization cannot have ready access to any information required to do a better job. even though firm size and level of internationalization influence the degree of using internet and other technologies (gregori, marinelli & temperini, 2015), the advantages arising by new information systems are noteworthy, since people can communicate instantaneously – despite time and space – and through a common global language. in other words, today’s organizations are “virtual space” or “cyber-ba” [9], where advanced in information technology provides people with new and more efficient ways to communicate and with timely access to more information. this regards all business activities, not only bureaucratic procedures but also manufacturing systems, which become more flexible and faster. this is consistent with the innovation related to industry 4.0, which organize firms as cyber-physical systems throughout large networks (brettel et al., 2014). 6. final thoughts environmental complexity pushes firms to find new ways to compete, by acquiring and exploiting not only tangible resources but also intangible assets, which, more than in the past, represent the source for competitiveness. this never-ending search leads companies to abandon their traditional hierarchical structures in order to create more flexible and adaptive configurations that help them to deal with environmental challenges. however, any process of organizational change requires the involvement of all members of the company, in terms of their comprehension and acceptance of business choices. this is one of the most important prerequisites to make change successful, resulting in knowledge improving and innovation. flexible structures not only allow firms to adapt faster to ever-changing business needs but also to facilitate information spreading. on one side, flexibility sustains communication process because interactions can occur without limits due to rigid hierarchies and bureaucracy; on the other side, communication represents an important prerequisite to implement flexibility, needed to realize changes. if in hierarchical structures information risks to be dispersed because of rigid top-down communication flows, in more fluid configurations information is available on a “just in time” base. this means that the specific information required to do a job goes directly to those people entitled to act in order to achieve business goals. from this point of view, flexibility regards not only the versatility of organizational structure and the modalities through which communication takes place, but also the managerial abilities suitable to interpret environmental changes and, consequently, modify quickly and efficiently strategic business paths. in this way, knowledge improvement comes from information combined with 16 experience, context, interpretation, and reflection; in these terms, knowledge is a high-value form of information that is ready to apply to decisions and actions. in any case, a perfect solution that can guarantee stability in the long time does not exist, at least for two reasons. the first one concerns the fact that companies cannot seek stability because change is the today imperative to deal with both the task and general environment, and, sometimes, even to survive. the second reason regards costs and obstacles in modifying the previous status quo and implementing a new asset. several and different factors limit change, like scarce resources, lack of strategic vision, managers’ attachment to hierarchical power and people skepticism towards innovations. companies represent complex systems struggling to design structures, manage human capital and exploit tangible and intangible resources in order to create the products and services that markets expect and want. the international dimension makes these goals more difficult to achieve, because of cultural diversity, geographical distance and costs to support international strategies. at the same time, 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consumers enjoy access to more information than ever before, but, on the other hand, they frequently reach decisions with limited deliberation. with its flow of information, does the age of the internet encourage the ideal of consumer rationality? our aim is to explore the role of social influences and environmental cues on consumer online behavior and to derive implications for improving our understanding of online behaviors. research findings on influence tactics highlight an increasing importance of social cues in assessing online information, while experiments in social psychology reveal the role of unconscious processes in automatically activating attitudes and behaviors. we discuss implications for developing our understanding of online consumer behavior and advancements necessary for consumer research. keywords: consumer rationality; online behavior; social proof; influence tactics; consumer decision-making; limited deliberation. 1. introduction decision making and consumer behavior are thought, traditionally, to result from individual information processing that leads to certain attitudes influencing subsequent behavior (ajzen & fishbein, 1980). consumers will choose a certain product or service after comparing the costs and benefits of each alternative. this more elaborated information processing takes place for expensive products, with important long-term consequences for the individual (chaiken, 1980; petty, cacioppo, & schumann, 1983). however, more frequently consumers do not engage in thorough information processing before making decisions, such as when they make daily and repeated decisions, when they decide on impulse or when they act without obvious consequences. many online behavioral decisions result from a limited analysis of costs and benefits, since they are only a click away and their consequences seem to be inexistent or inexpensive for the consumer. this is the case for behaviors such as game and applications downloading, subscribing to various online channels or reacting to online content. nonetheless, these behaviors have an increasingly important impact, at aggregate level, determining company international journal of economic behavior, vol. 8, n. 1, 2018, 19-31. 20  investments and having macroeconomic consequences. at individual level, online behaviors also impact the consumers’ life by changing their habits and their spending choices in terms of money and time, yet these consequences remain mostly invisible to consumers. thus, online behavior is a special kind of consumer behavior characterized by fast decision-making with few immediate individual consequences, but with an important aggregate impact. although the ideal of consumer rationality has long been criticized (scott, 2000, simon, 1957) or given various interpretations and developments (lancaster, 1966; samuelson, 1938), the current context of online consumer behavior challenges this view even more. the rational consumer is considered to access and process all information needed, to make a decision without social influences (or at best they are internalized as stable set of beliefs on social norms) and to hold stable preferences, which are not influenced by context (jackson, 2005). however, today consumers have access to more information than ever before in history, they are demanding for e-commerce platforms that embed social interactions and they still exhibit impulse buying behaviors. the online consumer behavior brings forefront some aspects that were ignored in the past: the social influence and the context’s impact. also the internet facilitates access to information, thus possibly driving consumers closer to that ideal of perfect information. so, what the main developments with respect to the ideal of consumer rationality that are facilitated by consumers’ use of the internet in their decisions? this paper aims to explore the role of social influences and environmental cues on consumer online behavior and to derive implications for moving forward the understanding of consumer behavior in online settings. multiple tactics are aimed at influencing consumer behavior to make decisions faster and thus with reduced information processing. many of these tactics use various social cues that determine impulsive behaviors, but consumers may become aware of them and develop defensive strategies, if they wish to do so (cialdini, 2001). other times consumers seem to make decisions unconsciously, without a deliberate information processing. dijksterhuis, smith, van baaren and wigboldus. (2005) illustrate how consumers simply bypass the deliberation process and, instead, are influenced by environmental cues. these may consist of elements related to the structure of choice, such as the website features, or may be driven by social cues with direct influence on behavior. this article is divided into three parts. first, we present an overview of the mechanisms that explain consumer decision-making with limited deliberation. we identified two types of influence mechanisms: those of which consumers may become aware of and those that function only at an unconscious level. secondly, we summarize research findings on how the influence mechanisms impact consumers’ online behavior and how social validation influences their assessment of information credibility. finally, we derive implications for the ideal of consumer rationality in online decision-making context and we propose future research directions for improving consumer behavior models. 2. mechanisms of individual decision-making with limited deliberation consumer choice with limited deliberation is explained through various mechanisms and mediating concepts, such as habits, the automatic attitude-behavior link, impulse decisions, a multitude of social influence tactics and a direct perception-behavior link (cialdini, 2001; dijksterhuis, smith, van baaren, & wigboldus, 2005; dittmar, 2008; fazio & olson, 2014; ouellette & wood, 1998;). frequently-made decisions are usually explained by the concept of habit, which is a repeated behavior that was the result of a previous information processing stage. the habit produces satisfying consequences to the consumer and therefore the behavior that is simply replicated in the future and acquires certain automaticity. ouellette and wood (1998) defined       21  habits as behavioral tendencies towards repeating a certain action when the context is stable, thus being highly dependent external cues. from a learning process perspective, habits are described as a mental mechanism that enables us to free up cognitive capacity for the more difficult tasks, while the habitual ones are performed automatically (maslow, 1954). although, the proponents of consumer behavior models based on the expectancy-value theory consider habit as already included in the attitudes towards a behavior (ajzen & fishbein, 1980; ajzen i., 1985; fishbein & ajzen, 1975), habitual behaviors often bypass the deliberation process. due to its automatic action initiation mechanism, habit is worth considering in addition to intention and attitudes towards a behavior, both for future behavior prediction and for behavioral change. in their meta-analysis, ouellette and wood (1998) tested whether past behavior and intention predicted differently subsequent behavior depending on the situation’s characteristics in terms of opportunity and stability. their findings confirm that habit predicts the behavior better in stable and favorable contexts, while for shifting contexts, intention performs better as predictor of future behavior. thus, since habits and intentions determine subsequent behavior differently depending on the choice context, the environmental cues can trigger habit activation in consumers. another mechanism explaining the decision-making with limited deliberation is the automatic attitude-behavior link, which is explored by fazio (1990) in the mode model. contrary to the popular idea that attitudes determine behavior through the mediation of intention, fazio (1990) proposes that attitudes and behavior are directly linked. this automatic attitude-behavior mechanism is used in spontaneous decision-making, a frequently encountered type of decision-making. fazio and olson (2014) note that the deliberative decision-making process, which involves the analysis of costs and benefits is rooted in the ideal of the rational consumer, is far less used by individuals, only when they have the opportunity and motivation to do so. fazio and olson (2014) posit that the external stimulus automatically activate consumer attitudes, which then trigger a subsequent behavior directly. thus, consumers do not hold a fixed set of attitudes towards behaviors as if they would hold a box of tools and as the theory of planned behavior suggests (ajzen, 1985). rather, individuals hold an immense variety of attitudes that become salient only when triggered by cues in the environment. an alternative justification for consumer decision-making with limited information processing is that sometimes consumers make impulse decisions and attitudes are completely bypassed, thus their cognitive processing. an impulse decision of particular interest in consumer behavior is the impulse buying decision, which has three main characteristics: it takes little deliberation and planning, it involves high emotional feelings from consumers and it makes individuals completely neglect the constraints and consequences of that decision (dittmar & drury, 2000). thus, the impulse buying decision is a situation where consumer passion overtakes deliberation. dittmar (2008) suggests that impulse buying decisions occur mostly for goods that are symbolically linked to that individual’s self-concept. cialdini (2001) also explored the mechanisms that drive individuals to impulse decisions and to accept offers. instead of looking at a symbolic link with goods, cialdini highlights a series of social influence tactics that lead to impulsive reactions. he identifies six fundamental psychological principles behind them: the priciples of scarcity, reciprocity, liking, consistency, authority and social proof. these principles are often recognized as the basic elements of marketing tools aimed at influencing consumer behavior. their main characteristics are highlighted below: 1. scarcity: individuals value more the offers in short supply and react faster to those which highlight an advantage they may lose. 22  2. reciprocity: individuals are inclined to pay back for the favors received, due to a feeling of indebtedness towards the person who offered the “gift” first. 3. liking: individuals allow others they like to influence or persuade them. this functions mainly through similarity to others or through being praised by others. 4. consistency: individuals will try to stick to their previously reported opinions or behaviors. 5. authority: individiuals give in to persuasive messages from experts. expert opinions make valuable and efficient short-cuts for good enough decisions. 6. social proof: individuals follow the behavior of others, especially in ambiguous contexts. these principles of influence have been frequently used in various contexts of social interaction. initially, the sales context was the place where these principles were discovered, yet they are ment to function in other social interaction settings as well. cialdini (2001 b) recommended managers to use them in order to persuade colleagues and subordinates to change behavior and he highlighted their potential to increase the results of fund-raising initiatives through a combination of these principles (cialdini, 2003). finally, the research on the direct link between perception and behavior illustrates situations when behavior is triggered unconsciously for the consumer. dijksterhuis smith, van baaren & wigboldus (2005) review the findings on this perception-behavior link and conclude that environmental cues play a major role in influencing subsequent behavior through their mere perception. these cues impact directly the behavior, at an unconscious level, by inducing certain behaviors or goals on the subjects. in many instances, social perception is involved in triggering the automatic behavior, as it activates a representation in the individuals mind with direct effect on the social behavior (dijksterhuis & bargh, 2001). imitation represents a direct consequence of the perception-behavior link. dijksterhuis and bargh (2001) investigated the role played by imitation on the decision to enact a behavior and they identified two ways in which imitation intervenes: the low and high road to imitation. the low road relates to a simple imitation of the observable behavior, such as when people mimic gestiures, facial expressions and speech characteristics. the high road implies a more complex imitation effect, when people try to imitate traits, goal and stereotypes of important others. automatic mimicry is recognized as an innate human ability, which plays a role in the learning from others’ behavior. the automatic mimicry is enabled by mirror neurons, as the findings on their functioning reveal (decety & grezes, 1999). iacoboni (2005) found that whenever individuals practice or observe an action the same areas in the brain get activated. thus, if the same brain’s regions are involved in coding own goals and intentions as well as those of others, then imitation provides also a means of understanding others’ actions. yet, even though imitation enables individuals to understand others, it also provides an automatic behavioral response that the person is not aware of. johnston (2002) tested the influence of mimicry on behavior in an experimental study and found a statistically significant effect on behavior. in the experiment, subjects were asked to eat ice cream in the presence of another person, who was instructed to eat a small or a large sample according to the assigned experimental group. the subjects in the experimental condition mimicked the behavior of their peer. chartrand and bargh (1999) tested experimentally whether mimicry impacts the sympathy felt by a peer and found that subjects who were imitated in the experiment liked more their peer than those who were not imitated by their partner. van baaren, holland, kawakami and van knippenberg (2004) found that mimicry also encourages pro-social behavior; in their studies, participants were more helpful and generous if they had been mimicked and they directed these       23  behaviors not only towards the mimicker but also to others, outside the strict context of mimicking. several studies on the effects of priming on subsequent behavior indicated a significant priming effect through the activation of goals, traits of personality and stereotypes in the mind of the participants. carver, ganellen, froming, and chambers (1983) primed subiects with the concept of hostility by exposing participants to an aggressive model and they were influenced by displaying a more aggresssive behavior subsequently or by interpreting others’ behaviors as more aggressive. bargh, chen, and burrows (1996) tested experimentally the effect of priming participants with the concept of rudeness and with certain stereotypes, an elderly stereotype and an african american stereotype, and in all cases they observed an automatic bevior inducing effect. dijksterhuis and van knippenberg (1996) studied as well the effects of stereotype activation on the cognitive performance in tests or on the speed of their reactions. in the experiments, they asked different groups of participants to read descriptions of older people, teachers and hooligans and the priming procedure facilitated or inhibited their performance in the tests applied. the direct link of perception with automatic behavior activation illustrates that the influences on decision-making are subtle and bear an unconscious dimension. individuals are more sensitive to social influences than posit popular consumer behavior models, such as the theory of planned behavior of ajzen (1985). additionally, social perception has the biggest impact on subsequent behavior, as individuals react more frequently towards others’ behaviors and less frequently to environmental cues outside the human context. thus, individuals are even more sensitive to the social influences than would suggest cialdini (2001). the social influence tactics he identified are a part of the determinants of behavior that could be observed once the consumer becomes aware. however, the direct link between perception and behavior inform us that this relationship resembles more a reflex reaction, without any cognitive processing. 3. influences on consumer behavior in online social contexts in june 2018 there were over 4 billion internet users, most of them being located in asia, 49%, followed by europe, with 16,8% users, and africa with 11% users of the total number of internet users worldwide (internet usage statistics, 2018). however, the highest penetration rate can be found in north america, where 95% of the population uses the internet, followed by europe with a 85,2% penetration rate. the increasing use of the internet and the intensified online interactions made it an interesting plaform for various attempts to influence others. fogg (2003, p.1) recognized the importance of technology in attampts to change consumer attitudes and behaviors and termed this class of technologies ‘persuasive technology’. besides being a topic of interest, the online social interaction is also charaterized by some particular features that enable the users more control over the timing and location of the interaction, the degree of anonimity, the physical appearance and the physical distance (guadagno, muscanell, rice, & roberts, 2013). these charasteristics have an impact over the functioning and the effectiveness of the persuasion strategies. guadagno and cialdini (2005) reviewed the influence of the authority and consistency principles of persuasion in online contexts and found the principles have different degrees of influence compared to the face-to-face interaction. the authority principle in online context has encountered a higher compliance to the influence agent, but the influence was diminished compared to an interactive context. the consistency principle, however, seemed to be as effective in computer-mediated contexts as in other communication means. in following article, guagagno, muscanell, rice, & roberts. (2013) examined how effective are the principles of liking and social proof in online influence. the higher the social validation, defined as the 24  number of individuals agreeing to a online request, the more influence it exerted on individuals to agree to the request. however, the likability of the blogger, although it was noticed, didn’t influence participants to comply to the request. orji, mandryk, & vassileva (2015) tested the impact of cialdini’s persuasion principales in online context and explored the difference in compliance by gender and age. in general, the most effective persuasive strategies were consistency and reciprocity. however, females were persuaded easier with the principles of reciprocity, consistency and social proof than men, suggesting that peer presure impacts more this group. with respect to age, younger adults responded more to scarcity, while adults were persuaded more by the consistency principle. the social interaction in the online environment is an essential feature that has contributed to important changes in the e-commerce activity. this type of online commerce, which is termed 'social commerce', incorpoates tools and interfaces that facilitate social interaction and help leveraging sales (huang & benyoucef, 2013). according to dennison, bourdage-braun, & chetuparambil (2009), implementing social commerce means including the word-of-mouth into the e-commerce activity, but the concept also refers to the use of social media applications in the interaction with consumers. all these developements impact the marketplace and the ways businesses interact with their public, transforming it into a user-driven one (wigand, benjamin, & birkland, 2008). as we discussed above, impuse behavior is one of the examples when consumers make decisions with limited or without cognitive deliberation. impulse online buying behavior is an important phenomenon to study since it is a type of behavior frequently observed in retail sales (hausman, 2000) as well as in online contexts (li, kuo, & russell, 1999). wells, parboteeah, & valacich. (2011) conducted two experiments in order to test the impact of online environment cues and consumer impulsiveness on impluse buying behaviors. they tested the website quality as a determining environmental cue and they found it has a significat role in influencing online impulse buying. the website quality was operationalized as a perceptual value with three dimensions: the security, the navigability and the visual appearance perceptions of the website. they conclude that relevant environmental cue (i.e. a high website quality) stimulates consumer impulsiveness and induces impulse buying behaviors, while less relevant cues (i.e. lower quality websites) negatively influence impulse buying. amblee & bui (2011) investigated the effect that online word-of-mouth has on sales and on the brand and product reputation. they studied the consumers’ information exchange, recommendations, shared thoughts and conversations about books and author quality on amazon.com. their findings revealed that the amount of shared online information about a products doesn’t only help users make evaluations and decisions, but it also directly influces the products’s sales performance. the more the product reviews are available, the more product sales are generated, and the rating score is less associated with sales as long as the number of reviews is smaller. in other words, the more an item is reviewed the better sales it enjoys, no matter the review score. consumers interaction with the online content and their usage of online information in decision-making also raise the question of consumers’capability to evaluate credibility of online information. individuals have always evaluated the credibility of information through social means and not in isolation (metzger, flanagin, & medders, 2010). traditionally, the credibility of information is assessed by referring to some recognized institution or expert that provides the reliable information. this was a good enough solution when people lived in a world where the information was scarce. however, as callister (2000) argues, the current context of abundent online information makes this convention for evaluating information credibility insufficient for the fast pace in which consumers need to make choices. the online environment       25  allows individuals to access large amounts of information from a wide variety of sources, so they also have a new need: to assess credibility while saving cognitive effort and time. since individuals need to cope with a problem of information overload and uncertainty in the online environments (sundar, 2008; taraborelli, 2008), they resort to several heuristic strategies. metzger, flanagin, & medders (2010) explored how individuals use such strategies to assess information credibility online, so that they can reach a decision fast enough and without a high cognitive effort. one dominant characteristic identified is the social arbitration, which means that individuals use online social networking, online assessments and online reputation systems to judge the information and source credibility. in their study, metzger, flanagin, & medders (2010) identified five heuristics used by individuals in online contexts: reputation, endorsement, consistency, expectancy violation and persuasive intent (p. 425). these heuristics fall in two major categories, namely heuristics based on social confirmation and heuristics rooted in expectations from the context:  the reputation heuristic – information is credible when it is published on well-known websites.  the endorsement heuristic – information is credible if others consider it as well (by sharing, liking, etc.) without further evaluation of website content or information source.  the consistency heuristic – information is credible when individuals can cross-validate it through several information sources; this heuristic requires more cognitive effort from participant.  the expectancy violation heuristic – information is credible if the website meets readers’ expectations in terms of appearance, layout, features, functionality and comprehensiveness; online sources which fail to meet the reader’s criteria in terms of layout in considered less credible.  the persuasive intent heuristic – information that is perceived as advertising, commercial or persuasive is generally considered not credible. the main observation of metzger, flanagin, & medders (2010) study is that individuals resort to distant information sources that they consider relevant through social evaluation mechanisms. this means that relevance and credibility is assessed through social information pooling and priviledging personal opinion confirmation, passionate recommendations and resources shared by familiar others. thus, the notion of ‘social proof’ proposed by cialdini (2001) supports the reputaion, endorsement and consistency heuristics, and therefore make individuals efficiently evaluate credibility (i.e. they reach a decision on the information at hand faster and with less cognitive effort) but are subject to manipulation influences. credibility assessment through social proof can be erroneous since it is based on crowd behavior and it equates popularity with credibility. in addition, individiuals may reject information as not credible if it disconfirms their personal opinion or expectations, leading thus to a narrowing of information avaliable to the individual though his/her own choice to ignore competeing opinions. the online visibility of individuals is subject to similar credibility evaluations and the social network of the individual influences the importance of his/her online presence. stoica, riederer & chaintreau (2018) observe that the online visibility of individuals, which depends on their social network, grows mainly with the help of the referral systems embedded in social media platforms. thus, the y tested whether the social recommendation algorithms affect the representation opportunities of different demographic groups, and especially if there are significant gender gaps enhanced or diminished by these algorithms. indeed, stoica riederer & chaintreau (2018) documented a reinforcement of the representation gender gap through the referral function in instagram’s recommendation 26  algorithm. they describe the effect observed as ‘an algorithmic glass ceiling’ for women that can be explained by the phenomenon of ‘differentiated homophily’ (stoica, riederer, & chaintreau, 2018, p. 2). this phenomenon implies that individuals favor interactions with similar others, so in this case men support more other men, while women don’t favor other women. the algorithm does not create this type of behavior, so it might be considered legitimate as it only reflects a pre-existing behavior in the human society. however, combining this finding with those related to the limits of online information processing, the effects on limiting representation may increase with the information volume and create unwanted social effects. stoica, riederer & chaintreau (2018) suggest that a good structural understanding of the causes should be encouraged in order to improve referral algorithms and reduce bias towards an overrepresentation of male postings. the recognized importance of social influence on consumer behavior in online contexts raises also a concern over the attempts to manipulate individuals’ decisions and behavior through online information and stimulus. an increasingly visible concern comes from the activity of social robots, or bots, which are software robots that mimic human behavior online. bots are defined as a computer algorithms that produce content and interact with users on social media, in order to influence their behavior (ferrara, varol, davis, menczer, & flammini, 2016). these bots are fulfilling mainly benign tasks and are useful in the achievement of different automatic functions. yet, the activity of social bots may become problematic when they are used to share rumours or wrong information. they enable manipulation attempts by giving individuals the false impression that some piece of information is popular and endorsed by many people, thus increasing its credibility through social proof. social bots can and are used to alter the impression of popularity and support for certain political campaigns and candidates (ratkiewicz, conover, meiss, goncalves, flammini, & menczer, 2011), they may increase panic feelings during emergencies and they can even alter stock market fluctuations (hwang, pearce, & nanis, 2012). although ferrara, varol, davis, menczer, & flammini (2016) describe the functioning of several detection systems that could be used to identify social bots, the biggest problem for individuals is that they lack the necessary abilities to use them on their own. as the proponents argue, each of the described detection system has its imperfections and their best use is possible when they are combined. thus, the biggest problem related to the influence of social bots comes from the inability of humans to recognize bots in social media. to counter this problem, individuals should become knowledgeable of online influences directed at them as well as of their own vulnerabilities. additionally, it might not be enough for consumers do learn how to detect social bots but it is necessary to profoundly understand the online and social transformation taking place with increased usage of the internet. the development of social bots implies that there are many actors interested in influencing consumer (or individual) actions. however, our level of knowledge on factors of social influence on online consumer behavior is at its infancy, and today consumers more often feel fooled and puzzled than knowledgeable of the market and self-aware of their own needs, wants and rationality. 4. moving forward the understanding of online consumer behavior the consumers’ online social interaction enhances some characteristics of consumer behavior that were mostly invisible and thus ignored in the past. the influence of social and environmental cues is now quite well documented in research results and there are convincing arguments to be integrated in models of consumer behavior. as well, the cognitive limitations of consumers in relation to the high volume of online information should be translated in attempts to better understand consumer decision-making skills and the ways in which they can be developed. since the premises of the rational consumer ideal are contradicted, consumer       27  researchers should start developing a new view on consumer rationality, adapted to the current reality. consumer rationality is not an inborn ability that everyone posseses, but it is dependent on an interaction of factors coming from the social environment and the individual self. also consumers’ abilities in decision-making are prone to multiple errors and vulnerabilities. consumer behavior in the online environment is still an emerging field of research which needs further exploration. the behaviors resulting from the online social interaction are dependent on the particular features offered by this environment: consumers have more control over engaging or not in the interaction and over when and how they will communicate. these characteristics of online social interaction apparently encourage an internal focus, which may enable consumers to hold back their implusiveness. however, many studies on impluse online behaviors confirm that consumers continue to be impulsive online, yet this type of behavior is dependent on the features offered by the computer-mediated communication tool. social influence has been proved to play a major role in determining online consumer behaviors, yet there are important differences compared to the traditional face-to-face interactions that are worth noting. the effectiveness of each of the influence principles proposed by cialdini (2001) differs in the online interaction: the consistency and the social proof principles have greater effectiveness, while the authority and liking principles face a reduced impact in influencing online behaviors. this might imply that online consumers are more concerned with maintaining a coherent self-concept and non-contradicting themselves, on one hand, and adjusting their self-concept to the relevant social context, on the other hand. future research should explore the construction and significance of consumers’ online identity as well as the importance of self-concept in accepting or rejecting the influence of tactics aimed to persuade them. social validation is also highly used by consumers in assessing online information credibility. the increasing volume of information available online leads to costs of cognitive processing (in terms of effort and time) and in order to cope with them individuals resort to heuristics for a faster decision-making. most of these heuristics are based on social validation and confirmation of personal expections, both of which are prone to errors. online information shared or endorsed by many is considered more credible and thus, individuals equate credibility with the popularity of an opinion. also, the online information that corresponds to own expections, whether in terms of content or appearance, is considered credible and hence narrowing the information variety available to the individual. online content creators can use the knowledge on these heuristics to make their message more credible, however, consumers should strive as well to become aware of their limitations and vulnerabilities in making wrong credibility judgements. future research should explore in depth the ways in which these heuristics are used depending on the experience of the online user. are some heuristics favored more by experienced internet users, while less experienced internet users favor other heuristics? do the frequency and type of social media used influence individuals propensity to use only certain heuristics? these questions would be interesting to explore in order to understand better consumer vulnerabilities in information processing. while the impact of social proof on consumer behavior may be observed, there are also more subtle influences illustrated by the research on the direct link between perception and behavior. according to their findings, consumers are very sensitive to environmental cues and they unconsciously adopt attitudes and behaviors induced by others. two implications are derived from this: automatic processes are not solely the result of repeated actions (habits) and the characteristics of the choice context influences behavioral decisions. conscious and unconscious processes both play an important role in determining behavior and most often they support one another (bargh, schwader, hailey, dyer, & boothby, 2012). usually, unconscious processes determine social behavior and conscious processes alter 28  uncounscious impulses. future research should try to include the study of unconscious processes in consumer behavior modeling and to find a way to account for the interplay between the conscious and unconscious thought processes. this development could be a real game changer in consumer behavior research, since the current methodologies based on self-reported answers to questionnaires will no longer be appropriate. although, further debate and analysis is needed in order to implement new research methodologies, new ideas could come from various other fields like experimental psychology and machine-learning. 5. conclusions despite an increased access to information, today’s consumer is not necessarily moving towards an increased consumer rationality in decision-making, since the increasing volume of online information comes with costs of cognitive processing and credibility evaluation. moreover, the social influence on individual choice is becoming increasingly visible, an aspect that was rather ignored in the ideal of rational consumer. the online environment highlights particular aspects of consumer behavior that were rather hidden and seemingly unimportant in the world unconnected by the internet: the impact of social influence and the cost of information processing. today, in order to make good enough choices in a timely manner, consumers resort different shortcuts. social proof is commonly used in decision-making and it mediates the credibility and authority given to the online source of information, directly influencing consumer trust and the subsequent behavior. this means that the information shared by many becomes true, trustworthy and acquires authority. moreover, there are also social and environmental cues that trigger behavior automatically, without any cognitive processing. these cues may be used in order to increase consumer impulsiveness and lead to immediate behavior performance. their impact is usually located at an unconscious level and for this reason they cannot be accounted for in consumer behavior model that concentrate on conscious cognitive processes. consumer behavior research procedures could be changed and new tools developed in order to understand all these changes observed in the online social interaction so that consumer knowledge advances with the technology available. this paper aimed to review of the main influence mechanisms responsible for consumer decision-making with limited deliberation and to highlight their functioning in online contexts. the paper contributes to the literature on the changes in consumer behavior driven by online contexts and it highlights their implications for the ideal of consumer rationality. another contribution is the discussion of social and environmental factors that increase consumer vulnerability and are worth considering for advancing consumer awareness and wellbeing. however, a major limitation for the paper is that it offers only an overall review of the multiple influences that diminish consumer deliberation in online settings. in order to improve our understanding and knowledge on the consumer online behavior three future research directions are proposed for further study: the impact of consumer experience with internet on evaluating information credibility, the role played by consumer’s self-concept on the effectiveness of social influence tactics and the importance of online cues in triggering automatic behaviors. another challenge for future research is also to find methodological solutions to reduce the use of the traditional way of testing consumer behavior patterns: through self-reported responses to questionnaires. in fact, there is a significant discrepancy between what consumers say they do and their actual behavior. this is a serious concern for testing models in online contexts since these questinnaires involve a lot of verbalization, while online interaction is based primarily on clicks, pictograms and multimedia content, none of which are spoken or       29  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(2010), sme food suppliers versus large retailers: perspectives in the international supply chains, dsi essays series, n. 13, mcgraw-hill, milano. 2 _15-01_ asongu international journal of economic behavior, vol 5, n. 1, pp. 3 financial system definition rip in developing countries african governance and development institute received: october 9, 2013 in this paper, we dissect with great acuteness contemporary insufficiencies of the ifs (2008) definition of the financial system and conclude from sound empirical justifications that the foundation, on which it is based, while solid for developed countries, holds less ground in developing countries. perhaps one of the deepest empirical hollows in the financial development lite perspective of money supply to liquid liabilities. this equation has put on the margin (and skewed) burgeoning phenomena of mobile banking, knowledge economy (ke), inequality…etc. we conclude that the component in the ifs conception and definition of the financial system can only be marginalized at the cost of misunderstanding recent burgeoning trends in mobile phone penetration, ke and poverty. hence, the dead battle and lost in the face of soaring trends highlighted above. despite the plethora of econometric and policy-making sins the definition has committed in developing countries through bias estimates and misleading inferences, may its soul rip keywords : banking; mobile phones; shadow economy; financial development; poverty jel classification: e00; g20; 1. introduction the title of this paper will strike some as fanciful and earthshaking, heartbreaking and eye catching for others. the international financial statistics (ifs, 2008) definition by the international monetary fund (imf)? for developed countries. however, this lamentation is a subject to controversy in developing countries and motivates no tears or elements of consolation. not least, because one of the deepest empirical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin, some burgeoning phenomena in the informal financial sectors of de countries. among others, mobile banking and microfinance (or in one conception ‘informal international journal of economic behavior, vol international journal of economic behavior, vol 5, n. 1, pp. 3may the soul of the ifs financial system definition rip in developing countries simplice a. asongu african governance and development institute, yaoundé, cameroon accepted: november 3, 2014 online published: abstract in this paper, we dissect with great acuteness contemporary insufficiencies of the ifs (2008) definition of the financial system and conclude from sound theoretical underpinnings and empirical justifications that the foundation, on which it is based, while solid for developed countries, holds less ground in developing countries. perhaps one of the deepest empirical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin (and skewed) burgeoning phenomena of mobile banking, knowledge economy (ke), inequality…etc. we conclude that the informal financial sector, a previously missing component in the ifs conception and definition of the financial system can only be marginalized at the cost of misunderstanding recent burgeoning trends in mobile phone penetration, ke and poverty. hence, the ifs definition has incontrovertibly fought its final dead battle and lost in the face of soaring trends highlighted above. despite the plethora of making sins the definition has committed in developing countries es and misleading inferences, may its soul rip. banking; mobile phones; shadow economy; financial development; poverty : e00; g20; i30; o17; o33 the title of this paper will strike some as fanciful and earthshaking, heartbreaking and eye catching for others. the international financial statistics (ifs, 2008) definition by the international monetary fund (imf)? to rest in peace (rip)? surely not. or at least surely not for developed countries. however, this lamentation is a subject to controversy in developing countries and motivates no tears or elements of consolation. not least, because one of the irical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin, some burgeoning phenomena in the informal financial sectors of de countries. among others, mobile banking and microfinance (or in one conception ‘informal international journal of economic behavior, vol 5, n. 1, pp. 15-30 15 -14, 201 may the soul of the ifs financial system definition rip in developing countries simplice a. asongu yaoundé, cameroon online published: march 14, 2015 in this paper, we dissect with great acuteness contemporary insufficiencies of the ifs (2008) theoretical underpinnings and empirical justifications that the foundation, on which it is based, while solid for developed countries, holds less ground in developing countries. perhaps one of the deepest empirical rature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin (and skewed) burgeoning phenomena of mobile banking, knowledge economy (ke), informal financial sector, a previously missing component in the ifs conception and definition of the financial system can only be marginalized at the cost of misunderstanding recent burgeoning trends in mobile phone ifs definition has incontrovertibly fought its final dead battle and lost in the face of soaring trends highlighted above. despite the plethora of making sins the definition has committed in developing countries banking; mobile phones; shadow economy; financial development; poverty the title of this paper will strike some as fanciful and earthshaking, heartbreaking and eyecatching for others. the international financial statistics (ifs, 2008) definition by the to rest in peace (rip)? surely not. or at least surely not for developed countries. however, this lamentation is a subject to controversy in developing countries and motivates no tears or elements of consolation. not least, because one of the irical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin, some burgeoning phenomena in the informal financial sectors of developing countries. among others, mobile banking and microfinance (or in one conception ‘informal 30, 2015 16 finance’) are elements of consolation for developing countries as the soul of the ifs conception and definition of the financial system rip. in this paper we dissect with great acuteness and contextualize the ifs definition of the financial system in developing countries in order to provide an updated account of the circumstances surrounding the definition in these countries. hence, we present theoretical justifications and empirical validity as to why, the conception and definition of the financial system by the ifs from a macroeconomic perspective is anachronistic and antagonistic. to this effect, we present recent findings on the weight of the informal financial sector (that is neglected in the definition); notably its nexuses with mobile banking, knowledge economy (ke) and inequality. recent findings on the dynamics of the ke-finance nexuses have shown: (1) the informal financial sector (a previously missing component in the definition by the ifs) significantly affects dimensions of ke; (2) disentangling the existing measurement (of the financial system) into its constituent components of formal (banking) and semi-formal (or other financial institutions) sector indicators improves dynamics of the ke nexus; (3) introducing measures of sector importance (competition) is relevant in understanding the dynamics of financial sector competition on ke (asongu, 2012). in fact, recent findings have prompted a complete rethinking of the definition of financial depth in developing countries after the burgeoning phenomenon of mobile banking could not be effectively appreciated with traditional financial development indicators. accordingly, with a relaxation of the ifs assumption on the marginality of the informal sector adopted, the informal financial sector has been found to be endogenous to how mobile phone penetration has positively affected financial development in developing countries (asongu, 2013). sound empirical evidence has also shown that, the informal financial sector significantly mitigates poverty through its positive income redistributive effect on household income (asongu, 2013, 2014a). in light of the weight of sound theoretical underpinnings (to be detailed below) and the empirical justifications highlighted above, the ifs (2008) definition for the financial system in developing countries has fought its final dead battle and lost. accordingly, even before the strong advent of information & communication technologies (ict) and ke in developing countries, it was factual that: “a great chunk of the monetary base (m0) in developing countries does not transit through the formal banking sector, hence, the equation of money supply (m2) to liquid liabilities fails to take account of the informal financial sector which substantially contributes to the circulation of currency”. the rest of the paper is organized as follows. section 2 discusses recent trends on linkages between informal finance and burgeoning phenomena. section 3 states the problem, rethinks financial development indicators and presents first generation solutions. second generation solutions are discussed in section 4. we conclude with section 5. 2. the burgeoning phenomena of informal finance, ke, mobile banking and, poverty 2.1. informal finance and knowledge economy (ke consistent with the world bank (2007, p.73), a ke cannot be built without finance. for small entrepreneurial projects in developing countries, funding needs may be relatively small (informal) and microfinance mechanisms are sufficient. hence, the need for sectorimportance (and informal financial) measurements which appreciate microfinance mechanisms. spreading rapidly throughout the world following the pioneering initiative of the bangladesh grameen bank, microfinance hinges on the social responsibility of borrowers belonging to a narrow group to ensure repayment (asongu, 2012). other entrepreneurial international journal of economic behavior, vol 5, n. 1, pp. 3 projects require a great amount of development capital. indeed a broad range services (formal, semi-formal and informal) are necessary to support growth and entrepreneurship in knowledge (world bank, 2007). but why is ke relevant in developing countries? it has become crystal clear that involved in the global economy it has to be competitive in ke. europe and north america have mastered the dynamics of ke and inexorably driving development in the global and international arena. other regions like asia and south america are reacting in calculated steps that underscore the role of ke in the current pursuit of national, regional and international initiatives (tchamyou, 2014) (hong kong, korea, taiwan & singapore, malaysia and china) led by japan are playing a substantial role in their moving towards ke from the ‘product economy’ in the post industrialization period (chandra & yokoyama, 2011). the main idea is that th creation and diffusion of knowledge is contingent on financial sectors that are the outcome of financial policies. hence, it is important to identify how financial sectors promote the diffusion of knowledge. 2.2. informal finance and mobile the mobile revolution has transformed the lives of many people in developing countries, providing not just communications but also basic financial access in the forms of phone money transfer and storage (jonathan & camilo, 2008; demombynes & high growth and penetration rates of mobile telephony that are transforming cell phones into pocket-banks in developing countries is providing opportunities to increase affordable and cost-effective means of bringing on board a large c been excluded from formal financial services for decades. such a transformation is the focus of interest not only to banks and micro financial institutions (mfis) but also to governments, financial regulators as well as development partners who are providing support to improve the livelihoods of the poor through poverty reduction and sustained economic growth. there are four principal avenues along which the incidence of mobile phone penetration on mobile banking could be discussed. the first strand captures the usefulness of mobile financial informal transactions (store of value, conversion of cash and, transfer of stored value). in the second strand, the concepts of savings (basic or partially integrated) in mobile banking are elucidated. the third strand relates mobile banking to gsm phones whereas the fourth presents some statistics on the proliferation of mobile banking in some developing countries (asongu, 2015a; 2015 in the first strand, jonathan & camilo ( in the developing world enable users to do three things. (a) store and preserve value (currency) in an account accessible through a handset. when the user already has a bank 1 “in order to have a mobile money account and make a deposit, a customer must own a cell phone sim card with the mobile operator and register for a mobile money account. the customer then makes cash deposits at the physical offices of one of the operator’s mobile mon credit in the account. customers can make person other mobile money users in the same network. they can also use their mobile money credit buy phone airtime. withdrawals (conversion to cash) could be made at the offices of the network’s mobile money agents. there is also a possibility for a mobile money customer to make a transfer to someone who is not registered with the same network. in this case, when notice of the transfer is received through an sms text message, the recipient can receive the cash at a mobile money agent international journal of economic behavior, vol 5, n. 1, pp. 3projects require a great amount of development capital. indeed a broad range formal and informal) are necessary to support growth and entrepreneurship in knowledge-based economies in the developing world, as elsewhere (world bank, 2007). but why is ke relevant in developing countries? me crystal clear that for any country, region or continent to be actively involved in the global economy it has to be competitive in ke. europe and north america have mastered the dynamics of ke and inexorably driving development in the global and ional arena. other regions like asia and south america are reacting in calculated steps that underscore the role of ke in the current pursuit of national, regional and international (tchamyou, 2014). the governments of the newly industrialized (hong kong, korea, taiwan & singapore, malaysia and china) led by japan are playing a substantial role in their moving towards ke from the ‘product economy’ in the post industrialization period (chandra & yokoyama, 2011). the main idea is that th creation and diffusion of knowledge is contingent on financial sectors that are the outcome of financial policies. hence, it is important to identify how financial sectors promote the informal finance and mobile banking the mobile revolution has transformed the lives of many people in developing countries, providing not just communications but also basic financial access in the forms of phone money transfer and storage (jonathan & camilo, 2008; demombynes & thegeya, 2012). the high growth and penetration rates of mobile telephony that are transforming cell phones into banks in developing countries is providing opportunities to increase affordable and effective means of bringing on board a large chunk of the population that hitherto has been excluded from formal financial services for decades. such a transformation is the focus of interest not only to banks and micro financial institutions (mfis) but also to governments, l as development partners who are providing support to improve the livelihoods of the poor through poverty reduction and sustained economic growth. there are four principal avenues along which the incidence of mobile phone penetration uld be discussed. the first strand captures the usefulness of mobile financial informal transactions (store of value, conversion of cash and, transfer of stored value). in the second strand, the concepts of savings (basic or partially integrated) in mobile banking are elucidated. the third strand relates mobile banking to gsm phones whereas the fourth presents some statistics on the proliferation of mobile banking in some developing ; 2015b). in the first strand, jonathan & camilo (2008) have emphasized, most mobile transactions in the developing world enable users to do three things. (a) store and preserve value (currency) in an account accessible through a handset. when the user already has a bank to have a mobile money account and make a deposit, a customer must own a cell phone sim card with the mobile operator and register for a mobile money account. the customer then makes cash deposits at the physical offices of one of the operator’s mobile money agents. these cash deposits create electronic money credit in the account. customers can make person-to-person transfers of mobile money credit to the accounts of other mobile money users in the same network. they can also use their mobile money credit buy phone airtime. withdrawals (conversion to cash) could be made at the offices of the network’s mobile money agents. there is also a possibility for a mobile money customer to make a transfer to someone who is not same network. in this case, when notice of the transfer is received through an sms text message, the recipient can receive the cash at a mobile money agent" (demombynes, & thegeya, 2012). 17 -14, 201 projects require a great amount of development capital. indeed a broad range of financial formal and informal) are necessary to support growth and based economies in the developing world, as elsewhere for any country, region or continent to be actively involved in the global economy it has to be competitive in ke. europe and north america have mastered the dynamics of ke and inexorably driving development in the global and ional arena. other regions like asia and south america are reacting in calculated steps that underscore the role of ke in the current pursuit of national, regional and international . the governments of the newly industrialized economies (hong kong, korea, taiwan & singapore, malaysia and china) led by japan are playing a substantial role in their moving towards ke from the ‘product economy’ in the postindustrialization period (chandra & yokoyama, 2011). the main idea is that the process of creation and diffusion of knowledge is contingent on financial sectors that are the outcome of financial policies. hence, it is important to identify how financial sectors promote the the mobile revolution has transformed the lives of many people in developing countries, providing not just communications but also basic financial access in the forms of phone-based thegeya, 2012). the high growth and penetration rates of mobile telephony that are transforming cell phones into banks in developing countries is providing opportunities to increase affordable and hunk of the population that hitherto has been excluded from formal financial services for decades. such a transformation is the focus of interest not only to banks and micro financial institutions (mfis) but also to governments, l as development partners who are providing support to improve the livelihoods of the poor through poverty reduction and sustained economic growth. there are four principal avenues along which the incidence of mobile phone penetration uld be discussed. the first strand captures the usefulness of mobile financial informal transactions (store of value, conversion of cash and, transfer of stored value). in the second strand, the concepts of savings (basic or partially integrated) in mobile banking are elucidated. the third strand relates mobile banking to gsm phones whereas the fourth presents some statistics on the proliferation of mobile banking in some developing 2008) have emphasized, most mobile transactions1 in the developing world enable users to do three things. (a) store and preserve value (currency) in an account accessible through a handset. when the user already has a bank to have a mobile money account and make a deposit, a customer must own a cell phone sim card with the mobile operator and register for a mobile money account. the customer then makes cash deposits at the ey agents. these cash deposits create electronic money person transfers of mobile money credit to the accounts of other mobile money users in the same network. they can also use their mobile money credit to pay bills and to buy phone airtime. withdrawals (conversion to cash) could be made at the offices of the network’s mobile money agents. there is also a possibility for a mobile money customer to make a transfer to someone who is not same network. in this case, when notice of the transfer is received through an sms text (demombynes, & thegeya, 2012). 18 account, this is generally an issue of linking to a bank account. if the user does not have an account, then the process creates a bank account for him/her or creates a pseudo bank account, held by a third party or the user’s mobile operator (asongu, 2013). (b) convert cash into and out of the account that stores value. when the account is linked to a bank account, then users can visit banks to cash-out and cash-in. in many cases, users can also visit the gsm providers’ retail stores. in most flexible services, a user can visit a corner kiosk or grocery store (maybe the same one where he/she purchases airtime) and perform a transaction with an independent retailer working as an agent for the transaction system. (c) transfer of stored value between accounts. users can generally transfer funds between accounts linked to two mobile phones, by using a set of sms (or menu commands) and pin codes. the new services offer a way to move money from place to place and present a genuine alternative to the payments system offered by banks, pawn shops, remittance firms…etc. the growth of m-banking (payments) systems has been particularly significant in the philippines (where three million customers use systems offered by mobile operators smart & globe; neville, 2006); kenya (where nearly two million users registered with safaricom mpesa system within a year of its nationwide rollout, vaughan, 2007; ivatury & mas, 2008) and south africa where 450, 000 people use wizzit (‘the bank in your pocket’; ivatury & pickens, 2006) or one of two other national systems (porteous, 2007). the second strand elucidates the concept of savings. demombynes & thegeya (2012) have tackled the mobile-finance nexus through this concept. they distinguish two types of mobile savings. (a) basic mobile savings; that is purely and simply the use of a standard mobile money system such as m-pesa to store funds. these basic mobile savings are not subject to interest. bank-integrated mobile savings approaches have received a great deal of attention as a way to provide banking services to the poor. they have the edge of offering access to basic banking services without requiring substantial proximity to a physical bank branch. therefore, with a bank-integrated mobile savings account, basic banking services can be accessed via network of mobile phone agents, which in kenya outnumber the weight of bank branches significantly (mas & radcliffe, 2011). (b) the term ‘partially integrated’ mobile savings system is also used to describe situations where bank account access through mobile phones depends on the establishment of a traditional account at a physical bank. additionally, banks are beginning to build their own agent networks in order to assume a more competitive bargaining standpoint in accessing mobile service platforms. fully and partially integrated savings present different types of contracts between the partnering bank and mobile service provider. consistent with demombynes & thegeya (2012), on the one hand, a partially integrated product clearly delineates the role of the bank (which provides and owns banking services) from that of the mobile service provider (which provides mobile telephony infrastructure and controls the agent network). hence, the bank compensates the mobile service provider for access to the network and enjoys the remaining profits. this type of contract more closely looks like a debt contract between parties (asongu, 2013). on the other hand, a fully integrated solution may not account for the same distinction between bank and mobile service providers. in this case, the distribution of surplus depends on the relative bargaining power of the bank and mobile service provider. this type of contract more closely looks like an equity contract between two parties. equity-oriented contracts are more likely to be complex and therefore more difficult to negotiate than debtlike contracts, there-by presenting a potential hurdle towards the goal of increasing access (asongu, 2015a; 2015b). international journal of economic behavior, vol 5, n. 1, pp. 3 in the third strand, we analyze how mobile banking is linked to gsm phones. ondiege (2010), chief economist of the african development bank has looked at the mobile nexus from four perspectives. firstly, the mobile phone can serve as a virtual bank card where customer and institution information can be securely stored, thereby miti distributing cards to customers. in fact he suggests, the subscriber identity module (sim) card inside most (if not all) gsm phones is in itself a smartcard (similar to the virtual bank card). hence, the banks customer’s pin and account perform the same functions as the virtual card of the bank. secondly, the mobile phone could also serve as a point of sale (pos) terminal. accordingly, a mobile phone could be used to transact and communicate with t authorization. these are similar functions of a pos terminal at mails, retail or other stores. a mobile phone can duplicate these functionalities quite easily. thirdly, the mobile phone can also be genuinely used as an atm. a pos is therefore used to pay for goods and services at the store. if cash and access to savings were to be acknowledged as ‘goods and services’, that customers buy and store, then the pos will also serve as a cash collection distribution point that basically is the function of an automatic teller machine (atm). fourthly, the mobile phone could be used as an internet banking terminal. this implies, it offers two fundamental customer services: a) ability to make payments and and; b) instant access to any account. ultimately, the mobile phone device and wireless connectivity bring the internet terminal into the hands of otherwise unbanked customers (asongu, 2015a; 2015b). for a clearer perspective, it is w mobile banking) with figures and statistics in the fourth strand. consistent with mbiti & weil (2011), the story of the growth of mobile phones in africa is one of a tectonic and unexpected change in communications technology. from virtually unconnected in the 1990s, over 60% of africa now has mobile phone coverage and there are now more than 10 times as many mobiles as landline phones in use (aker & mbiti, 2010). in accordance with aker & mbiti (2010), mobile phone coverage in africa has soared at staggering rates over the past decade. in 1999, only 11% of the african population had mobile phone coverage, in northern africa for the most part (egypt, algeria, libya, morocco and tunisia), with also coverage in sothern africa (kenya and south africa). by 2008, 60% of the population (477 million) could get a telephone signal and an area of 11.2 million square kilometers had mobile phone coverage: equivalent to the united sates and argentina combined. by the end of 2012, it is estimated that most villages in africa will have coverage with only a handful of countries relatively unconnected. & thegeya (2012), kenya has undergone a remarkable ict revolution. towards the the 1990s, less than 3% of kenyan households owned a telephone and less than 1 in 1000 kenyan adults had mobile phone service. however, by the end of 2011, 93% of kenyan households owned a mobile phone. this substantial soar is largely credited to mobile-banking network (demombynes & thegeya, 2012, pp. 23 2.3. informal finance and poverty the role of informal finance in poverty alleviation is too obvious to be discussed owing to space constraint (asongu, 2014a discussing how mobile penetration mitigates poverty through a form of informal finance. many lives have been transformed by the mobile revolution, which is providing not just communication but also basic financial access in the forms of phone and storage (jonathan & camilo, 2008; demombynes & thegeya, 2012; asongu, 2015a 2015b). at the 2007 ‘connect africa’ summit, paul kagame, president of rwanda eloquently international journal of economic behavior, vol 5, n. 1, pp. 3in the third strand, we analyze how mobile banking is linked to gsm phones. ondiege 2010), chief economist of the african development bank has looked at the mobile nexus from four perspectives. firstly, the mobile phone can serve as a virtual bank card where customer and institution information can be securely stored, thereby miti distributing cards to customers. in fact he suggests, the subscriber identity module (sim) card inside most (if not all) gsm phones is in itself a smartcard (similar to the virtual bank card). hence, the banks customer’s pin and account number can be stored on this sim card to perform the same functions as the virtual card of the bank. secondly, the mobile phone could also serve as a point of sale (pos) terminal. accordingly, a mobile phone could be used to transact and communicate with the appropriate financial institution to solicit transaction authorization. these are similar functions of a pos terminal at mails, retail or other stores. a mobile phone can duplicate these functionalities quite easily. thirdly, the mobile phone be genuinely used as an atm. a pos is therefore used to pay for goods and services at the store. if cash and access to savings were to be acknowledged as ‘goods and services’, that customers buy and store, then the pos will also serve as a cash collection distribution point that basically is the function of an automatic teller machine (atm). fourthly, the mobile phone could be used as an internet banking terminal. this implies, it offers two fundamental customer services: a) ability to make payments and and; b) instant access to any account. ultimately, the mobile phone device and wireless connectivity bring the internet terminal into the hands of otherwise unbanked customers for a clearer perspective, it is worthwhile blending the above facts (on the proliferation of mobile banking) with figures and statistics in the fourth strand. consistent with mbiti & weil (2011), the story of the growth of mobile phones in africa is one of a tectonic and unexpected in communications technology. from virtually unconnected in the 1990s, over 60% of africa now has mobile phone coverage and there are now more than 10 times as many mobiles as landline phones in use (aker & mbiti, 2010). in accordance with aker & mbiti 2010), mobile phone coverage in africa has soared at staggering rates over the past decade. in 1999, only 11% of the african population had mobile phone coverage, in northern africa for the most part (egypt, algeria, libya, morocco and tunisia), with also coverage in sothern africa (kenya and south africa). by 2008, 60% of the population (477 million) could get a telephone signal and an area of 11.2 million square kilometers had mobile phone coverage: equivalent to the united sates and na combined. by the end of 2012, it is estimated that most villages in africa will have coverage with only a handful of countries relatively unconnected. in line with demombynes & thegeya (2012), kenya has undergone a remarkable ict revolution. towards the the 1990s, less than 3% of kenyan households owned a telephone and less than 1 in 1000 kenyan adults had mobile phone service. however, by the end of 2011, 93% of kenyan households owned a mobile phone. this substantial soar is largely credited to banking network (demombynes & thegeya, 2012, pp. 23-25; asongu, 2015a informal finance and poverty the role of informal finance in poverty alleviation is too obvious to be discussed owing to space constraint (asongu, 2014a). it would be interesting however to devote space in discussing how mobile penetration mitigates poverty through a form of informal finance. many lives have been transformed by the mobile revolution, which is providing not just c financial access in the forms of phone-based money transfer and storage (jonathan & camilo, 2008; demombynes & thegeya, 2012; asongu, 2015a b). at the 2007 ‘connect africa’ summit, paul kagame, president of rwanda eloquently 19 -14, 201 in the third strand, we analyze how mobile banking is linked to gsm phones. ondiege 2010), chief economist of the african development bank has looked at the mobile-finance nexus from four perspectives. firstly, the mobile phone can serve as a virtual bank card where customer and institution information can be securely stored, thereby mitigating the cost of distributing cards to customers. in fact he suggests, the subscriber identity module (sim) card inside most (if not all) gsm phones is in itself a smartcard (similar to the virtual bank card). number can be stored on this sim card to perform the same functions as the virtual card of the bank. secondly, the mobile phone could also serve as a point of sale (pos) terminal. accordingly, a mobile phone could be used to he appropriate financial institution to solicit transaction authorization. these are similar functions of a pos terminal at mails, retail or other stores. a mobile phone can duplicate these functionalities quite easily. thirdly, the mobile phone be genuinely used as an atm. a pos is therefore used to pay for goods and services at the store. if cash and access to savings were to be acknowledged as ‘goods and services’, that customers buy and store, then the pos will also serve as a cash collection and distribution point that basically is the function of an automatic teller machine (atm). fourthly, the mobile phone could be used as an internet banking terminal. this implies, it offers two fundamental customer services: a) ability to make payments and transfers remotely and; b) instant access to any account. ultimately, the mobile phone device and wireless connectivity bring the internet terminal into the hands of otherwise unbanked customers orthwhile blending the above facts (on the proliferation of mobile banking) with figures and statistics in the fourth strand. consistent with mbiti & weil (2011), the story of the growth of mobile phones in africa is one of a tectonic and unexpected in communications technology. from virtually unconnected in the 1990s, over 60% of africa now has mobile phone coverage and there are now more than 10 times as many mobiles as landline phones in use (aker & mbiti, 2010). in accordance with aker & mbiti 2010), mobile phone coverage in africa has soared at staggering rates over the past decade. in 1999, only 11% of the african population had mobile phone coverage, in northern africa for the most part (egypt, algeria, libya, morocco and tunisia), with also significant by 2008, 60% of the population (477 million) could get a telephone signal and an area of 11.2 million square kilometers had mobile phone coverage: equivalent to the united sates and na combined. by the end of 2012, it is estimated that most villages in africa will have in line with demombynes & thegeya (2012), kenya has undergone a remarkable ict revolution. towards the end of the 1990s, less than 3% of kenyan households owned a telephone and less than 1 in 1000 kenyan adults had mobile phone service. however, by the end of 2011, 93% of kenyan households owned a mobile phone. this substantial soar is largely credited to the m-pesa ; asongu, 2015a; 2015b). the role of informal finance in poverty alleviation is too obvious to be discussed owing to ). it would be interesting however to devote space in discussing how mobile penetration mitigates poverty through a form of informal finance. many lives have been transformed by the mobile revolution, which is providing not just based money transfer and storage (jonathan & camilo, 2008; demombynes & thegeya, 2012; asongu, 2015a; b). at the 2007 ‘connect africa’ summit, paul kagame, president of rwanda eloquently 20 emphasized: “in ten short years, what was once an object of luxury and privilege, the mobile phone has become a basic necessity in africa” (aker & mbiti, 2010, p. 208). an article in the economist (2008) had earlier made this claim: “a device that was a yuppie toy not so long ago has now become a potent for economic development in the world’s poorest countries”. as far as we have reviewed, one of the most exhaustive accounts on the ‘mobile penetration’ development literature concludes: “existing empirical evidence on the effect of mobile phone coverage and services suggest that the mobile phone can potentially serve as a tool for economic development in africa. but this evidence while certainly encouraging remains limited. first, while economic studies have focused on the effects of mobile phones for particular countries or markets, there is little evidence showing that this has translated into macroeconomic gains…” (aker & mbiti, 2010, p. 224). empirical validity for these slogans is presented in the second part of section 4.2.3. consistent with asongu (2015a; 2015b), the equalizing and ‘poverty mitigating’ incidences of mobile phone penetration could be explained from several angles. firstly, many lives have been transformed by the mobile revolution thanks to basic financial access in the form of phone-based money transfer and storage (jonathan & camilo, 2008; demombynes & thegeya, 2012; asongu, 2015a). therefore, the significant growth and penetration rates of mobile telephony that is transforming cell phones into pocket-banks in africa is providing countries in the continent with increase affordable and cost-effective means of bringing on board a large part of the population that have until now been excluded from formal financial services for decades. secondly, mobile phones can assist households’ budget when confronted with unpredictable shocks which drive poverty. the probability of a poor family incurring drastic loss due to an unpredictable shock is certainly mitigated and lowered when families are able to respond to the shock in a more timely fashion. therefore, the mobile phone could have the greatest effects on poverty reduction during vulnerable shock experiences via driving down costs associated to the shock. better financial management and coping with shock include: incurring lower travel costs, less trauma, more efficient action and, improved access to information. immediate positive feedbacks of income saving and cost mitigation are found particularly during vulnerable situations like death or illness within the family. it is also worthwhile to cite security increases for poor families through reduced loss of poverty. for instance, a family’s ability to scale-down the number of overnight hospital days or capacity to avoid transport cost during desperate situations are some major cost saving strategies implemented with the quick dial of the mobile phone (asongu, 2015a). in a nutshell, the communication device provides a means of timely response, reduced surprises, multi-task and plans during shocks, as well as less time required to physically search individuals during difficult ordeals. thirdly, mobile phones could empower women to engage in small businesses (and/or run existing businesses more efficiently), thus enabling them to bridge the gap between gender income inequality. it is also worthwhile to point-out that mobile phones represent long-term economic growth investments for the disadvantaged in income-distribution. therefore, many households maybe willing to cope with unpleasant sacrifices (such as reduction in food consumption or sanitation in the perceived short-term) in the hope that, the mobile phone would improve their opportunities with income and jobs in the long-run (asongu, 2015b). 3. problem statement and solutions a bias in the definition of the financial system by the imf is core to this problem statement because it is biased toward the developed world. according to the ifs, the financial system is made-up of the formal and semi-formal sectors; that is, deposit money banks and other international journal of economic behavior, vol 5, n. 1, pp. 3 financial institutions (see lines 24, 25 and 45 of the ifs, 2008). whereas this definition could be quasi-true for developed countries, it fails to take account of the informal financial sector in undeveloped countries. this begs the con (in economic development) discussed in section 2 above is not just thin air. in this section, we first provide the ifs conception of the financial system in the context of developing countries, before rethinking the premises on which the definition is based and, finally generation solutions. 3.1. the international financial statistics’ (2008) conception of the financial system as detailed in table 1 below (by asongu (2012) inspired by s refers to services that are regulated by the central bank and other supervisory authorities. semi-formal finance provides a distinction between formal and informal finance. this is the segment of finance that occurs in a formal a good example is microfinance. informal finance is one that is not arranged through formal agreements and not enforced through the legal system. from the fourth column, the last two types of ‘saving and among the financially excluded or those on low incomes. unfortunately, the ifs definition completely marginalizes the last types. we postulate that evidence, informal finance should no longer be undermined in the definition of the financial system. table 1 – segments of the financial system by degree of formality in paper’s context paper’s context formal financial system imf definition of financial system from international financial statistics (ifs) formal financial sector (deposit banks) semiformal and informal financial systems semi-formal financial sector (other financial institutions) missing component in ifs definition informal financial sector source (asongu, 2012) international journal of economic behavior, vol 5, n. 1, pp. 3financial institutions (see lines 24, 25 and 45 of the ifs, 2008). whereas this definition could true for developed countries, it fails to take account of the informal financial sector in undeveloped countries. this begs the concern of knowing if the roles of the informal sector (in economic development) discussed in section 2 above is not just thin air. in this section, we first provide the ifs conception of the financial system in the context of developing countries, hinking the premises on which the definition is based and, finally the international financial statistics’ (2008) conception of the financial system as detailed in table 1 below (by asongu (2012) inspired by steel (2006)), formal finance refers to services that are regulated by the central bank and other supervisory authorities. formal finance provides a distinction between formal and informal finance. this is the segment of finance that occurs in a formal financial environment but not formally recognized. a good example is microfinance. informal finance is one that is not arranged through formal agreements and not enforced through the legal system. from the fourth column, the lending’ are very common in developing countries, particularly among the financially excluded or those on low incomes. unfortunately, the ifs definition e last types. we postulate that based on the weight of available nformal finance should no longer be undermined in the definition of the financial segments of the financial system by degree of formality in paper’s context tiers definitions institutions formal financial (deposit formal banks licensed by central bank commercial and development banks formal financial (other financial institutions) specialized non-bank financial institutions rural banks, post banks, saving and loan companies, deposit taking micro finance banks other nonbank financial institutions legally registered but not licensed as financial institution by central bank and government credit unions, micro finance ngos informal financial informal banks not legally registered at national level (though may be linked to a registered association) savings collectors, savings and credit associations, money lenders 21 -14, 201 financial institutions (see lines 24, 25 and 45 of the ifs, 2008). whereas this definition could true for developed countries, it fails to take account of the informal financial sector cern of knowing if the roles of the informal sector (in economic development) discussed in section 2 above is not just thin air. in this section, we first provide the ifs conception of the financial system in the context of developing countries, hinking the premises on which the definition is based and, finally discussing first the international financial statistics’ (2008) conception of the financial system teel (2006)), formal finance refers to services that are regulated by the central bank and other supervisory authorities. formal finance provides a distinction between formal and informal finance. this is the financial environment but not formally recognized. a good example is microfinance. informal finance is one that is not arranged through formal agreements and not enforced through the legal system. from the fourth column, the lending’ are very common in developing countries, particularly among the financially excluded or those on low incomes. unfortunately, the ifs definition based on the weight of available nformal finance should no longer be undermined in the definition of the financial segments of the financial system by degree of formality in paper’s context institutions principal clients commercial development large businesses, government rural banks, post banks, companies, deposit taking micro finance large rural enterprises, salaried workers, small and medium enterprises credit unions, micro finance microenterprises, entrepreneurial poor savings and associations, money lenders self-employed poor 22 3.2. rethinking financial development indicators consistent with asongu (2012, 2013), financial development indicators have been universally employed without due regard to regional/country specific financial development realities (contexts). the employment of some indicators simply hinge on the presumption that they are generally valid (gries et al., 2009)2. as far as we have reviewed, but for beck et al. (1999) and asongu (2012, 2013, 2014abc), the absence of studies that underline the quality of financial development indicators with regard to contextual development is a significant missing component in the financial development literature. some studies have identified the issue, but fallen short of addressing it. hence, it has been well documented that the financial depth indicator as applied to developing countries is very misleading as it does not integrate the realities and challenges of financial intermediary development (demetriades & hussein, 1996; khumbhakar & mavrotas, 2005; ang & mckibbin, 2007; abu-bader & abu-qarn; 2008). therefore, a motivation of this work hinges on an existing debate over the contextual quality of financial development indicators. indeed, as we shall cover in the section on second generation solutions, recent findings have shown that traditional financial indicators based on the ifs definition of the financial system do not capture certain dimensions of ke (e.g mobile banking). 3.3. first generation solutions consistent with asongu (2014a), reforms of the first generation embody a stream of the literature that has raised the concern in the ifs definition but failed to substantially address it because the informal financial sector is not incorporated into the measurement of the financial system. the fundamental concern raised in this strand is that the principal measurement of financial development in the literature has been money supply (m2): an indicator that has been substantially used over the decades to proxy for liquid liabilities (world bank, 1989; king & levine, 1993). while m2 can proxy for liquid liabilities in advanced countries, there are a number of shortcomings in the equation of the former to the latter in developing countries. the basis for the criticism is that in nations with less developed financial systems, growth in m2 may not necessarily represent an improvement in bank deposits or liquid liabilities. we discuss proposed solutions in three main strands. first, demetriades & hussein (1996) have addressed the issue by deducting currency that flows outside of the banking system from m2. this new measurement of liquid liabilities reflects the situation of developing countries. while this form of adjustment has been used substantially in the literature (e.g abu-bader & abu-qarn, 2008), in the correction of the problem, the authors have failed to incorporated the missing informal financial sector that has been traditionally neglected by the ifs financial system definition. second, the concern has been tackled by another stream of authors using principal components analysis. in this process, financial depth is combined with other financial development indicators to derive a composite index (ang & mckibbin, 2007; gries et al., 2009; khumbhakar & mavrotas, 2005; asongu, 2014a). the fundamental draw-back in this approach is that m2 is mixed with a plethora of financial development variables which in conception and definition may not be directly related to financial depth. for instance, some variables that are combined with m2 include, inter alia financial dynamics of activity (private domestic credit), efficiency (bank credit/bank deposits), size (deposit bank assess/total assets). 2gries et al. (2009) state: “in the related literature several proxies for financial deepening have been suggested, for example, monetary aggregates such as money supply (m2) on gdp. to date there is no consensus on the on the superiority of any indicator” (p. 1851). international journal of economic behavior, vol 5, n. 1, pp. 3 third, asongu (2012, 2013, 2014abc) neither financial concepts are mixed nor is the informal financial sector neglected. the author has documented a pragmatic method of articulating the effects of various financial sectors incorporated in m2. given the substanti section 2, we present the third strand 4. second generation solutions there are three main justifications for qualifying these solutions as ‘second generat (asongu, 2014a). first, the missing element system is clearly articulated. second, the existing indicator of financial system is decomposed into formal and semi-formal financial sector contemporary financial development tendencies like burgeoning phenomenon of mobile phone penetration that is substantially positively (negatively) correlated with the informal (formal) sector. 4.1. propositions financial development can either by direct or indirect. whereas, the former financial markets and the latter development. in this study, we are limited to the latter dimension, which according to beck et al. (1999) can be further classified into financial development components of depth (m2), allocation efficiency3, activity is the most widely employed in the financial development literature. after decomposing m2 into financial sector components and extending the ifs financial system definition, propositions in table 2 from asongu (2012) are obtained. these proportions are founded on insufficiencies of the financial system definition presented in table 1 and discussed in section 3.2. therefore, the previously missing informal financial sector has been incorporated in asongu (2012, 2013, 2014 existing indicator into formal and semi measurements proposed could also be used as indicators of financial sector competition. the following sections discuss recent empirical evidence based on the new financial sy definition and corresponding indicators. 4.2. recent empirical evidence 4.2.1. knowledge economy and informal finance based on the propositions above, asongu (2012) has assessed how financial sector competition plays-out in the development of know the same time to the macroeconomic literature on measuring financial development and responded to the growing field of ke by means of informal sector promotion, micro finance and mobile banking. the study has indee various financial sectors on different components of ke. the variables identified under the world bank’s four knowledge economy index (kei) have been employed in testing three main hypotheses based on seven propositions in table 2. 3 bank credit on bank deposits. 4 private domestic credit. 5 deposit bank assets / central bank assets plus deposit bank assets. international journal of economic behavior, vol 5, n. 1, pp. 3third, asongu (2012, 2013, 2014abc) has proposed a solution to the problem in which neither financial concepts are mixed nor is the informal financial sector neglected. the author has documented a pragmatic method of articulating the effects of various financial sectors incorporated in m2. given the substantial weight of the informal financial sector discussed in section 2, we present the third strand in detail as a second generation solution. 4. second generation solutions there are three main justifications for qualifying these solutions as ‘second generat (asongu, 2014a). first, the missing element of the informal financial sector system is clearly articulated. second, the existing indicator of financial system is decomposed formal financial sectors. third, this solution clearly development tendencies like ke dynamics, mobile banking and the burgeoning phenomenon of mobile phone penetration that is substantially positively (negatively) correlated with the informal (formal) sector. financial development can either by direct or indirect. whereas, the former financial markets and the latter is via the banking sector or financial intermediary we are limited to the latter dimension, which according to beck et al. (1999) can be further classified into financial development components of depth (m2), , activity4 and size5. we have already seen that among the indicators, m2 the most widely employed in the financial development literature. after decomposing m2 into financial sector components and extending the ifs financial system definition, propositions in table 2 from asongu (2012) are obtained. these ded on insufficiencies of the financial system definition presented in table 1 and discussed in section 3.2. therefore, the previously missing informal financial sector has been incorporated in asongu (2012, 2013, 2014a). the author has disentangled the isting indicator into formal and semi-formal financial sectors. moreover, the new measurements proposed could also be used as indicators of financial sector competition. the following sections discuss recent empirical evidence based on the new financial sy definition and corresponding indicators. recent empirical evidence knowledge economy and informal finance based on the propositions above, asongu (2012) has assessed how financial sector out in the development of knowledge economy (ke). he has contributed at the same time to the macroeconomic literature on measuring financial development and responded to the growing field of ke by means of informal sector promotion, micro finance and mobile banking. the study has indeed tested the feasibility of disentangling the effects of various financial sectors on different components of ke. the variables identified under the world bank’s four knowledge economy index (kei) have been employed in testing three n seven propositions in table 2. deposit bank assets / central bank assets plus deposit bank assets. 23 -14, 201 tion to the problem in which neither financial concepts are mixed nor is the informal financial sector neglected. the author has documented a pragmatic method of articulating the effects of various financial sectors al weight of the informal financial sector discussed in as a second generation solution. there are three main justifications for qualifying these solutions as ‘second generation’ of the informal financial sector in the financial system is clearly articulated. second, the existing indicator of financial system is decomposed lution clearly incorporates ke dynamics, mobile banking and the burgeoning phenomenon of mobile phone penetration that is substantially positively financial development can either by direct or indirect. whereas, the former is through via the banking sector or financial intermediary we are limited to the latter dimension, which according to beck et al. (1999) can be further classified into financial development components of depth (m2), . we have already seen that among the indicators, m2 after decomposing m2 into financial sector components and extending the ifs financial system definition, propositions in table 2 from asongu (2012) are obtained. these ded on insufficiencies of the financial system definition presented in table 1 and discussed in section 3.2. therefore, the previously missing informal financial ). the author has disentangled the formal financial sectors. moreover, the new measurements proposed could also be used as indicators of financial sector competition. the following sections discuss recent empirical evidence based on the new financial system based on the propositions above, asongu (2012) has assessed how financial sector ledge economy (ke). he has contributed at the same time to the macroeconomic literature on measuring financial development and responded to the growing field of ke by means of informal sector promotion, micro finance d tested the feasibility of disentangling the effects of various financial sectors on different components of ke. the variables identified under the world bank’s four knowledge economy index (kei) have been employed in testing three 24 table 2 – summary of propositions propositions name(s) formula elucidation panel a: gdp-based financial development indicators proposition 1 formal financial development bank deposits/gdp bank deposits6 here refer to demand, time and saving deposits in deposit money banks. proposition 2 semi-formal financial development (financial deposits – bank deposits)/ gdp financial deposits7 are demand, time and saving deposits in deposit money banks and other financial institutions. proposition 3 informal financial development (money supply – financial deposits)/gdp proposition 4 informal and semiformal financial development (money supply – bank deposits)/gdp panel b: measures of financial sector importance proposition 5 financial intermediary formalization bank deposits/ money supply (m2) from ‘informal and semi-formal’ to formal financial development (formalization)8. proposition 6 financial intermediary ‘semi-formalization’ (financial deposits bank deposits)/ money supply from ‘informal and formal’ to semiformal financial development (semi-formalization)9. proposition 7 financial intermediary ‘informalization’ (money supply – financial deposits)/ money supply from ‘formal and semi-formal’ to informal financial development (informalisation)10. proposition 8 financial intermediary ‘semi-formalization and informalization’ (money supply – bank deposits)/money supply formal to ‘informal and semiformal’ financial development: (semi-formalization and informalization)11 n.b: propositions 5, 6, 7 add up to unity (one); arithmetically spelling-out the underlying assumption of sector importance. hence, when their time series properties are considered in empirical analysis, the evolution of one sector is to the detriment of other sectors and vice-versa. 6 lines 24 and 25 of the ifs (october 2008). 7 lines 24, 25 and 45 of the ifs (2008). 8 in undeveloped countries m2 is not equal to liquid liabilities (liquid liabilities equal bank deposits: bd). whereas, in undeveloped countries bd/m2<1, in developed countries bd/m2 is almost equal to 1. this indicator measures the rate at which money in circulation is absorbed by the banking system. financial formalization here is defined as the propensity of the formal banking system to absorb money in circulation. 9 this indicator measures the level at which the semi-formal financial sector evolves to the detriment of formal and informal sectors. 10 this proposition shows the rate at which the informal financial sector is developing at the cost of formal and semi-formal sectors. 11 the proposition appreciates the deterioration of the formal banking sector to the benefit of other sectors (informal and semi-formal). from common sense, propositions 5 and 8 should be perfectly antagonistic, meaning the former (formal financial development at the expense of other sectors) and the later (formal sector deterioration) should display a perfectly negative coefficient of correlation (see appendix 2). proposition 7 has a high positive correlation with proposition 8 and therefore, only the former will be used in the empirical section. international journal of economic behavior, vol 5, n. 1, pp. 3 hypothesis 1: the informal financial sector (a previously missing component in the definition of the financial system) significantly affects ke. propositions hypothesis. hypothesis 2: disentangling different components of the existing measurement (financial system) into formal (banking) and semi could improve understanding of the ke hypothesis. hypothesis 3: introducing measures of sector importance is relevant to understand financial sector competition in ke 12. propositions 5, 6 & 7 have examined this hypothesis. results summarized in table 3 below have shown previously missing component in the definition of the financial system by the imf significantly affects ke dimensions; (2) disentangling different components of the existing measurement of the financial system improves dynamic introduction of measures of sector importance provides relevant new insights into how financial sector competition affects ke. these finding are broadly consistent with theoretical underpinnings covered in section 2.1 table 3 – summary of results on the ke education educatex e uh hyp. 1 prop.3 n.a + prop.4 n.a + hyp. 2 prop.1 n.a + prop.2 n.a hyp. 3 prop.5 n.a + prop.6 + prop.7 n.a e: controlling for endogeneity. uh: controlling for the unobserved heterogeneity. prop: proposition. applicable due to insignificance of estimated coefficient. °: invalid instruments. educatex component of primary, secondary and tertiary school enrolments. ictex: first principal component of mobile, telephone and internet subscriptions. creditex: first principal component of private credit and interest rate spreads. tradex: first principal component of trade and tariffs. results are based on robust panel 2sls to control for endogeneity and panel fixed effects to control for the unobserved heterogeneity. 4.2.2. mobile phone penetration and informal finance in the first macroeconomic empirical assessment of the relationship between mobile phones and finance, asongu (2013) has examined the correlations between mobile phone penetration and financial development using two conflicting definitions of the financial financial development literature. 12 to put this in other terms, the need to evaluate how one financial sector develops at the expense of another (and vice-versa) and the incidence the ke-finance nexus. international journal of economic behavior, vol 5, n. 1, pp. 3the informal financial sector (a previously missing component in the definition of the financial system) significantly affects ke. propositions 3 & 4 have tackled this : disentangling different components of the existing measurement (financial system) into formal (banking) and semi-formal (other financial institutions) sector indicators could improve understanding of the ke-finance nexus. propositions 1 & 2 have addresse : introducing measures of sector importance is relevant to understand financial . propositions 5, 6 & 7 have examined this hypothesis. results summarized in table 3 below have shown that: (1) the informal financial sector, a previously missing component in the definition of the financial system by the imf significantly affects ke dimensions; (2) disentangling different components of the existing measurement of the financial system improves dynamics in the ke-finance nexus and; (3) introduction of measures of sector importance provides relevant new insights into how financial sector competition affects ke. these finding are broadly consistent with theoretical underpinnings covered in section 2.1 summary of results on the ke-finance nexuses ict economic incentive ictex creditex tradex journals e uh e uh e uh e n.a n.a n.a + + n.a n.a n.a n.a n.a + + n.a n.a n.a + n.a -° + + n.a n.a + n.a n.a + + + n.a n.a n.a + + + n.a e: controlling for endogeneity. uh: controlling for the unobserved heterogeneity. prop: proposition. applicable due to insignificance of estimated coefficient. °: invalid instruments. educatex component of primary, secondary and tertiary school enrolments. ictex: first principal component of mobile, telephone and internet subscriptions. creditex: first principal component of private credit and interest rate principal component of trade and tariffs. results are based on robust panel 2sls to control for endogeneity and panel fixed effects to control for the unobserved heterogeneity. mobile phone penetration and informal finance in the first macroeconomic empirical assessment of the relationship between mobile phones and finance, asongu (2013) has examined the correlations between mobile phone penetration and financial development using two conflicting definitions of the financial financial development literature. to put this in other terms, the need to evaluate how one financial sector develops at the expense of another the incidence of these changes on various components of ke could 25 -14, 201 the informal financial sector (a previously missing component in the definition 3 & 4 have tackled this : disentangling different components of the existing measurement (financial formal (other financial institutions) sector indicators finance nexus. propositions 1 & 2 have addressed this : introducing measures of sector importance is relevant to understand financial . propositions 5, 6 & 7 have examined this hypothesis. informal financial sector, a previously missing component in the definition of the financial system by the imf significantly affects ke dimensions; (2) disentangling different components of the existing finance nexus and; (3) introduction of measures of sector importance provides relevant new insights into how financial sector competition affects ke. these finding are broadly consistent with theoretical innovation journals fdi inflows uh e uh n.a n.a n.a n.a n.a n.a + + + n.a + n.a + n.a + + n.a e: controlling for endogeneity. uh: controlling for the unobserved heterogeneity. prop: proposition. n.a: not applicable due to insignificance of estimated coefficient. °: invalid instruments. educatex: first principal component of primary, secondary and tertiary school enrolments. ictex: first principal component of mobile, telephone and internet subscriptions. creditex: first principal component of private credit and interest rate principal component of trade and tariffs. results are based on robust panel 2sls to control for endogeneity and panel fixed effects to control for the unobserved heterogeneity. in the first macroeconomic empirical assessment of the relationship between mobile phones and finance, asongu (2013) has examined the correlations between mobile phone penetration and financial development using two conflicting definitions of the financial system in the to put this in other terms, the need to evaluate how one financial sector develops at the expense of another on various components of ke could be crucial in grasping 26 as presented in table 4 below, with the traditional ifs (2008) definition, mobile phone penetration has a negative correlation with traditional financial intermediary dynamics of depth, activity and size (panel a). conversely, when a previously missing informal-financial sector component is integrated into the definition, mobile phone penetration has a positive correlation with informal financial development (panel b). three implications have resulted from the findings: there is a growing role of informal finance; mobile phone penetration may not be positively assessed at a macroeconomic level by traditional financial development indicators and; it is a wake-up call for scholarly research on informal financial development indicators which will guide monetary policy. these finding are broadly in accordance with theoretical underpinnings covered in section 2.2. table 4 – impact of mobile phone penetration on financial development panel a dependent variables: traditional financial intermediary dynamics financial depth financial efficiency financial activity financial size economic financial depth financial system depth banking system efficiency financial system efficiency banking system activity financial system activity financial system size mobile phone penetration na na panel b dependent variables: measures financial sector importance proposition 1 proposition 3 proposition 7 proposition 8 mobile phone penetration na + + results are based on cross-sectional ols with robust hac standard errors and specified with ramsey reset. n.a: not applicable due to insignificance of estimated coefficient. 4.2.3 inequality and informal finance a) from the propositions in assessing the effects of the propositions on inequality, asongu (2014a) has tested the following hypotheses. hypothesis 1: the informal financial sector (a previously missing component in the definition of money supply) is good for the poor. hypothesis 2: disentangling different components of the existing measurement (financial system) into formal (banking sector) and semi-formal (other financial institutions) financial sector indicators contribute significantly to the finance-inequality nexus debate. hypothesis 3: introducing measures of sector importance provides interesting dynamics of financial sector competition in the finance-inequality nexus. the main finding as summarized in table 5 shows that, from an absolute standpoint (gdp base measures), all financial sectors are pro-poor. from specific standpoints, three interesting findings are drawn from measures of sector importance: (1) the expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income-effect; (2) growth of informal and semi-formal financial sectors at the expense of the formal financial sector has an income equalizing effect; (3) the positive income redistributive effect of semiinternational journal of economic behavior, vol 5, n. 1, pp. 3 formal finance in financial sector competition is highe informal finance. these findings broadly corroborate the postulations in section 2.3. table 5: impact of propositions on income full data proposition 1 proposition 2 na proposition 3 na proposition 4 proposition 5 na proposition 6 proposition 7 full data proposition 1 na proposition 2 na proposition 3 na proposition 4 proposition 5 na proposition 6 proposition 7 noi: non overlapping intervals. na dynamic system panel gmm. the blank spaces indicate propositions that were not taken into account in the specifications owing to issues of multico b) from mobile phone penetration to provide additional insights into the effect of propositions 3 & 4 on income asongu (2015a) has examined how the sentiments and slogans discussed in section 2.3 are reflected in the incidence of ‘mobile phone penetration’ on income african countries. the findings shown in table 6 overwhelmingly suggest that mobile penetration is pro-poor, as it has an equalizing income effect. ‘mobile phone’ poverty reduction channels have already been covered in section 2.3. the study is significant because it deviates from mainstream country approaches in the literature and provides a macroeconomic assessment of the inequality nexus. table 6 – impact of mobile penetration on income regressions without hac standard errors model 1 mob. penetration regressions without hac standard errors model 4 mob. penetration na: not applicable because of insignificant estimates. international journal of economic behavior, vol 5, n. 1, pp. 3formal finance in financial sector competition is higher than the corresponding impact of informal finance. these findings broadly corroborate the postulations in section 2.3. table 5: impact of propositions on income-inequality (gini index) panel a: first specification full data 2 year noi 3 year noi na na na na na na na na na na na na na na na na na na na panel b: second specification full data 2 year noi 3 year noi na na na na na na na na na na na + + na noi: non overlapping intervals. na: not applicable because of insignificant estimates. results are based on dynamic system panel gmm. the blank spaces indicate propositions that were not taken into account in the specifications owing to issues of multicollinearity. different control variables are used in the two specifications. b) from mobile phone penetration to provide additional insights into the effect of propositions 3 & 4 on income asongu (2015a) has examined how the sentiments and slogans discussed in section 2.3 are eflected in the incidence of ‘mobile phone penetration’ on income-redistribution in 52 african countries. the findings shown in table 6 overwhelmingly suggest that mobile poor, as it has an equalizing income effect. ‘mobile phone’ poverty reduction channels have already been covered in section 2.3. the study is significant because it deviates from mainstream country-specific and microeconomic survey approaches in the literature and provides a macroeconomic assessment of the impact of mobile penetration on income-inequality (gini index) dependent variable: gini index panel a: ols with ramsey reset regressions without hac standard errors regressions with hac standard errors model 2 model 3 model 1* model 2* panel b: two-stage least squares regressions without hac standard errors regressions with hac standard errors model 5 model 6 model 4* model 5* na na na: not applicable because of insignificant estimates. 27 -14, 201 r than the corresponding impact of informal finance. these findings broadly corroborate the postulations in section 2.3. 5 year noi na na na na + na na 5 year noi na na na na + na na : not applicable because of insignificant estimates. results are based on dynamic system panel gmm. the blank spaces indicate propositions that were not taken into account in the les are used in the two specifications. to provide additional insights into the effect of propositions 3 & 4 on income-inequality, asongu (2015a) has examined how the sentiments and slogans discussed in section 2.3 are redistribution in 52 african countries. the findings shown in table 6 overwhelmingly suggest that mobile poor, as it has an equalizing income effect. ‘mobile phone’-oriented poverty reduction channels have already been covered in section 2.3. the study is significant specific and microeconomic survey-based approaches in the literature and provides a macroeconomic assessment of the ‘mobile phone’inequality (gini index) regressions with hac standard errors model 2* model 3* regressions with hac standard errors model 5* model 6* 28 5. conclusion and policy recommendations in this paper, we have dissected with great acuteness contemporary insufficiencies of the ifs (2008) definition of the financial system and concluded from sound theoretical underpinnings and empirical justifications that, the foundation on which it is based, while solid for developed countries, holds no ground in developing countries. perhaps one of the deepest empirical hollows in the financial development literature has been the equation of financial depth in the perspective of money supply to liquid liabilities. this equation has put on the margin (and skewed) burgeoning phenomena of mobile banking, knowledge economy (ke), inequality…etc. we conclude that the informal financial sector, a previously missing component in the ifs conception and definition of the financial system can only be marginalized at the cost of misunderstanding recent burgeoning trends in mobile phone penetration, ke and poverty. hence, the ifs definition has incontrovertibly fought its final dead battle and lost in the face of soaring trends highlighted above because, it is inherently antagonistic and 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